Was the NVDA sell-off this week a correction, or a sign of something more? Many investors will be thinking about that very question this week as AI and chips continue to play huge roles in the stock market. It’s fair to say that AI-driven tech valuations remain very high, and fears of a bubble aren’t totally unfounded. Amid that uncertainty, it may be worth revisiting the benefits of active tech investing.
See more: Active Management Can Help Avoid Overvalued Companies
Before we put aside the question of whether investors are facing a potential bubble in AI, it’s worth noting that many industry leaders are concerned about concentration risk, mostly led by tech. In a recent chat with VettaFi, T. Rowe Price leader Jay Nogueira spoke about concerns regarding concentration risk, including those huge tech firms. He compared the current situation to the Four Horsemen stocks that dominated markets before the global financial crisis.
Active tech investing can provide one option amid uncertainty about AI-related tech potentially reaching bubble status and bursting. Whereas index funds stick with the index they’re tracking with limited flexibility, active tech investing funds and ETFs can adapt. Many retain the flexibility to over- or underweight certain firms based on fundamental research.
For example, strategies like the T. Rowe Price U.S. Equity Research ETF (TSPA) can provide a notable option. The fund recently hit its three-year ETF milestone. It leans on T. Rowe Price’s research capabilities in place of big sector calls, aiming to produce a sector-neutral portfolio.
Many investors still want exposure to those big tech firms driving the market. They have contributed significantly to the S&P 500 over the last 12 months. However, risks remain, as evidenced by the NVDA sell-off. Whether that sell-off is a blip or something more, active tech investing can provide that exposure with more adaptability than offered by rival index strategies.
For more news, information, and analysis, visit the Active ETF Channel.
