Market volatility has picked up significantly, with tech stocks (again) leading the entire market lower on Thursday, a day after recovering markedly from Wednesday’s losses. Indeed, it can be a rather stomach-churning experience to be invested in stock markets these days.
With stocks kicking off August with a steep plunge, many beginner investors may be scrambling to offload some free-falling tech names before the damage has a chance to worsen.
Though I’m no advocate for selling based on fear and negative momentum, making subtle adjustments can make sense, especially if you just discovered you’re under-diversified and overexposed to a specific sector (like tech) or industry (semiconductors).
In this piece, we’ll look at three growth stocks to sell if you want to rotate into value or can’t stand the latest volatility spike. Of course, it’s quite a stretch to say you’ll regret not selling the following names. That said, they still seem a tad overvalued right here, and with momentum reversing, perhaps lightening up is more prudent than doubling down.
Nvidia (NVDA)
It hurts to put Nvidia (NASDAQ:NVDA) stock on a list of stocks to sell; it really does. But even the king of artificial intelligence (AI) chips needs to take a nap every so often. While NVDA stock will gain again, the rest of the second half could prove punishing for shares as the semiconductor trade begins breaking down in a big way.
Eventually, NVDA stock will be an excellent buy on weakness (perhaps it’s a great buy today for investors seeking growth for the next five years and beyond). But until the dust settles and Blackwell chips begin selling, Nvidia could be an absolute roller-coaster ride that could cause some investors to toss their cookies.
Going into next year, it’ll all be about Blackwell. And maybe by then, dip-buyers will be able to punch their ticket at below $100 per share.
Additionally, should the big chip spenders (think other Magnificent Seven members) start reining in on AI spending in the fourth quarter, Nvidia stock’s negative momentum could worsen considerably. With its 1.68 beta, NVDA shareholders should expect nothing less than a rocky ride between now and year-end.
Tesla (TSLA)
Tesla (NASDAQ:TSLA) stock has been driving through some tough terrain in recent years, and odds are, it’ll continue to do so for the rest of the year. The delay to the much-anticipated robotaxi event could cause some impatient traders to throw in the towel on shares as the recent post-quarter spike looks to get wiped out entirely.
Today, TSLA stock is off 22% from its 52-week high of almost $279 per share. With momentum accelerating to the downside, I’d much rather be in a lower beta (TSLA stock boasts a huge 2.31 beta, which entails significant market risk) name as the tech sell-off intensifies.
With yet another recall (1.8 million vehicles this time) over hood issues and a recent Seattle-area Tesla self-driving car crash to worry about, the stock has more than enough negative drivers that could bring it below $200 per share by robotaxi day.
Some big-name analysts are concerned about valuation. Given negative headwinds and softened growth, the 58.5 times trailing price-to-earnings (P/E) multiple still seems too steep.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) is another high-tech momentum play that’s been rolling over in recent weeks. At writing, AVGO stock is now down close to 20% from its recent all-time high after tumbling 8.5% on Thursday’s session. Undoubtedly, Broadcom, the business, is firing on all cylinders. But with tech and semis experiencing vicious action, perhaps it’s time to reconsider buying the recent dip.
At 24.5 times forward P/E, Broadcom shares aren’t really all too expensive. Additionally, its AI muscles seem to get stronger by the day, with the firm’s ASIC business likely to gain for many years to come. Like Nvidia, Broadcom’s latest sell-off will probably create a stellar entry point for longer-term thinkers.
However, unless you’re prepared for more down days like the one we had on Thursday, AVGO stock looks more like a trim than a buy here. Even after falling into a bear market, the stock is up 167% in the past two years, making the decline look like a relatively small blip. While the name may not be overvalued, it’s certainly overheated and at risk of more pain if this tech wreck continues through August.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.