Wall Street supports the technology stock pullback: Wrongly killing is a good buying opportunity, chip stocks are cooling down before the earnings report and are creating a golden opportunity.

Notice that the recent sharp sell-off in tech stocks has triggered market panic, but Wall Street analysts generally believe that this adjustment is not the end of the bull market, but rather a healthy market rotation and buying opportunity before earnings season. Paul Hickey, co-founder of Bespoke Investment Group, stated that the recent sell-off in tech stocks before major earnings announcements is a healthy and welcome market rotation. The strategist believes that after a significant surge, tech stocks (especially in the storage sector) have become overextended, with the semiconductor index rising over 90% so far this quarter. Hickey explained, "These tech stocks, especially in the storage sector, have risen too fast and too far ahead, they need to take a breather." He pointed out that prior to this sell-off, every sector this quarter has underperformed the S&P 500 index, except the tech sector, indicating an unsustainable pace of development. Looking ahead to the upcoming earnings reports from companies like Micron, Hickey emphasized that a pullback before major announcements is actually beneficial for investors. He explained, "Seeing this kind of pullback before earnings announcements is actually quite healthy," adding that such declines help lower the market's expectations entering earnings season. The strategist pointed to encouraging macroeconomic signals indicating that market leadership will expand beyond the tech sector. The preliminary reading of the Purchasing Managers' Index (PMI) hit a five-month high, and the decline in oil and natural gas prices should benefit consumer-focused businesses. Hickey advised investors to look for opportunities in consumer leverage stocks, industrial sectors, and financial sectors. Finally, Hickey dismissed concerns about the Federal Reserve raising rates before the midterm elections, noting how quickly the market narrative can change. He emphasized that average oil prices have fallen from around $98 per barrel in May to $73, which should help cool down inflation data over the summer months, even if it may not immediately reflect in this week's Personal Consumption Expenditures (PCE) data. Tech giants reduced to chipmakers' "day laborers"? Ben Reitzes, head of technology research at Melius Research, also sees the current pullback as an opportunity, advising investors to buy tech stocks that are currently being sold off, as historically, these market pullbacks have proven to be buying opportunities. Reitzes stated in an interview, "in the past, these have all been opportunities, and we aren't seeing any real change right now," He believes that the market is still in the early stages of adopting artificial intelligence (AI), a trend that is fundamentally reshaping business competition. "I think companies that are adopting AI will absolutely crush those that aren't," he explained, noting that companies are just beginning to realize that they must embrace this technology to stay competitive with rivals who are already effectively using it. The analyst views the current moment as part of a generational shift towards computational power, a trend that could span twenty years. "Computational power is the next big trend, and right now, we're three years into this trend, and we might be in a twenty-year trend," Reitzes said. He compares computational power to oil, believing it will ultimately prove even more crucial: "It's the new oil of the era, and its scale will be even greater than any oil we've seen before." While Reitzes maintains a "buy" rating on chip manufacturers like NVIDIA Corporation, Broadcom Inc., Micron, and AMD, he is more cautious towards mega-cap cloud service providers like Microsoft Corporation, Oracle Corporation, and Alphabet Inc. Class C. His reasoning is simple: these mega-cap cloud service providers are essentially funneling money back to semiconductor companies. "Why play that game (buying them) when they're essentially just passing money to companies I'm invested in? It never stops," he said. "These guys are in debt. They've all stopped buying back stock." Reitzes emphasized that due to their strong cash generation and shareholder-friendly practices, chip manufacturers represent a superior investment choice structurally compared to mega-cap cloud service providers. He noted that companies like NVIDIA Corporation are actively buying back stock, which helps defend their stock price.