Tesla Is Last Stronghold for Investors Buying the Dip in Tech Stocks

As for Tesla, individuals have been steady buyers since the end of 2021, doubling down when the stock tumbled to close out 2022. They have spent more money on Tesla shares in the past six months than in the five years prior, Vanda found. And on Jan. 10, one-day net purchases of Tesla shares hit a record high of $316 million.

“As markets took a big hit, we saw retail investors shift into their favorite tech stock rather than investing across the whole sector,” Vanda analyst Lucas Mantle said of Tesla. “It might be the last shoe to drop.”

The Federal Reserve’s fight to tame inflation through aggressive interest-rate increases last year abruptly changed the outlook for big tech stocks, which for years had lifted the major stock indexes to new highs. Investors were forced to reassess the pros and cons of investing in companies whose appeal centered on the prospect of huge profits years down the line.

Tesla shares dropped 65% in 2022, their worst year on record.

Facebook

parent Meta Platforms Inc. sank 64%, and

Netflix Inc.

declined 51%. But tech and other growth stocks have rebounded to start the new year, buoyed by hopes that the Fed will slow its pace of rate increases. The S&P 500 has edged up 3.2% in January.

In the coming week, investors are awaiting quarterly earnings reports from Tesla, along with

Microsoft Corp.

,

Intel Corp.

and other big companies for the latest updates on how they are weathering tough economic conditions. They will also parse the Fed’s preferred gauge of inflation for clues about the trajectory of monetary policy.

Even as skeptics cite concerns about production disruptions, demand worries and Chief Executive Elon Musk’s divided attention after his acquisition of Twitter Inc., Tesla’s most ardent supporters keep their faith in a long-term payout.

Abhas Gupta, a 41-year-old entrepreneur in Irvine, Calif., said he moved his whole equity portfolio into Tesla shares in 2018, enamored by its electric cars and promise of disruptive innovation. Last year, he lost his entire seven-figure retirement fund after taking out margin loans and using options to turbocharge his bets on Tesla, he said. Still, he said he is far from calling it quits.

“I basically burned a lifetime’s worth of wealth, but none of this has shaken my confidence in the company. There is just no company even remotely close to Tesla on innovation,” Mr. Gupta said. 

“Why would I invest in a basket of dinosaurs?” he said of the S&P 500.

Mr. Gupta said he is aggressively buying long-dated call options on Tesla. Call options give traders the right, though not the obligation, to buy shares at a stated price by a certain date, while put options grant the right to sell.

Overall, options volume in Tesla has grown in the past few months, according to Cboe Global Markets. One of the largest options bets on Tesla is that shares will reach $825 in the next three years; the stock closed at $133.42 per share Friday.

Gabriel Wilson, a 52-year-old physician who splits his time between Texas and New York, said the Fed remains his primary concern in the market. After first leasing Tesla’s Model X in 2018, he said he moved all of his investments into Tesla. Although he cashed out his holdings around the end of 2021 due to concerns about near-term market weakness, he is looking to buy Tesla shares again soon, he said.

Despite last year’s market turmoil, he hasn’t touched a roughly $100,000 trust fund for his son held solely in Tesla shares, he said.

“No one can compete with Tesla,” Dr. Wilson said. “I have absolutely no doubt Tesla is the future.”

Many professional investors remain cautious on tech stocks to start the new year. Fund managers rotated out of technology stocks in January and are more underweight the sector than their historical positioning, according to

Bank of America Corp.’s

latest global fund manager survey.

But some individuals are betting that tech could reign supreme again if the Fed signals plans to pivot from raising interest rates. Federal-funds futures, used to wager on the course of interest rates, show traders expect the central bank to cut rates later this year, even though Fed officials have repeatedly said their work to cool the economy isn’t done.

Nicki Bourlioufas, 51, said she bought shares of

Advanced Micro Devices Inc.

and

Nvidia Corp.

last year, then refrained from adding new positions as those semiconductor stocks struggled. The financial public-relations consultant in Sydney said she is looking for opportunities to pick up shares of Tesla, along with Microsoft,

Apple Inc.

and

Alphabet Inc.

“As soon as there’s any hint that interest rates will be cut, then I expect tech stocks will rally and I’d like to be there and positioned,” she said. “I use their products and I’d like to also reap their profits.”

Write to Hannah Miao at hannah.miao@wsj.com