Don’t Fear the AI ‘Bubble' - Buy the Dips
When headlines scream about an “AI bubble” and an impending recession, it’s easy to get swept away by the drama.
But if you’ve been around long enough, you know that panic selling often creates the best buying opportunities.
Today we’ll look into specific tickers and data that show why U.S. tech—and particularly AI-driven growth stocks—remain compelling for dividend investors.
The So-Called Slowdown: Data Over Hysteria
Talk of an economic slowdown and “stagflation” has put many investors on the defensive. Yet, consider these facts:
Inflation figures (CPI, PPI, and even the PCE) have come in milder than expected.
Fed Policy: The Fed’s messaging is dovish. Their dot plot now includes two cuts for 2025, and they’ve signaled that rate hikes are off the table.
Treasury Moves: With the 10-year yield moving from around 4.135% to 4.25% and a potential to drop toward 3%, the Treasury’s playbook is clear: keep long-term rates low to stimulate economic activity.
This isn’t a harbinger of doom—it’s a setup for a rally.
When policy meets technology head-on, the best growth stories don’t vanish; they accelerate.
Why the “AI Bubble” Isn’t a Bubble
Despite alarmist headlines, the fundamentals of AI are solid. Look at NVIDIA (NVDA):
There’s no sign of a slowdown in demand for NVDA chips, servers, or network equipment.
The cost of processing an inference request has dropped exponentially, driving adoption across industries—from healthcare to finance.
Tech giants like Amazon (AMZN), Meta Platforms (META), and Alphabet (GOOGL) are not only leveraging AI to fuel their growth but also maintaining robust revenue streams.
The relentless drive for efficiency and productivity is not a sign of speculative mania; it’s the engine for sustainable growth.
Timing the Dips:
For dividend investors, the key is to blend stable income with the upside potential of tech.
Let’s get specific with a few tech stocks currently on the radar:
American Express (AXP)
Data Point: AXP’s 52-week high hit $326, but it’s now trading around $270.
Outlook: A bullish cup-and-handle pattern is forming. If broader market sentiment turns sour near critical events, we might see a retest around $260—a potential entry point for adding to positions.
Carvana (CVNA)
Data Point: CVNA tumbled from roughly $300 to the mid-$160s after a 10% sell-off.
Outlook: A tariff-driven panic might push it back to around $170, presenting a tactical opportunity if its fundamentals hold.
Netflix (NFLX)
Data Point: NFLX peaked at $1,064 before dropping to around $862 during last week’s sell-off.
Chart Insight: The formation of a rising pennant pattern signals potential volatility. With a standing order to buy more at $903, any pullback could be a strategic entry for further accumulation.
These concrete numbers aren’t just arbitrary—they represent the market’s pulse at a moment.
The opportunities are ripe for those who don’t let fear dictate their moves.
Risk Management: Protecting Your Upside
If you’re diving into AI-centric tech, disciplined risk management is a must:
Limit Exposure: Keep AI high-growth stocks to no more than 15% of your overall portfolio.
Set “Mental Floors”: Determine your exit points—if AXP falls below $260 or if NFLX’s overhead resistance holds, trim your positions.
Quarterly Reviews: Reassess fundamentals and market trends to ensure your thesis remains intact.
This isn’t about chasing every headline—it’s about building a resilient portfolio that can weather volatility while capitalizing on growth.
The data is on our side: strong corporate earnings, robust demand for AI, and a central bank ready to intervene if needed. When the market pans for every minor concern, the savvy investor knows that it’s often the calm before the next significant upswing.
Stay the Course and Capitalize on the Opportunity
Don’t let sensational headlines drive your investment decisions.
U.S. tech and AI stocks—backed by concrete fundamentals—remain a crucial part of a diversified, dividend-focused strategy.
By blending a core of stable dividend payers with a tactical allocation in growth names like NVDA, AMZN, META, and GOOGL, you position yourself to reap both steady income and long-term capital appreciation.
Employ covered calls to enhance yields, maintain a reserve with short-term Treasuries, and watch for tactical entry points—like AXP around $260 or NFLX near its support levels.
In a market where fear can trigger irrational selling, the disciplined investor stands to benefit the most.
Until next time,
Mike Thornton, Ph.D.