How to buy the dip while tech darlings are down
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Palantir, CoreWeave, Robinhood and other AI and crypto stocks are under pressure, as investors take their feet off the gas. Is it signal to buy?
Why it matters: Dip buying was so strong over the summer that significant declines rarely occurred. Here's how to think about when to buy into a stock that's off its highs.
State of play: "If you can't find anything wrong with the company, that is your dip-buying opportunity," says Mark Malek, chief investment officer at Siebert Financial.
Zoom in: Stocks primarily go down for one of two reasons, Malek tells Axios.
- Systematic risk: Something existential that could rattle the entire market, asset class, sector or theme.
- Idiosyncratic risk: Company-specific concerns like a sudden drop in sales or a change in leadership.
Driving the news: The recent selloff is about risks to the overall market.
- Nothing has fundamentally changed about Palantir this week. Sure, the company's valuation is atmospheric, but that's been true for a while.
- "I was buying it when it was higher than here. I love it even more right here," Malek says.
Between the lines: Even with the bigger tech giants selling off this week, specifically Nvidia, Malek contends he has "all the conviction in the world."
- "This is beyond what even my models are trying to predict," he says. That kind of conviction makes it clearer when dips are buying opportunities.
Zoom out: More broadly, Malek notes getting AI right is "do or die for these companies" as they risk "losing the browser wars." That indicates to him the AI rally has legs for years to come.
Yes, but: There's still the risk that these companies stop the party at any time by slowing their spending on AI.
- "I know for a fact…Microsoft and Amazon and Alphabet, once they start seeing their growth numbers slow down in terms of justifying those bills, they're going to slow down" on spending, Malek says.
- "But right now, they cannot stop, they cannot close that spigot at all, because they risk losing the huge opportunity that's in front of them."
The bottom line: If you have conviction in a stock when it's expensive, you should like it even more when it's cheap, according to Malek's view.
