Top Two Stocks to Consider Amid Nasdaq Market Correction

The Nasdaq Composite (NASDAQINDEX: ^IXIC) has entered correction territory, reflecting a decline of at least 10% from its peak. Although many investors are apprehensive about market downturns, this pullback offers a compelling opportunity to acquire quality stocks at reduced prices. Let’s examine two promising companies well-positioned for long-term growth that you can buy during this market dip.

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1. Alphabet

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has seen its shares decrease approximately 20% from their peak in February. This decline has brought its forward price-to-earnings (P/E) ratio down to an attractive 18.5, an appealing valuation for such a diversified company.

While primarily known for Google, its dominating search engine, Alphabet encompasses a broader array of businesses. It stands as the world’s top digital advertising company, effectively linking advertisers with consumers via its own platforms and various third-party sites. Google remains the largest digital advertising network, closely followed by YouTube, the fourth largest globally. Competing entities include Meta Platforms with its social media platforms like Facebook and Instagram, alongside Amazon which provides sponsored ads for products sold on its marketplace.

Currently, Alphabet focuses significantly on artificial intelligence (AI), leveraging it to enhance search results and develop AI Overviews which deliver concise answers to user queries. Historically, the corporation has only monetized ads on around 20% of its searches, and AI Overviews present a fertile ground for future growth by potentially introducing new ad formats. With a robust network of advertisers and abundant search data, Alphabet is well-equipped to capitalize on this opportunity.

Moreover, Alphabet’s latest Gemini 2.0 model is making strides to keep pace with competitors. It boasts its own app and is being integrated into various services across the organization. This development positions the company as a pioneer in multimodal search, including visual search capabilities. Additionally, its Veo 2 text-to-image video generator is outperforming rival technologies.

Furthermore, Alphabet ranks third in the cloud computing sector with Google Cloud, which assists clients in developing their AI models and applications. The division reported a 30% revenue increase last quarter and a remarkable 142% rise in segment income, indicating a turnaround to profitability after reaching scale. Collaborating with Broadcom, the company has also engineered its own custom AI chip, which contributes to faster processing times and reduced costs—essential factors for ongoing profitability improvement.

Alphabet is also pioneering in quantum computing and autonomous driving technologies. Its Willow chip made recent advancements in resolving issues central to quantum computing, while Waymo is the sole company currently providing paid robotaxi rides in the U.S.

In conclusion, Alphabet presents itself as an attractive investment at these levels.

Image source: Getty Images.

2. Microsoft

Similarly, Microsoft (NASDAQ: MSFT) is renowned for its Office 365 suite, which includes productivity tools like Word, Excel, and PowerPoint. However, its portfolio is far broader. Microsoft operates the world’s second-largest cloud computing service, maintains the Windows OS, and runs professional networking platform LinkedIn, along with software coding platform GitHub, AI voice system Nuance, and the Xbox gaming platform.

The company has shown agility, adapting its business model from traditional software licensing to subscription-based Office 365 offerings. Microsoft has also distinguished itself as a frontrunner in AI through significant investments and collaborations with OpenAI.

Its Azure cloud computing service has especially benefitted from Microsoft’s AI initiatives, boasting a 31% revenue increase last quarter. Following the trend, Azure AI revenue surged an impressive 157% year over year, attracting more customers to its tools and solutions like SQL Hyperscale and Cosmos DB.

A major growth avenue for Microsoft lies within its Microsoft 365 AI copilots—intelligent assistants designed to enhance productivity. These copilots can organize email messages in Outlook, summarize Word documents, and even assist in drafting PowerPoint presentations using conversational language. They are now tackling more complicated tasks, such as executing Python scripts in Excel using simple text prompts.

Priced at $30 per enterprise user monthly, in addition to the Microsoft 365 subscription, this service has substantial growth potential. If these copilots prove efficient, they may achieve widespread adoption over time.

In light of the market’s downturn, Microsoft’s stock is trading at a forward P/E ratio of 25 based on anticipated earnings for the fiscal year ending June 2026. This valuation is reasonable for a leading tech firm with a high degree of recurring revenue and a track record of successful adaptations. Therefore, now is an opportune moment to consider investing in Microsoft.

Should You Invest $1,000 in Alphabet Right Now?

Before making any investments in Alphabet, keep the following in mind:

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