Samsung’s stock just dropped despite promising an 1,800% jump in profits. Is big tech about to break? Protect yourself

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The selloff in semiconductor stocks worsened in early July as shares in Samsung Electronics tumbled, despite a very optimistic earnings report.

Shares of the electronics giant were off 6.25% Wednesday, July 8 on the South Korean stock market (the company does not trade on major American markets). That followed a steep 8% dive the previous day.

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That decline, and the continued fall, came despite a company announcement that it expects operating profit to jump 1,800% with quarterly profits besting both Apple and Nvidia (1).

This is another dive for Samsung stock in the past month. In late June, shares fell 12% (rival chipmaker SK Hynix was down an equal amount that day). That triggered a 20-minute trading halt by the exchange operator.

“It’s unnerving that you’re seeing this kind of volatility,” Alexander Redman, chief equity strategist at the brokerage CLSA, said at the time (2). “It just feels very, very frothy.”

Big earnings, but not big enough

Samsung reported a preliminary operating profit of about $58 billion for the April–June quarter. That was 6% above analyst expectations (3). Normally, that would cause the stock to surge, but expectations in the artificial intelligence space are sometimes unreasonably high.

Some investors could also have been taking profits. Despite Wednesday’s drop and the decline in June, Samsung shares are up 116% year to date — and more than 350% in the past year.

The Samsung selloff had ripple effects throughout the sector. SK Hynix was down just under 5% that same Tuesday and another 6% Wednesday in South Korea. U.S. memory makers also saw losses, but regained strength in early trading the following day.

As of mid July, Samsung stock has continued to slip despite a brief recovery on the 15th (4).

Read More: Millionaires under 43 hold only 25% of their wealth in stocks. Here’s where their money is actually going

Is the bubble about to pop?

Artificial intelligence has become Wall Street’s biggest growth story and a global powerhouse, helping propel many of the largest tech companies to record-breaking valuations. Companies tied to AI have added trillions of dollars in market value over the past few years.

But that rapid climb has also made the sector increasingly vulnerable to pullbacks amid a tumultuous economic backdrop. It’s also connected AI prospects directly to traditionally stable investment vehicles like ETFs tracking the S&P 500.

Even as AI optimism continues to fuel long-term enthusiasm, inflation worries, shifting interest-rate expectations and growing concerns about lofty valuations continue to weigh on the broader tech sector.

Veteran investor Jeremy Grantham argues the AI frenzy has pushed valuations to unprecedented levels.

“Based on the value of the stock market compared to GDP, with modifications, this is the most expensive market in American history,” Grantham said in an interview with CNBC (5).

This market capitalization-to-GDP ratio currently sits around 235%. That’s well above the level legendary investor Warren Buffett once warned about.

Buffett said back in 2001 that when the indicator “approaches 200% — as it did in 1999 and a part of 2000 — you are playing with fire (5).”

While no one knows exactly when a correction could happen, elevated valuations can leave your portfolio vulnerable when sentiment shifts. Fortunately, there are still options available for investors trying to soften the blow and capitalize afterwards.

Stick to safer bets

As markets remain highly volatile, diversification is now more crucial than ever.

Although megacap tech stocks bounced back after June’s encouraging inflation data, the broader outlook remains clouded. Tensions between the U.S. and Iran have pushed energy prices higher again, which could spark another pullback.

Rather than relying entirely on high-growth AI stocks, it may be worth adding investments that don’t move in lockstep with equities.

Hedge with a safe-haven asset

If AI stocks stumble after their historic run, assets that have traditionally performed differently from equities could help soften the blow.

Gold has long been considered a safe-haven asset because its value isn’t tied to the fortunes of any single company or industry. During periods of inflation, geopolitical uncertainty or financial market stress, investors have often flocked to the precious metal as a store of value.

One way to invest in gold that also provides significant tax advantages is to work with Priority Gold to open a gold IRA.

This allows you to hold physical gold or gold-related assets within a retirement account, which combines the tax advantages of an IRA with the protective benefits of investing in gold.

If you opt for Priority Gold’s platinum package, you can get free account setup and insured shipping and storage for up to five years. Plus, you can also roll over your existing IRA or 401(k) into a precious metals IRA with Priority Gold — tax and penalty-free.

And when you make a qualifying purchase with Priority Gold, you can receive up to $10,000 in precious metals for free. Just keep in mind that gold is often best used as one part of a well-diversified portfolio.

Add real estate to the mix

Another way to reduce your reliance on AI stocks is by owning assets driven by entirely different economic forces. Real estate values tend to depend on factors such as housing demand, rental markets, construction activity, and local demographics rather than on investor sentiment surrounding the latest AI breakthrough.

This can allow real estate investors to hedge their portfolios in case high-growth tech stocks experience a prolonged correction. Even better, during periods of stock market volatility, rental properties can continue to generate income, and rents have historically trended higher as the cost of living rises.

And you don’t need hundreds of thousands of dollars to invest in real estate. You can buy in shares of rental homes nationwide through platforms like mogul.

Founded by former Goldman Sachs real estate investors, mogul handpicks the top 1% of single-family rental homes nationwide for you. This way, you can invest in institutional-quality offerings for a fraction of the usual cost — while receiving monthly rental income, real-time appreciation, and tax benefits.

The team at mogul carefully vets each property, requiring a minimum 12% return even in downside scenarios. Across the board, the platform features an average yearly return of 18.8%. Their cash-on-cash yields, meanwhile, average between 10% to 12% annually. With investments typically ranging between $15,000 and $40,000 per property, offerings often sell out in under three hours.

Getting started is a quick and easy process. You can sign up for an account and then browse available properties. Once you verify your information with their team, you can invest like a mogul in just a few clicks.

Lock in your returns with a CD

If your priority is protecting a portion of your savings while earning a competitive return, consider investing in a Certificate of Deposit (CD).

Unlike stocks, CDs don’t depend on earnings growth or market sentiment. They typically pay higher interest than traditional savings accounts, which are locked in for the full term. That means you know exactly how much you’ll earn, even if markets become more volatile or interest rates start falling.

For those seeking predictable, reliable growth, a platform like CD Valet can help you find higher-yield options that work for you, whether you’re saving for something soon or building a cushion for the long haul.

CD Valet tracks over 40,000 verified rates from FDIC-insured banks and NCUA-insured credit unions nationwide. Unlike other websites, they show every publicly available rate, ensuring you have a comprehensive view of the market.

Plus, their CD rates are updated continuously, so you can shop, compare and open CDs with ease.

Boost your passive income

As the markets remain volatile, building additional sources of income that aren’t dependent on stock prices can help shield your finances if equities take a hit. If you like the idea of a CD, but want higher returns and the security of investing in real estate, there are even more options on the table.

The Arrived Real Estate Income Fund is designed to generate regular dividend income while focusing on capital preservation. The fund currently manages more than $83 million in assets and has historically delivered an annualized cash yield of more than 8.1%.

How it works is simple: Arrived offers short-term loans for professional real estate projects seeking to renovate, refinance or fund new construction. Each loan goes through a disciplined selection process and is backed by residential real estate, adding another layer of underwriting rigor and downside protection.

Even better, Arrived Real Estate Income Fund investors also have quarterly liquidity options beginning six months after their initial investment, offering more flexibility than many traditional income-focused investments.

You can also invest with just $100 to see if it’s right for you before committing.

— With files from Chris Morris

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Article Sources

We rely only on vetted sources and credible third-party reporting. For details, see our ethics and guidelines.

CNBC (1), (5); The New York Times (2); Yahoo Finance (3); Yahoo Finance Canada (4); Berkshire Hathaway (6)

This article provides information only and should not be construed as advice. It is provided without warranty of any kind.