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Macro Research

Nasdaq enters correction — should investors be concerned?

Despite tariff uncertainties and market volatility, the tech sector remains a promising investment opportunity due to strong earnings and the ongoing AI boom.

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  • Published on 08 Mar 2025

Nasdaq enters correction — should investors be concerned? | Open a FREE FSMOne account and manage all your investments conveniently in ONE place


• On March 6, the Nasdaq Composite entered correction territory, which is defined as a decline of more than 10% from its peak

• The selloff in technology stocks was driven by fears of reinflation and slowing economic growth, rather than any deterioration in the fundamentals of tech stocks

• Recent tech earnings were positive, and the sector’s earnings growth are expected to continue outpacing other sectors 

• Big Tech companies remain our top pick, and we encourage investors to capitalise on market dips to buy fundamentally strong companies

At the start of the year, we made the case that tech stocks would continue to lead markets in 2025. However, that view has been challenged in recent weeks. The tech-heavy Nasdaq Composite is down 6.3% year-to-date and has fallen over 10% from its record high on December 16, entering correction territory. 

In this article, we will examine the factors behind the recent selloff in tech stocks and discuss what it means for investors moving forward. 


Tariff uncertainty weigh on investor sentiment 


Earlier this week, U.S. President Donald Trump imposed 25% tariffs on Mexico and Canada after a month-long pause and introduced an additional 10% tariff on China. Canada responded strongly with a 25% tariff on CAD 30 billion worth of US imports, while China retaliated with tariffs of up to 15% on a wide range of US agriculture exports, effective March 10. Although Trump has since temporarily exempted Canadian and Mexican imports that are compliant with the United States-Mexico-Canada Agreement (USMCA) from tariffs, the move did little to lift markets, as the S&P 500 recorded its worst day of 2025 on March 6 with a 1.78% decline. 

While the selloff was broad-based, tech stocks took a greater hit with the Nasdaq Composite falling 2.61%. After leading the market in returns over the past two years, tech stocks appear to have fallen out of favour as investors shift their focus from the growth potential of AI to concerns over economic growth and inflation. 


Tech earnings remain robust, with long-term growth drivers intact


Trump is an unpredictable figure, and the only certainty we can expect from him is uncertainty. While the extent and duration of tariffs remain difficult to predict, we encourage investors to focus on the underlying fundamentals of companies instead. In the latest earnings season, the technology sector delivered impressive earnings, with an average positive earnings surprise of 4.18% (Figure 1). However, share prices’ reactions were mostly negative, declining by an average of 1.9% a week after earnings announcement. This suggests that the selloff was largely sentiment-driven, rather than a reflection of weak fundamentals. 

Moreover, we believe that the long-term growth drivers for the technology sector remain intact, supported by the AI boom. Just days ago, Broadcom released impressive earnings results along with a strong second-quarter forecast, assuaging investor concerns about AI chip demand. The company also hinted at new potential customers that could boost revenue in a highly competitive market. This suggests that AI demand remains robust, even amid tariff uncertainties. Overall, the tech sector is still expected to deliver the strongest earnings growth relative to other sectors (Figure 2).

Figure 1: Technology stocks sell off despite strong earnings


Figure 2: Earnings growth estimates are the highest for the technology sector

Don't miss this opportunity to acquire high-quality technology stocks at a discounted price


Among technology companies, Big Tech remains our top pick. During uncertain times, we believe Big Tech firms are better positioned to navigate through these challenges, thanks to their strong balance sheet, global business models with products essential to consumers and  businesses worldwide, and strong competitive advantages including network effects and high switching costs. These companies are also at the forefront of the AI boom, which we expect to endure and support earnings growth despite economic uncertainty. Therefore, we believe that the current drawdown presents an attractive entry point for investors to buy into high-quality technology stocks at a lower price.


Investors seeking more diversified exposure to the tech sector may also consider our recommended digital economy ETF, the Invesco NASDAQ Internet ETF (NASDAQ: PNQI). Based on our previous price target of USD 61, PNQI offers an upside potential of 31% following the recent sell-off.

For those looking to take an active approach to investing in tech, we also recommend Fidelity Global Technology A-ACC-USD and Eastspring Investments Unit Trusts - Global Technology SGD.

Table 1: Projections for the Nasdaq CTA Internet Total Return Index

NETX Index

2023

2024E

2025E

2026E

Earnings Per Share (EPS)

33.11

48.25

54.74

63.60

Earnings Growth YoY

76.85%

45.73%

13.45%

16.19%

PE Ratio (X)

33.84

30.81

26.62

22.92

Target Price for PNQI (based on a fair PE of 30X)

-

-

-

61

Upside Potential

-

-

-

30.71%

Source: Bloomberg Finance L.P., iFAST Compilations.

Data as of 7 March 2025


Figure 3: Share prices are driven by earnings growth in the long run 


Declaration: 

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