Paul R. La Monica

Tech stocks are off to an awful start this year. The Nasdaq Composite has tumbled 6.5% so far in 2025, while the Roundhill Magnificent Seven exchange-traded fund has fallen 11%, dragged down by steep drops in Nvidia and Tesla. But there may be some tech stocks that could hold up even as investors worry about a momentum pullback.

Analysts at Trivariate Research identified several technology stocks that have low betas and positive skew, meaning respectively that they tend to be less volatile and have lower correlations to the broader market. In other words, they could go up even in a down market.

International Business Machines, Motorola Solutions, Cognizant Technology Solutions, Check Point Software Technologies and Amdocs were some of the low beta/positive skew stocks singled out by Trivariate. Because they tend to be less volatile, the Trivariate team wrote that investors might want to buy them to minimize risk.

That strategy seems to be working out in 2025. IBM is up more than 15% so far in 2025, and shares of Big Blue are not far from a record high as investors have recognized that it may be a less pricey artificial-intelligence play thanks to its Watson X technology.

Cognizant, Check Point and Amdocs have also bucked the downward trend in tech this year, and have rallied. Check Point even hit a new all-time high on Friday.

Motorola Solutions has fallen nearly 10%, though, but Wall Street is bullish. Eleven of the 14 analysts that cover Motorola Solutions stock have buy or outperform ratings, and the consensus target price of just above $522 is nearly 25% above current levels.

Others think that investors can be opportunistic amid the tech selloff as well.

Shannon Saccocia, chief investment officer with Neuberger Berman Private Wealth told Barron's she's recommending that investors rotate a little bit out of the megacap techs due to valuation concerns. But she said there could be bargains in "second-tier" tech stocks that still have strong earnings growth and "haven't been caught up in the momentum trade."

And Eric Freedman, chief investment officer at U.S. Bank Asset Management, said in an interview with Barron's that investors need to pick their spots in tech as well. He said investors should be looking more at software companies since they are the ones rolling out more AI features and stand to gain from cheaper technology that may come about from competition from DeepSeek and other Chinese companies. "We like software over semiconductors. They are the beneficiaries of lower selling prices," he said.

But investors may need to be wary of higher-beta tech stocks that could still have more downside ahead as well as techs that have so-called negative skew, which tend to be more volatile. Shopify, MicroStrategy, Workday, Zoom Communications, Intel, and SoundHound AI were some of the names identified by Trivariate as being higher risks right now.

"These might be less defensive in a down market than investors anticipate," the Trivarirate research team wrote in its report.

Write to Paul R. La Monica at paul.lamonica@barrons.com

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March 07, 2025 13:37 ET (18:37 GMT)

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