What initially seemed like a cause for celebration after Jerome Powell hinted that a September interest rate cut “could be on the table” quickly turned into another selloff for tech stocks the day after the July Federal Open Market Committee meeting.

Investors reevaluated their positions in tech giants in light of disappointing economic data released Thursday and the latest earnings reports, shifting toward a more risk-averse approach.

The Nasdaq 100, as tracked by the Invesco QQQ Trust (NASDAQ:QQQ), tumbled 2.7% after a 3% rally on Wednesday.

The Magnificent Seven tech stocks, monitored through the Roundhill Magnificent Seven ETF (NASDAQ:MAGS), declined by 1.9%. Chipmakers faced another significant blow, with the iShares Semiconductor ETF (NYSE:SOXX) plummeting over 7%, wiping out the gains made on Wednesday.

Some investors, relying on fundamentals, see potential entry opportunities during this selloff.

Ed Yardeni’s Insights On Tech Stock Prospects

Veteran Wall Street investor Ed Yardeni, chief investment strategist and president at Yardeni Research, said that despite investor disappointment in Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG) and Microsoft Corp. (NYSE:MSFT) earnings, there were no indications that artificial intelligence would fail to live up to expectations.

According to Yardeni, their capital spending plans—higher than anticipated—indicate a strong commitment to developing infrastructure to support AI.

“If that's the case, much of the selloff may be in the rearview mirror,” Yardeni wrote.

Despite the selloff, the MegaCap-8 stocks (excluding Tesla) are still enjoying “a banner year:”

• Nvidia Corp. (NASDAQ:NVDA): up 122% year-to-date through 1:30 p.m. ET Thursday.
• Meta: up 41%
• Netflix Inc. (NASDAQ:NFLX): up 29%
• Alphabet: up 22.5%
• Amazon.com Inc. (NASDAQ:AMZN): up 21.5%
• Apple Inc. (NASDAQ:AAPL): up 16.6%
• Microsoft Corp.: up 11.2%
• Tesla Inc. (NASDAQ:TSLA): down 12%

Some stocks within this group still offer attractive valuations, according to Yardeni.

For instance, he said Nvidia’s forward price-to-earnings (P/E) ratio of 32.1 is considered “extremely low” relative to its expected forward earnings growth of 60.9%. Similarly, Meta and Netflix are not fully recognized for their strong earnings growth, which almost matches their respective forward P/E ratios, he said.

“Conversely, some forward multiples are harder to justify,” Yardeni said.

Here’s a fundamental snapshot of the MegaCap-8 stocks in terms of their forward multiples and expected earnings growth:

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