Should We Buy the Dip in NVDA and Semis?
Shares of NVIDIA (NASDAQ: NVDA) fell by more than 10% while Super Micro Computer Inc (NASDAQ: SMCI) tumbled by 23%. The drop put NVIDIA’s stock in bear market territory as it is now more than 22% off of its all-time high price. It was the single worst session for the NASDAQ index since the bear market in October 2022. 
One has to believe that the recent correction is coming to an end. The QQQ ETF is fast approaching a re-test of its support level at around $408. This is a key area as it was a strong precious resistance that has flipped to support. So does that make the recent drop in semiconductor stocks a screaming buy?
When buying dips you need to ask yourself if you are okay with a further drop. It’s hard to time the bottom of stocks, so you need to be prepared for further pain. But if you buy at these prices now, will you be happy in five or ten years? Can you hold it for that long? Context is everything in investing, so know what you are getting into before you commit to buying a dip.
Has Anything Changed With Semiconductor Stocks?
Has anything materially changed since Friday’s session? The answer is no. The only thing that has changed is the valuation of the stock. Is NVIDIA more attractive here at $762.00 then near $1,000? Of course! That’s a no-brainer. With NVIDIA heading back towards its 21-day EMA which is a level that most stocks will continuously re-test in an uptrend, we may be nearing a short-term bottom.
Now, there is a weakness in the markets from macroeconomic issues. Inflation continues to be a problem and the Fed is adamant on waiting for inflation to hit 2.0% before cutting rates. Some Fed members have suggested we may not see rate cuts until 2025.
While I agree we may have gotten ahead of ourselves with the whole AI valuation, I don’t think the correction means AI is over and done with. On the contrary, all of the sales numbers and demand for NVIDIA’s GPUs are still there. Sure, some companies are opting to start designing and building their own GPUs, but most experts say they are a good three to five years behind NVIDIA’s technology.
I’m not recommending buying any dip blindly. Make sure it aligns with your investment strategy and timeline. If these prices continue to drop I’ll be adding more exposure to semis into my portfolio. My top picks? I’d love to add NVIDIA and Taiwan Semiconductor Manufacturing Company (NYSE: TSM). I think these two will emerge as the leaders in AI and chip production. If you believe that AI and high-powered chips will be needed in the future, then this is the dip you’ve been waiting for to get invested in these semiconductor stocks.
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