The Tech Market’s Resilience Amid Turmoil
In the wake of President Trump’s second term, investors are navigating a complex landscape marked by two significant shocks—a downturn in tech stocks primarily caused by the emergence of Chinese AI competitor DeepSeek and renewed trade tensions. Despite this, many tech investors are actively purchasing the dip in hopes of rebound.
Recent concerns about DeepSeek pushed chip stocks into a tailspin, with NVIDIA (NVDA) leading the selloff. The Chinese startup claims it has developed an AI assistant utilizing cheaper chips and less data than current models while achieving similar performance levels. (For more on this, see: Will the Rise of DeepSeek Usher in a New AI Era? ETFs in Focus).
Strategic Investments Amid Challenging Times
Despite these challenges, investors are responding with confidence—many engaging in leveraged buying. NVIDIA’s shares plummeted 17% on January 27, marking its steepest drop since early 2020. However, the GraniteShares 2x Long NVDA ETF (NVDL), which doubles Nvidia’s daily returns, drew $1.6 billion in inflows the previous week. This behavior signals a strong desire among investors to capitalize on temporary setbacks, even though leveraged investments can result in greater losses. (Read more at: Palantir Soars on Solid Q4 Earnings, Cautions on DeepSeek: ETFs to Buy).
Retail Investors Join the Buying Frenzy
As indicated by Vanda Research, retail traders stepped in during NVIDIA’s latest decline, investing at a rate not seen since the post-election period in November, as noted on Yahoo Finance. This influx of investment, spanning both ETFs and individual stocks, showcases a strong belief in the long-term potential of tech industries.
The trend of “buying the dip” is well-established, shaped by years of easy monetary policy and swift recoveries from downturns such as the global financial crisis and the rebound following COVID-19. This phenomenon has encouraged many traders to view market declines as opportunities.
Uncertain Waters Ahead for Investors
Although the buy-the-dip strategy has historically yielded positive outcomes, it is poised to face new tests. The market’s growing sensitivity to unexpected events, exemplified by concerns surrounding DeepSeek and tariffs, suggests that volatility is likely to persist. With an active presidency and traditionally volatile market dynamics during the first year in office, even the most optimistic analysts cannot dismiss possible disruptions.
Despite the looming uncertainties, current trends indicate that confidence remains strong among investors, particularly in Big Tech stocks. As we explore potential ETF investing strategies for these challenging times, several approaches might prove beneficial.
Utilizing Covered Call ETFs for Enhanced Income
A covered call strategy offers a way to mitigate risk during market downturns. Historically, such strategies have outperformed the assets they are based on in bear or stagnant markets, although they tend to underperform during robust bull markets when stocks sharply exceed their strike prices.
Global X Nasdaq 100 Covered Call ETF (QYLD) tracks the CBOE NASDAQ-100 BuyWrite V2 Index, which represents the total return of a portfolio of stocks from the NASDAQ-100 Index paired with systematically written call options. The fund charges 61 basis points in fees and provides a yield of 12.33% annually.
Global X Nasdaq 100 Covered Call & Growth ETF (QYLG) also tracks the CBOE Nasdaq-100 Half BuyWrite V2 Index. This ETF reflects the performance of a portfolio holding the NASDAQ 100 stocks while writing a series of one-month at-the-money covered call options, yielding 24.82% annually with a fee of 35 basis points.
First Trust Nasdaq BuyWrite Income ETF (FTQI) primarily invests in U.S. exchange-listed equity securities and employs an options strategy that includes writing covered calls on the Nasdaq-100 Index. This ETF yields 11.58% annually and charges 75 basis points in fees.
Positive Outlook for Semiconductors
Regardless of the developments with DeepSeek and the broader market, demand for AI technology—and thus chips—remains strong. Even amidst concerns, executives from Microsoft (MSFT) and Meta (META) maintain that heavy investment in infrastructure is essential for future dominance in the AI space. Meta CEO Mark Zuckerberg has emphasized the need for substantial capital investment to secure a competitive edge over time, as stated on Yahoo Finance.
Microsoft CEO Satya Nadella echoed this sentiment, arguing that such expenditures are vital for overcoming capacity issues and meeting growing AI demands. Consequently, semiconductor ETFs like the VanEck Semiconductor ETF (SMH) are worth considering as investments at this time. (See: Will 2025 See Slowing AI Investments in Big Tech? ETFs in Focus).
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Microsoft Corporation (MSFT): Free Stock Analysis Report
NVIDIA Corporation (NVDA): Free Stock Analysis Report
VanEck Semiconductor ETF (SMH): ETF Research Reports
Global X Nasdaq 100 Covered Call ETF (QYLD): ETF Research Reports
Global X Nasdaq 100 Covered Call & Growth ETF (QYLG): ETF Research Reports
Meta Platforms, Inc. (META): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
