The stock market, and in particular the technology sector, has been in selloff mode since early October. The combination of unresolved trade disputes and rising interest rates is starting to threaten the underlying health of the global economy. This is bad news for stocks, and especially so for tech stocks, which have pushed higher over the past several years based on the assumption that big growth would persist for a lot longer. All the sudden, big growth going forward is anything but a sure thing, and tech stocks are consequently falling off a cliff.
But, not all tech stocks have suffered the same fate.
While pretty much all the heavy-hitting FAANNG stocks are in bear market territory and the Nasdaq Composite is in correction territory, not all tech stocks have dropped since early October. Instead, some tech stocks have displayed shocking and impressive resilience due to low exposure to the tariff and interest rate headwinds.
These headwinds will likely persist. It increasingly looks like both China and the U.S. are playing the long game, and that the trade situation will get worse before it gets better. Also, despite recent market volatility, the Federal Reserve hasn’t backed off of its hawkish tone, and interest rates will likely keep heading higher.
Because of this, tech stocks may continue to struggle for the next several months. But, the tech stocks which have been resilient thus far, should continue to be resilient over the next few months, too. As such, if you like tech but want to mitigate exposure to broad tariff and interest rate headwinds, look at the group of tech stocks that have weathered the recent market selloff.
Which tech stocks are those? Let’s take a deeper look.
Microsoft (MSFT)
![Tech Stocks That Have Weathered The Market Sell-Off: Microsoft (MSFT)](https://investorplace.com/wp-content/plugins/lazy-load/images/1x1.trans.gif)
% Change Since Oct. 1 (Alpha vs Nasdaq): -8% (+4 points)
The first stock on this list is the only mega-cap tech giant that hasn’t been absolutely butchered during the recent market selloff.
Internet giant Microsoft (NASDAQ:MSFT) is down just 8% since Oct. 1 and it is roughly 8% off all time highs. That means MSFT isn’t even in correction territory yet. Meanwhile, all the FAANNG stocks besides Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) are well into bear market territory (20% or more off recent highs), and GOOG stock is almost there.
Why the resilience in MSFT stock? The big headwinds dragging down mega-cap tech (higher rates weighing on valuations and upping debt costs, regulation threatening growth in the digital ad industry, tariffs pulling down margins, the crypto bubble popping, so on and so forth) do not apply to Microsoft. Meanwhile, the tailwinds, which are keeping tech stocks afloat (big growth in AI and data markets) do apply to Microsoft. Thus, MSFT stock is benefiting from all the tech tailwinds, while having mitigated exposure to the headwinds.
This should persist for the foreseeable future. Microsoft’s red-hot cloud business is only getting hotter, and the company’s pioneering efforts in AI remain impressive and market-leading. So long as these two tailwinds remain robust, MSFT stock should continue to weather broader tech market weakness.
Tesla (TSLA)
![Tech Stocks That Have Weathered The Market Sell-Off: Tesla (TSLA)](https://investorplace.com/wp-content/plugins/lazy-load/images/1x1.trans.gif)
% Change Since Oct. 1 (Alpha vs Nasdaq): +10% (+22 points)
The second stock on this list is a company that struggled when tech markets were red-hot, but is now surging as tech markets are struggling.
Electric vehicle manufacturer Tesla (NASDAQ:TSLA) was a perpetual sideways stock for the better part of 2017 and into the first half of 2018, while the Nasdaq rallied by more than 50% during that stretch. But, as the growth fundamentals across the technology sector have weakened over the past two months due to the threat of higher rates and bigger tariffs, Tesla’s growth fundamentals have actually improved.
Last quarter was a landmark quarter for TSLA. The company successfully accelerated Model 3 production to record levels. Now, the company is producing enough Model 3 vehicles to reasonably match mass market demand. Plus, the company turned a profit in Q3, the first time Tesla has done that in several years. Considering vehicle production is only improving, gross margins are only moving higher and opex rates are only dropping with scale, it looks like profitability this time around is here to stay.
In other words, Tesla has turned the page in its growth narrative. This is no longer a company struggling with production and profits. Tesla is now a company with healthy and improving production levels and consistent profitability. So long as production and profits continue to move in the right direction, TSLA stock will head higher regardless of the broader market trend.
Nio (NIO)
![Tech Stocks That Have Weathered The Market Sell-Off: NIO (NIO)](https://investorplace.com/wp-content/plugins/lazy-load/images/1x1.trans.gif)
Much like Tesla, the next stock on this list has surged higher while broader tech markets have struggled due to improving fundamentals.
The “Tesla of China,” Nio (NYSE:NIO), has seen its stock rise by over 13% since early October, while the Nasdaq has dropped 12%, giving the stock a whopping 25 points of alpha during that stretch.
Why the big out-performance? Because one of the biggest headwinds affecting broader tech stocks (the threat of bigger tariffs) is actually a benefit for NIO. The logic is pretty straight forward. The more tariffs the U.S. and China implement on one another, the more consumers turn to products and goods that are produced domestically. A large chunk of NIO’s competition in China produces vehicles outside of China. NIO produces its vehicles in China. As such, bigger tariffs push Chinese consumers toward NIO.
The long-term outlook on NIO stock still lacks clarity. But, there have been and continue to be positive near-term developments such as bigger tariffs and strong EV sales trends in China, which should keep this stock afloat amid broader market volatility.
Intel (INTC)
![Tech Stocks That Have Weathered The Market Sell-Off: Intel (INTC)](https://investorplace.com/wp-content/plugins/lazy-load/images/1x1.trans.gif)
% Change Since Oct. 1 (Alpha vs Nasdaq): +3% (+15 points)
Next to Microsoft, there is also one other blue-chip tech giant that has performed reasonably well over the past two months while tech stocks have struggled.
Chipmaker Intel (NASDAQ:INTC) has seen its stock rise by 3% since early October, giving the stock 15 points of alpha over the market during that stretch. This is especially impressive considering its semiconductor peers Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) are down 45% and 40%, respectively, in the same period.
Where has Intel stock succeeded where Nvidia and AMD stock have failed? Valuation and consistency. In early October, AMD stock was trading at nearly 70X forward earnings. Nvidia stock was trading at 40X forward earnings. Intel stock was trading at just 10X forward earnings. Naturally, as investors have grown increasingly concerned about a looming recession, AMD and Nvidia have suffered from multiple compression, while Intel has not.
Also, AMD and Nvidia both had sizable exposure to the cryptocurrency mining market. Intel did not. As such, as this market has essentially gone to zero over the past few months, AMD and Nvidia stock have both dropped due to decelerating growth. Intel stock has not, because its growth trajectory has actually improved.
Intel’s resilience should continue. Much like Microsoft, Intel is benefiting from tailwinds in its core data-center market, while having mitigated exposure to tariff and interest rate risks. Thus, so long as Intel’s data-center tailwinds remain robust, INTC stock should perform well.
As of this writing, Luke Lango was long MSFT, GOOG, TSLA, INTC and NVDA.