UK retail investors buy the dip after bruising tech sell-off

UK retail investors are snapping up tech stocks following a bruising sell-off prompted by concerns about a slowdown in AI development in the wake of the US midterm elections.

Brokers and investment sites told the FT that individuals were buying AI-related stocks on the dip after a plunge in value, while wealth managers such as Rathbones were preparing to take advantage of the sharp sell-off.

Shares in US tech companies tumbled on Thursday following a sweeping Democratic victory in the US midterms, stoking fears over potential opposition to data centres, which are needed for AI.

The tech-focused Nasdaq Composite dropped by more than 5 per cent — its biggest daily fall in more than a year and a half — while individual companies focused on the AI build-out, such as CoreWeave, plunged even further.

But the market correction was seen as a buying opportunity by many retail investors.

“There was a sharp uptick in buying activity among US tech stocks on Thursday,” said Lee Wild, head of equity strategy at Interactive Investor. “Dip buyers were attracted to most of the big names, but Nvidia and SpaceX were most popular.

“Nvidia purchase volumes were four times greater on Thursday than the previous session and buy interest in SpaceX more than doubled. Selling activity increased too, but not to the same degree.”

Hargreaves Lansdown said clients were net buyers of some of the biggest names in US tech over the past week, with Nvidia, SpaceX, Micron, AMD and Alphabet making up the top five.

The UK’s largest “DIY” investment site said the volume of trades doubled on Thursday compared with the Monday to Wednesday average.

“Nvidia and SpaceX are the headline names, while Micron and AMD give investors exposure to the hardware side of the story,” said Anna Macdonald, investment strategy director at Hargreaves.

“Overall, many of our clients are taking a long-term view and see this as a moment to get back into some of these names at a cheaper entry point.”

Macdonald added that “demand for AI isn’t going away, and we expect the newly elected US officials to take a pragmatic approach to the build-out and find a workable middle ground.”

Investment site AJ Bell said that investors on Thursday had piled into Nvidia, SpaceX and Micron, as well as global equity tracker funds — an ongoing trend.

“Those buying tech stocks amid the market carnage are taking a strong view that certain names have been oversold and could be worth much more in the future,” said Dan Coatsworth, head of markets at AJ Bell.

“There is always uncertainty as to when a rebound will happen, if at all, but history shows that staying in the market is a sensible course to take. Market rebounds can happen quickly,” he added.

Wealth managers running money on behalf of clients said they were also ready to take advantage of the lower valuations.

Canaccord said it was “selectively adding to technology exposure in this weakness . . . We believe this represents a buying opportunity although expect volatility to remain elevated and further downside risks are present.”

Alex Waters, head of asset allocation at Rathbones, said: “We remain ready to protect portfolios if the fundamental environment deteriorates, but equally ready to take advantage of market dislocations where prices have moved further than fundamentals justify.”

He said that even though there are “legitimate questions” around the amount of investment made into AI and data centres, corporate fundamentals suggest this latest sell-off is a correction rather than the beginning of a prolonged bear market.

“Corporate earnings remain resilient, economic activity has held up and we are not seeing the degree of stress in credit markets that would normally accompany a more serious deterioration.”

But some in the industry remain cautious. Jason Hollands, managing director of wealth manager Evelyn Partners, said: “Bull markets do not rise in a linear fashion and it is too soon to know whether these declines are just a short-term blip or a more durable shift.”

He added: “Those with long memories may recall that during the dotcom bubble the Nasdaq Composite experienced eight corrections [declines of more than 10 per cent] and one bear market before the bubble decisively burst.”