After a nearly perfect start to the year, the financial world was shaken yesterday as US investors saw more than $1 trillion vanish from the stock market. Losses were primarily led by AI superstar NVIDIA (NASDAQ:NVDA), which plunged nearly 17%, or approximately $600 billion in market cap—the largest one-day loss for a stock in the history of the stock market.
The upheaval followed news that Chinese artificial intelligence (AI) startup DeepSeek's latest model has developed a cost-effective, high-performing solution to AI processing, calling into question the rich valuations of high-flying AI tech companies.
European stocks also were on a rout, with the iShares STOXX Europe 600 Technology UCITS (ETR:SX8PEX) down another 5.2%.
But as the dust settles on the selloff, the main question now preying on investors' minds is - Is this the right time to buy the dip, or are the worries around DeepSeek justified? (You can leave your opinion in the comments section of this article or check out the Nasdaq futures forum here).
While the jury remains out, one thing is certain: taking all your money out of the market and running for the hills as a nervous reaction to the selloff is never the best answer.
However, that does not mean you should simply do nothing and watch as your investments fall at the risk of losing a significant part of their earlier gains either.
Regardless of whether you believe this dip will be bought as soon as the market opens or that this is the start of something much bigger, having the proper risk exposure within your portfolio remains the surest path to long-term wealth generation.
To be fair, if you haven't done so, adjusting the risk exposure in portfolios was already overdue before this selloff, given that the market had been fluctuating around all-time highs for a long time and volatility was a sitting duck.
This is where InvestingPro's superior suite of offerings, otherwise only available to professional investors, can completely transform your long-term wealth generation plans.
Whether it is from the financial metrics side, from the news side, or for finding defensive ideas in the market, we have got you covered. Check out InvestingPro here for less than $7 a month as part of our New Year sale.
Here are a few ways you can turn to InvestingPro for answers on how to fare in this volatile moment:
Most Undervalued Stocks
InvestingPro members can see all the cheapest stocks in the market here, according to their latest financial metrics. Being positioned at these stocks when the market is this expensive can prove the difference between holding steady and sinking like a rock amid a selloff. Moreover, this could be a great opportunity to get high-growth names at a discount.
Most Overvalued Stocks:
Check out this list to see if you are holding any highly overvalued names, as they tend to sink faster when the market is going under.
Pro News:
Stay up-to-date on what major Wall Street analysts are saying about the stocks you hold at the second their reports come out. For instance, this morning, Bernstein defended Swedish AI giant's Munters Group (ST:MTRS) valuation, prompting a rebound for the stock.
As a matter of fact, analysts at Cantor have gone as far as to say that, "DeepSeek is 'very bullish' for Nvidia, not bearish."
Stock Screener:
Among the several sectors selling off, Chinese tech is not only undervalued, but it is also jumping on the news. Know which names are moving the market? Then check out this tech innovators screener for ideas.
ProPicks AI:
If you are looking to lower your risk exposure, check out our low-risk AI-powered stock picks, such as Top Value Stocks - a strategy that outperformed the S&P 500 last year by 9% despite holding a mid-to-low risk/return proposition. As a matter of fact, Top Value is up a fantastic 5.9% in January alone, with picks such as Builders FirstSource (+17.8% this month) and Insight Enterprises (NASDAQ:NSIT) (+14.5% this month) - among several other names.
Diversify Geographically:
Prior to today's selloff, US stocks had been the most expensive in relation to European ones in more than 35 years. While the outperformance can very well continue for years, such divergencies often precede a change in narrative, with fat gains for those able to spot high-value contrarian plays.
InvestingPro members can check out our global strategies here, available since the start of this year, with picks such as:
- SemCNS Co Ltd (KQ:252990) (Korea): +30% in January.
- Iveco NV (BIT:IVG) (Italy): +20% in January.
- G2 Goldfields (TSX:GTWO) (Canada): +22.2% in January.
- Banco de Sabadell (OTC:BNDSY) (BME:SABE): (Spain) +16.9% in January.
Among several others...
Bottom Line
Putting too much emphasis on the DeepSeek news is a fool's errand at this point. If you hold a consistent long-term plan based on well-researched, value-generating names, this selloff can very well prove to be a fantastic opportunity to find the right stocks at a discount.
