# Nasdaq’s Volatility: Key Bargains to Consider in a Downturn
Volatility has returned to the Stock market, particularly impacting the tech-heavy Nasdaq Composite index. Currently, this index has fallen about 3.8% year to date and is down approximately 7.5% from its all-time high. This decline indicates that the Nasdaq is nearing a technical correction, defined as a drop of 10% from its recent peak.
Given the current market environment, some investors are questioning whether there are any bargains within the Nasdaq. Today, three Motley Fool contributors will present their preferred investment opportunities: Advanced Micro Devices (NASDAQ: AMD), Broadcom (NASDAQ: AVGO), and Amazon (NASDAQ: AMZN).
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High-Potential AI Stock: Advanced Micro Devices
Will Healy (Advanced Micro Devices): Advanced Micro Devices (AMD) has faced challenges over the past year. A slump in its gaming and embedded segments, along with a forecast indicating a sequential decline in revenue, have contributed to a 55% drop in the company’s stock price from its peak a year ago.
However, this stock’s decline may not accurately reflect its potential. AMD’s data center segment often experiences seasonal volatility, and a decline in revenue during the first quarter of last year supports this pattern. Recent advancements, like DeepSeek’s technology, allow for the operation of artificial intelligence (AI) models at significantly lower costs. This means that while AMD may trail behind market leader Nvidia, its entry-level AI accelerators could still see increased demand.
Importantly, AMD’s revenue growth has improved in recent quarters, with fourth-quarter revenue for 2024 rising 24% to $7.7 billion compared to just 9% year-on-year in Q2. Signs of recovery in its embedded segment are visible as well, with the revenue decline decreasing from 41% to 13% annually from Q2 to Q4.
Even with a 59% drop in gaming revenue, the long-term outlook remains positive. Major clients like Microsoft and Sony haven’t released new gaming consoles recently, likely impacting this segment negatively.
From a valuation perspective, many of AMD’s metrics look attractive. Despite a high P/E ratio of 102, its forward P/E has dropped to 22, suggesting a valuation more typical of a stable, mature company rather than a rapidly evolving semiconductor firm.
As conditions improve, AMD’s stock may quickly rebound, and the current 55% decrease could soon be seen as a miscalculation.
Broadcom Presents a Strong Buying Opportunity Post 27% Sell-off
Justin Pope (Broadcom): Broad market sell-offs, like the recent 27% drop in Broadcom’s stock, can provide excellent buying opportunities for long-term investors. Although it may not feel promising now, such declines can ultimately lead to substantial gains for patient buyers.
The recent rally in the markets since early 2023 has pushed some stocks to levels not supported by their fundamentals. This is not the case with Broadcom. The recent sell-off allows investors to accumulate shares in a company well-positioned to capitalize on the expanding AI market.
Broadcom stands to benefit from the increasing demand for inference chips, crucial for translating AI models into practical applications. During its Q4 earnings call, the company estimated an opportunity for AI-related revenue to hit between $60 billion and $90 billion by 2027, up from just $12.2 billion in 2024.
Furthermore, Broadcom’s diverse business model—anchoring in communications and software (making up 42% of 2024 revenue)—helps stabilize its performance against the cyclical nature of the semiconductor sector. Analysts forecast Broadcom will see earnings growth of 18% annually over the next three to five years.
Broadcom’s PEG ratio has fallen to 1.7, indicating a reasonable price point. I typically consider companies attractive with PEG ratios up to 2.5. Thus, Broadcom’s current valuation is appealing, and further decreases could enhance its attractiveness even more.
Though buying stocks in a downturn can be emotionally challenging, Broadcom’s diversified nature and strong growth prospects make it a favorable choice in these uncertain times.
Amazon: A Smart Buy During Market Pullbacks
Jake Lerch (Amazon): When navigating volatile markets, my strategy is to identify quality stocks to hold long-term. Amazon Stock appears to be a compelling choice amid recent dips.
The current downtrend in Amazon’s stock reflects broader market fluctuations rather than company-specific issues. Now could be an advantageous time to invest, as the stock typically rebounds strongly after dips.
Market Fluctuations: Finding Opportunities in Amazon’s Stock Performance
Recent market movements stem from a combination of poor economic data, rising concerns over tariffs, and waning enthusiasm around AI stocks. However, it’s crucial to remember that such stock market noise often dissipates. Strong companies usually navigate through challenging headlines successfully, continuing to provide significant returns for their shareholders.
Take Amazon as a prime example. In the past three years, the company’s stock has faced five pullbacks of 15% or more from its all-time high, including its latest drop of just over 15%. Each decline presented an opportunity for investors to acquire shares. Historically, Amazon has rebounded after each dip to reach new heights.
During its steepest downturn in late 2022, Amazon shares were down more than 50% from their all-time high. Investors who seized this moment would have seen substantial gains over time. For instance, a $10,000 investment at the beginning of 2023 would now be worth over $24,000, despite recent market fluctuations.
Looking at Amazon’s fundamentals reveals a minimal impact from recent concerns. The company is well-managed and diversified, boasting the leading e-commerce platform, a robust cloud services division, and an underappreciated advertising segment. With a long-term perspective, many believe that Amazon can endure any economic turbulence. This outlook suggests that investors might benefit from purchasing Amazon shares during this dip.
Considering Investing $1,000 in Amazon?
Before you decide to buy shares in Amazon, it’s worth considering the advice from the Motley Fool Stock Advisor analyst team, which recently identified their top ten stock picks—Amazon was not included in that list. The stocks that made it could provide significant returns in the near future.
For context, when Nvidia was recommended on April 15, 2005, a $1,000 investment at that time would now be valued at approximately $690,624*.
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John Mackey, the former CEO of Whole Foods Market, an Amazon subsidiary, is on The Motley Fool’s board of directors. Jake Lerch has stock positions in Amazon and Nvidia. Justin Pope holds no position in any mentioned stocks. Will Healy holds positions in Advanced Micro Devices. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Broadcom and has options recommendations for Microsoft. The Motley Fool maintains a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
