Buy the Dip Mentality Revived in Tech Amid Recent Market Shocks

Two significant market declines within three weeks of President Trump's second term have prompted a familiar strategy for tech investors: "buy the dip."

Tariff apprehensions triggered the recent sell-off, leading to a 4% drop in small-cap stock futures overnight. However, by Tuesday's close, markets had recovered most of those losses. Similarly, concerns about AI competition from DeepSeek sent chip stocks plummeting, particularly Nvidia (NVDA).

In both instances, investors aggressively embraced the "buy the dip" approach, leveraging their purchases. Despite Nvidia's 17% loss on January 27th, the GraniteShares 2x Long NVDA ETF (NVDL) reportedly attracted $1.6 billion in inflows. This ETF aims to double the daily returns of NVDA, amplifying Monday's decline to 34%.

ETF strategist Todd Sohn observes that the "buy the dip" mentality persists in the tech sector. Vanda Research reports that retail traders invested approximately $4.25 billion into US financial markets during the Nvidia selloff, the highest inflow rate since November's election period.

This reflexive "buy the dip" behavior is a result of years of easy money policies and swift recoveries during the global financial crisis and COVID-19 pandemic. However, markets have demonstrated sensitivity to event risks this year, as evidenced by the DeepSeek and tariff developments.

Despite these risks, dip-buying optimism remains strong. As Tuesday's market close indicated, investors are willing to overlook volatility and embrace the potential for gains by purchasing dips in tech stocks.