Stock market correction: what have UK investors been buying in the past week?

UK stock investors have been busily buying the dip in tech shares. This follows last week’s carnage when the Nasdaq plunged into correction territory (a fall of 10%+ from the index’s recent high).

According to AJ Bell, six of the 10 most bought shares on its platform over the past week have been US tech companies. But which was the most popular?

Getting in on Google

Here are the 10 names:

As we can see, the theme here is that these are companies at the centre of the AI boom, namely SpaceX, Nvidia, Micron, Intel, and Google owner Alphabet. Most of these took a battering last week.

Now, while Standard Life tops the list, it’s worth noting that the pensions and retirement firm paid a dividend recently, so is probably on there due to automatic dividend reinvestment plans. If so, this skews the figures somewhat because it likely doesn’t reflect fresh buying interest.

Also, eagle-eyed readers will have noticed that Alphabet appears twice. That’s because there are two classes of public shares (C class have no voting rights).

Adding these together, we can see that Alphabet shares have been particularly popular recently. Why might that be?

Innovator’s dilemma?

The reason is that the tech giant slumped more than 12% at the end of October, shedding more than $500bn in market value in one day. Indeed, after peaking at $399 in May, the stock has tumbled to $285. That’s a fall of almost 30%!

The recent culprit was the firm’s Q3 results. Here, revenue of $127.6bn missed the mark slightly, but there was a much bigger earnings per share (EPS) miss ($2.12 reported versus $2.94 expected).

In particular, investors were spooked by weakness in Google Search. While revenue rose 12%, that was again short of the mark, fuelling fears that AI chatbots are starting to disrupt the core search business.

Ben Barringer of wealth manager Quilter Cheviot commented: “The problem for Google is it faces an innovator’s dilemma and doesn’t know whether to protect its core business or look to join the disruption. As such, Google has lost its edge with Gemini and is behind peers on agentic AI”. 

Is this as big a risk as it sounds? Well, it could be if there’s ongoing weakness in search’s numbers.

However, Alphabet put some of the weakness down to lower monetisation in AI Mode, which it’s now addressing by scaling ads in both AI Overviews and AI Mode. So the market sell-off could prove to be an overreaction.

Another issue though is the firm’s enormous capital expenditure on AI data centre infrastructure (projected to be as much as $205bn this year). This heavy spend tipped free cash flow into negative territory (-$9.1bn).

On the other hand, Google Cloud revenues skyrocketed 103% to $30.7bn, demonstrating the incredible AI demand flowing through its platform. And the Gemini app has reached 1bn users.

A forward P/E ratio of 19 doesn’t look overly expensive for a company of Alphabet’s quality. My feeling is that the stock will eventually recover and gain new highs in future.

However, with AI jitters showing little sign of easing, that might take some time. As such, it’s not one I’m looking to buy right now.

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Ben McPoland owns shares of Nvidia, Rolls-Royce and SpaceX.