It Might Be Time to Buy Stocks Again. Even Tech.

A scene from the New York Stock Exchange on Monday. (NYSE)

Key Points

• Investors are buying Tesla, Nvidia, and Meta Platforms, indicating a trend of sticking with established tech companies despite market fluctuations.
• The Roundhill Magnificent Seven exchange-traded fund rebounded almost 60% after plunging nearly 30% from late January through early April.
• Some investors are shifting from single tech stocks to large-cap tech ETFs.

Investors must be patient and embrace diversification as they position themselves for a tech-stock rebound after this month’s slide. But they don‘t need an all-clear sign from Nvidia after the chip company’s earnings to wade back in.

There are plenty of good opportunities in the market, even in some of the beaten-up tech and artificial intelligence names.

“To some extent, customers have been running towards the danger instead of from it. They’re buying Tesla, Nvidia and Meta Platforms ,” said Steve Sosnick, chief strategist with Interactive Brokers, about recent client activity. “They’re sticking with the ones they brought to the dance. And no company is more crucial to the AI theme than Nvidia,” whose quarterly earnings are due out after the market closes on Wednesday.

Sosnick said in an interview that many investors have been conditioned to buy these stocks after big pullbacks because, for the most part, they have rebounded quickly.

Just think about the tech selloff that followed the release of China’s DeepSeek AI technology earlier this year, as well as the market rout in response to fear over tariffs in April. The exchange-traded fund plunged nearly 30% from late January through early April but has rebounded almost 60% since then.

“Our customers are basically sticking with the Magnificent Seven stocks,” Sosnick said. “Dip buying has worked tremendously well. It’s been a good strategy for the past few years.”

Some investors are hoping that the results, and what CEO Jenson Huang says about the outlook, can reignite the tech rally.

Others are noticing some buy-the-dip behavior as well, but for exchange-traded funds, rather than individual stocks.

Jill Carey Hall, an equity and quant strategist with BofA Securities, noted in a report Wednesday that while investors sold single stocks, particularly in tech, over the past week, they actually were net buyers of big tech ETFs. “Flows into large cap ETFs led clients to be net buyers of large cap equities overall,” she wrote.

Investors seem to realize that the AI trade and high valuations for tech stocks aren’t necessarily a major long-term problem for the market.

“I don’t see concentration in and of itself as a problem that could topple the markets,” said Osman Ali, global co-head of quantitative investment strategies at Goldman Sachs Asset Management, at a media roundtable Monday. “The quality of the companies here that are dominating the markets are so high. They’re so profitable. They have so many tailwinds that I don’t see a sign of a crisis at this point.”

But Ali added that diversification is important. Investors shouldn’t put all their proverbial eggs in the AI basket.

“There are certainly better ways to have allocated capital recently that would have given you broader exposure, created healthier portfolios and delivered as good, if not better, returns,” he said. “And I think investors are starting to take notice of that much more so.”

Josh Nelson, head of global equity for T. Rowe Price, agreed. He said in a media briefing Wednesday that the valuation gap between big tech stocks and other sectors in the U.S. should narrow next year as earnings growth improves across the board. He added that international stocks continue to look attractive.

“This broadening of the rally can continue going forward,” Nelson said. “Opportunities are expanding beyond U.S. megacap tech.” That means the rally could do the same.

Bill Smead, chief investment officer and lead portfolio manager with the Smead Value Fund, told Barron’s that investors should be hunting for bargains, not just what he calls “glam growth stocks.”

Smead thinks healthcare stocks, which have recently begun to rebound, have more room to run. He owns Amgen and Merck and said he recently bought the insurer UnitedHealth after its big slide this spring.

Smead also likes home builders, energy and some select consumer stocks, which he thinks should rebound next year. His fund owns home builders Lennar, DR Horton, and NVR ; the Canadian oil-and-gas company Cenovus Energy; and mall owners Simon Property Group and Macerich.

So even if Nvidia earnings wind up igniting another rally in tech and growth stocks, investors shouldn’t ignore the rest of the market.

Write to Paul R. La Monica at paul.lamonica@barrons.com