Analyst: Tech Stock Dip Presents a Near-Term Opportunity
Amidst a downturn in 2025, some experts see a short-term buying opportunity in technology stocks, despite underlying concerns about the market.
Dan Niles, portfolio manager at Niles Investment Management, believes that the recent drop in tech stocks may present a chance for investors to enter the market; however, he has warned that the opportunity is only for a “near-term statistically likely technical bounce.”
Niles’ analysis, which draws on proprietary models and data analytics, indicates that some of the names are now at levels where he would consider buying. He expressed these sentiments in an X post citing that “some of these fears get discounted in the market.”
I’ve been sort of waiting for a tech side where I thought they were overvalued, and now they’ve kind of come back in as some of these fears get discounted in the market — Dan Niles (@DanielTNiles) March 4, 2025
However, Niles excluded the ‘Magnificent 7’ tech giants from his top five stock picks for 2025. Factors driving the decision include disappointing first-quarter earnings outlooks.
“The issue with the S&P is investors are falling out of love with U.S. technology stocks because estimates are going down and valuations are high,” Niles said.
Niles’ primary concerns include potential impacts related to:
- Political uncertainty: The possible effects of former President Trump’s policies on inflation, economic growth, and Federal Reserve actions.
- Overvalued assets: Current market valuations are perceived as too high.
- AI investment pause: A possible slowdown in AI-related capital expenditures as the market absorbs recent investments.
Contrarian Opinion: S&P 500’s Composition and Trump Tariffs
Niles mentioned that tariffs imposed by President Trump will “sort themselves out” because no foreign country wants to lose access to the U.S. consumers. The portfolio manager cited the S&P’s strong performance during Trump’s first term despite tariff uncertainty.
Expanding Charles Darwin’s theory, Niles noted that natural forces that are “adaptable to change” have the highest chance at survival.
Market Performance Reflects Analyst’s View
The SPDR S&P 500 ETF Trust (SPY) and the Invesco QQQ Trust ETF (QQQ) both fell on Tuesday.
- SPY: Declined 1.18% to $576.86
- QQQ: Dropped 0.30% to $495.55
On Wednesday, Dow Jones futures were up 0.61%, S&P 500 traded 0.70% higher, whereas Nasdaq 100 futures advanced by 0.84%.
