My Top 5 Bargain AI Stocks to Buy in the Nasdaq Correction
The Nasdaq, an index that led overall stock market gains over the past two years, has done just the opposite over the past few weeks. The tech-heavy benchmark fell into correction territory, dropping more than 10% from its most recent peak on Dec. 16. The reason for this major turnaround? With concern mounting about the impact of President Trump’s tariffs on the economy and corporate earnings, some investors have shifted out of growth stocks — including artificial intelligence (AI) players. Growth companies generally are most sensitive to the economic backdrop, making them the first to suffer when uncertainty is high.
But even though it might feel intimidating to invest in growth companies during tough or uncertain times, it actually has proven to be a fantastic strategy for long term investors. That’s because, over time, the Nasdaq always has gone on to recover and grow — after every downturn or crash. So if you buy a fund that tracks the index or a handful of quality stocks now, you may set yourself up for a significant win over the long haul.
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The reason to buy at this point is, following recent declines, many AI stocks are trading for bargain prices — and the AI growth story is far from over. Let’s check out my top five to buy in the Nasdaq correction.
Image source: Getty Images.
1. Nvidia
Nvidia (NASDAQ: NVDA) is the stock to buy to gain exposure to AI, a market expected to surpass $1 trillion by the end of the decade. The company is the leader in the AI chip market and has built an entire portfolio of products to handle the needs of just about any AI customer.
This has translated into double- and triple-digit revenue growth quarter after quarter, and with margins surpassing 70%, a high level of profitability on sales. So Nvidia is winning when it comes to growth and ensuring profit. On top of this, the tech giant pledges to update its chips on an annual basis, and this commitment to innovation should keep it ahead of the crowd.
Today, Nvidia shares are trading for 27 times forward earnings estimates, down from 50 earlier this year. Considering Nvidia’s earnings track record, market leadership, and plans to innovate, this looks like a golden opportunity to get in on this long-term stock.
2. Palantir Technologies
Palantir Technologies (NASDAQ: PLTR) offers customers an AI-driven platform to help them make better use of their data. Though this may sound mundane, it’s actually just the opposite. Palantir’s Artificial Intelligence Platform (AIP) is helping customers score major gains in efficiency and is positioning them to make game-changing decisions.
The company has been most linked to government contracts over its 20-plus years in business, but in recent times, its commercial business has taken off — today, both of these businesses are generating double-digit revenue growth. Palantir shares have fallen in recent weeks as investors fear cuts to the budget of the Pentagon — a big customer — could hurt revenue. But Palantir’s ability to help customers gain in efficiency actually could result in additional government contracts and more revenue.
And, in any case, the company’s long-term prospects in both commercial and government markets look bright, making it a solid long-term buy — especially since its forward PEG ratio has fallen to less than 1, suggesting it isn’t overvalued.
3. Alphabet
Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is using AI to make its top performing platform, and one that helps it generate billions of dollars in revenue, even better. I’m talking about Google Search, the world’s leading search engine. Alphabet has developed its own large language model (LLM), Gemini, to improve search results and the experience for advertisers.
But Gemini’s power doesn’t stop there. It’s helping drive growth at Alphabet’s cloud business, Google Cloud — a unit that delivered revenue gains of 30% in the most recent quarter to $12 billion. Customers are flocking to Google Cloud for a variety of products and services as they build up their AI platforms. And since we’re still in the early days of AI growth, this is likely to continue.
Today, Alphabet is the cheapest of the Magnificent Seven stocks, the tech players that led market gains over the past two years. The stock trades at only 18 times forward earnings estimates, while most others trade in the range of 23 to 31. All of this makes it the top Magnificent Seven bargain to buy now.
4. Broadcom
Broadcom (NASDAQ: AVGO) is a networking giant, selling thousands of connectivity products that you’ll find anywhere from your own home to a huge data center. And demand from AI customers has helped revenue soar in recent times.
For example, in the latest quarter, Broadcom delivered a 77% increase in AI revenue to more than $4 billion, and infrastructure software revenue jumped 47% to $6.7 billion. The company predicts ongoing strong demand in the coming quarter as customers pile into Broadcom’s XPU chips and connectivity products.
Broadcom works closely with three major cloud service providers that it predicts will generate a serviceable addressable market of $60 billion to $90 billion in the 2027 fiscal year. And on top of this, the company is attracting business from other cloud providers — two others recently chose Broadcom for custom accelerators to train advanced AI models.
So, Broadcom, at 29 times forward earnings estimates down from more than 36 earlier in the year, offers investors a great entry point today.
Image source: Getty Images.
5. Amazon
AI already is boosting earnings at e-commerce and cloud computing giant Amazon (NASDAQ: AMZN). The company uses the technology throughout its e-commerce business to gain in efficiency and better serve customers. And in its cloud computing unit, Amazon Web Services (AWS), it offers a full portfolio of products and services to AI customers — this helped AWS reach a $115 billion annual revenue run rate last year.
Since AWS is the world’s biggest cloud company, Amazon has access to an enormous number of potential AI customers — and Amazon has structured its offerings to suit all of them. AWS offers premium Nvidia chips, but it also sells its own in house-designed chips for the cost-conscious customer. And it offers a fully managed service called Amazon Bedrock, which allows customers to adapt popular LLMs to their needs.
Amazon is well positioned to gain as the AI market grows, and that means today, at 31 times forward earnings estimates, down from 45 last year,, it’s a screaming buy.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Nvidia, and Palantir Technologies. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.