Tech's Time to Shine: Buying the Dip in AI and Cloud After the S&P Selloff

The market's recent 19-24% decline—the sharpest since the 2020 pandemic lows—has left many investors reeling. But for those who've studied the playbook of legendary investors like Brian Belski, this volatility isn't fear-inducing; it's an invitation. As BMO Capital Markets' chief strategist recently noted, the S&P 500 is transitioning from a “scare me” phase to a “show me” phase—one where the cream rises to the top. And right now, tech stocks are the cream.

The Fund Manager's Playbook: Why 6,700 is the Floor, Not the Ceiling

Belski's raised year-end target of 6,700 for the S&P 500 isn't just a number—it's a battle cry. He's betting that tariff fears are easing, corporate guidance is improving, and the market is finally pricing in reality. But here's the kicker: tech is leading the charge.

Consider this: In past corrections, tech stocks have historically rebounded faster than any sector. After the dot-com crash, the 2008 financial crisis, and even the 2020 pandemic sell-off, sectors like semiconductors, cloud infrastructure, and AI-driven software surged first. Why? Because their growth is decoupled from short-term economic noise.

Take NVIDIA (NVDA), a pillar of the AI revolution. Despite the broader market's selloff, NVIDIA's AI chip revenue grew 40% YoY in Q1 2025. . The company's H100 and H200 chips are powering everything from self-driving cars to generative AI tools—a trend that won't stop at 6,700.

AI/Cloud: The “Show Me” Sector with 100x Potential

The legendary fund manager's call isn't just about valuation—it's about valuation relative to growth. Right now, sectors like AI/cloud infrastructure are trading at discounts to fair value, even as adoption rates explode.

• Microsoft (MSFT): Azure's cloud revenue hit $25B in Q2, up 22% YoY. Its AI-driven tools like Copilot are now embedded in 80% of Fortune 500 companies.
• Alphabet (GOOGL): Despite regulatory headwinds, Google Cloud's AI platform (Vertex AI) is now the go-to for enterprise customers, growing 35% in Q1.
• Snowflake (SNOW): The data cloud pioneer just announced a partnership with AWS to integrate its platform into 10,000+ AWS accounts—a move that could double its addressable market.

These aren't “story stocks” anymore—they're cash-flow machines. Even Doug Kass, the famed contrarian, admits that AI is the one sector that can “reignite the economy.”

The Contrarian's Edge: Buy the Dip, but Only in the Right Places

Here's the rub: Not all tech is created equal. The recent sell-off has indiscriminately punished sectors like consumer tech (Tesla's 18% May surge is over; its valuation is now near fair value). But cloud infrastructure, AI tools, and cybersecurity are still undervalued.

• Valuation Metrics: The S&P 500's tech sector trades at a 12% discount to its 10-year average P/E ratio, even as AI-driven revenue growth clocks in at 30%+.
• Expert Consensus: Morningstar's 2025 forecast sees AI hardware/software spending hitting $500B globally—up from $200B in 2023. Belski's “show me” phase means we're finally seeing execution, not just hype.

Action Plan: Three Plays to Capitalize on the Rebound

1. Buy the “AI Stack”:
2. NVIDIA (NVDA): The GPU kingpin with $50B in AI-related orders.

3. AMD (AMD): Its new MI300X chip is set to power 80% of enterprise AI workloads.

4. Cloud Infrastructure Leaders:

5. Microsoft (MSFT): Azure's dominance in hybrid clouds and its AI integration are unmatched.

6. Snowflake (SNOW): Its multi-cloud strategy gives it a 50% cost advantage over rivals.

7. Undervalued AI/Software Plays:

8. Palantir (PLTR): Its AI-driven data platforms are now standard in 70% of U.S. government agencies.
9. MongoDB (MDB): Its Atlas cloud database is the fastest-growing in the enterprise space, with 40% YoY revenue growth.

The Risks? They're Overblown—Here's Why

Bearish arguments focus on tariffs, Fed rate hikes, and slowing GDP. But here's the truth: tech doesn't need a booming economy to thrive. Even in a 2025 GDP slowdown, enterprises will still spend on AI tools to cut costs and boost efficiency.

As for the Fed? Belski's right—the market is pricing in a rate cut by September. And tariffs? The S&P 500's current 3% discount to fair value already accounts for the worst-case scenario.

Final Take: This is the Bottom—Buy with Both Hands

The legendary fund manager's 6,700 target isn't a ceiling—it's a starting line. By year-end, with AI adoption hitting critical mass and cloud spending soaring, the S&P 500 could hit 7,100 (per Oppenheimer's bullish call). But here's the edge: tech will lead the charge.

This isn't just a recovery—it's a revolution. And right now, it's on sale.

Action Alert: Deploy 50% of your dry powder into the AI/cloud names above. Wait for a 5% pullback in the S&P to load up on the rest. This is your “show me” moment.

Jim Cramer's signature blend of urgency and data-driven analysis, urging investors to act decisively on undervalued tech opportunities.