The stock market selloff heated up Thursday after the bulls attempted to hold the line at the Nasdaq’s 200-day moving average mid-week.

Wall Street appears overwhelmed by the tariff battle between the U.S., Canada, Mexico, and China.

No one knows exactly what Trump and his administration will do next. It is, however, unlikely they want to cause major harm to the U.S. economy or the stock market.

Still, the downturn could continue as investors big and small race to lock in huge profits as fear overtakes Wall Street.

Digging into the Stock Market Selloff

A selloff was due after the artificial intelligence boom drove massive triple-digit gains for many stocks over the last few years.

Nvidia, the shining example of AI, is up 380% in the last two years alone and 1,700% in the last five years. Despite Nvidia’s recent drop, the AI chip stock is up 21% in the past 12 months.

The Nasdaq and the S&P 500 have climbed over 100% in the last five years.

The benchmark is up around 44% in the past 24 months and the tech-heavy index has ripped 55% higher.

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Those are eye-popping gains and more investors might start taking profits if they see their huge paper profits continue to slip.

So when is it time to buy into the weakness?

The Nasdaq and the S&P 500 fell below their 200-day moving averages for the first time since the fourth quarter of 2023 (the tech-heavy index briefly sank below in August 2024 before rocketing higher).

Both are now testing their 50-week moving averages.

The stock market may fall much further to recalibrate valuations closer to historic medians. The S&P 500 trades at 20.6X forward earnings vs. its 10-year median of 18.1X.

Others might think a selloff to the market’s late 2021 peaks is a possibility.

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No one knows what’s right around the corner, and be wary of anyone who claims they do.

Here is what we do know. The S&P 500 and the Nasdaq have slipped from overbought RSI levels at the end of 2024 to some of their most oversold in the past several years.

The market euphoria is gone. A widely-tracked contrarian stock market buying signal, CNN’s Fear & Greed Index, tumbled from Neutral in the middle of February to Extreme Fear (17 out of 100).

More critically, the S&P 500 earnings growth outlook remains stellar after every major tech company provided updated guidance.

Benchmark earnings are projected to grow 13.3% in 2025 and 13.7% in 2026 vs. 7.3% projected expansion in 2024, based on the most recent Zacks data.

On top of that, the Fed is set to lower rates in 2025.

Earnings and interest rates drive the market. Therefore, investors might start dipping their toes into beaten-down stocks and ETFs, or at least preparing to strike if we get a larger flush.

Time to Buy Beaten Down Tech Stocks and ETFs?

Invesco’s QQQ ETF tracks the Nasdaq-100 Index, providing exposure to Apple, Microsoft, Nvidia NVDA, and nearly all of the largest and most innovative tech companies.   

QQQ is a simple way to invest in the tech sector without picking winners. The ETF has dropped below its 200-day moving average just like the Nasdaq.

The tech ETF has given up all of its post-Trump election gains and it just fell below its summer highs.

QQQ’s Thursday drop pushed it to the verge of a correction, down roughly 10% from its February records. Investors with long-term outlooks might want to consider nibbling at QQQ here and buying more if it continues to drop.

Those who want to buy individual tech stocks might take a look at Meta and Amazon.

Meta META stock has dropped 15% since February 14.

The fall took Meta from its most heavily overbought RSI levels in the last five years to close to oversold and below its 50-day.

Meta trades at its 10-year median and a 60% discount to its 10-year highs at 24X forward 12-month earnings.

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Meta’s bull case is simple: Meta’s core social media and messenger business has thrived despite competition from TikTok and others.

Meta is set to expand for years in a world of smartphone addicts. The company reaches 3.3 billion people daily across its apps.

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Mark Zuckerberg and Meta are also carving out a unique path in the artificial intelligence arms race by going all-in on open-source AI.

Meta is projected to grow its earnings by around 12% in 2025 and 2026 on the back of 15% and 13%, respective sales growth.

This backdrop might encourage some investors to take a chance on the Meta now, or at least circle it on their watchlists to strike at a potentially lower price.

Amazon AMZN shares have tanked 17% since its early February earnings release. Investors used the report to take profits on the overheated stock.

AMZN fell to its 200-day and just above its 50-week. Amazon may come under more selling pressure.

But Amazon trades over 90% below its highs and a 50% discount to its 10-year median at 31.9X forward 12-month earnings.

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Amazon trades at some of its cheapest forward earnings levels since the 2008 financial crisis driven mostly by its massive earnings growth.

Amazon is projected to grow its EPS by 14% in 2025 and 18% in FY26, following a 90% expansion last year.

AMZN is expected to boost its sales by 9% in FY25 and 10% next year to $769 billion in 2026—adding $130 billion vs. FY24.

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Amazon remains a cloud computing power and the giant of e-commerce.

AMZN is also spending heavily to ensure it grabs its share of the rapidly expanding AI pie. Amazon is even trying to compete against Nvidia in the AI chip market. 

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This article originally published on Zacks Investment Research (zacks.com).

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