With the Nasdaq Composite index down around 9% from its October 2025 high, it wouldn't be out of line to say the market is in the middle of a "tech stock dip." Indeed, top stocks such as Nvidia (NVDA 0.38%) and Palantir Technologies (PLTR 0.28%) are trading in correction territory, down 15% and 25%, respectively. Issues including high valuations, massive capital expenditures (capex), and market disruptions have some investors more hesitant about artificial intelligence (AI) stocks.
Under such conditions, stocks could fall further, or the recent declines could signal buying opportunities in many of these stocks. Knowing this, should investors buy the dip in tech stocks or "run for the hills"?
Image source: Getty Images.
Making sense of the "tech dip"
Admittedly, figuring out how to approach this situation brings difficulties. Such stocks often appear to trade as a block, and the ones that do not follow their peers in either direction are relatively rare exceptions.
Nonetheless, during such times, it is critical to go back to fundamentals and block out the noise. Famed investor Warren Buffett advised the following: "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
This coincides with advice from Warren Buffett's mentor, Benjamin Graham. Graham's investment metaphor, Mr. Market, describes a businessman driven by euphoria in good times and depression when the market drops. Under either condition, Mr. Market will tend to price his business based on emotion instead of business fundamentals.
During a "tech dip," this can play into the hands of investors looking for a fair (or sometimes below fair) price for stocks they would like to buy.
Still, even if an investor finds stocks at desired prices, they face an issue with timing. Market highs and lows are only clear in retrospect. Thus, when stocks reach that "fair price," an investor is not going to know whether that becomes a bottom or keeps falling, and buying too early could cause even contrarian investors to run for the hills.
NASDAQ: PLTR
Key Data Points
How to invest in the "tech dip"
Ultimately, if one finds a fair price for a high-quality stock, it is probably time to buy the dip. Nonetheless, how one buys is also important. As previously mentioned, fair prices can become low prices just as easily as they can go up. Thus, it may be best to use the fair price to begin buying through dollar-cost averaging (DCA).
DCA protects an investor no matter what happens. If the stock stalls, they have a position and may still be able to make the next purchase of a stock at or near that fair price. If the stock rises in price, then their earlier lower-priced purchase will even out the investment's overall cost. Conversely, if a stock falls after the initial purchase, the next purchase allows them to buy more shares at a lower price with the same cash allocation. That approach can be repeated with subsequent purchases.
No matter what happens, investors will have to deal with uncertain conditions. However, by buying at fair prices and dollar-cost averaging, investors can ultimately turn that uncertainty to their advantage.
