Tech Stocks Decline: Opportunities in Nvidia and Meta Amid Turmoil
Early 2025 has brought significant turmoil to tech stocks. Donald Trump’s trade policies are causing ripples in global markets, affecting even leading technology firms. As of now, the S&P 500 is down over 11% year-to-date, and the tech-focused Nasdaq-100 has dropped more than 16%. Despite this downturn, savvy investors may find a promising opportunity to acquire shares of top-notch companies at discounted prices.
Instead of retreating from technology during this volatile period, strategic investors might consider positioning themselves in firms that stand to gain from unstoppable trends such as artificial intelligence (AI). Even with short-term challenges ahead, these pivotal technologies continue to reshape industries globally. Two prominent players, Nvidia (NASDAQ: NVDA) and Meta Platforms (NASDAQ: META), have faced major declines and now offer exceptional value for long-term investors willing to navigate the current market fluctuations.
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Nvidia: AI Hardware Leader at Discount Prices
Nvidia has seen its shares decline 34% from their recent 52-week high, primarily due to increasing U.S.-China tensions and newly imposed export limits. This sharp decline has reduced Nvidia’s valuation to just 21.8 times earnings estimates, a significant drop from its valuation at previous peaks. Recently, the company disclosed it anticipates $5.5 billion in write-offs related to a China-specific H20 chip, further accelerating the stock’s fall. Nevertheless, Nvidia’s fundamental growth story remains solid for markets beyond China.
What sets Nvidia apart from its rivals is its robust economic moat, which stems from its leading graphics processing unit (GPU) hardware and proprietary Compute Unified Device Architecture (CUDA) software platform. This effective combination generates considerable switching costs for AI developers, enabling Nvidia to sustain its leadership even as others, like Advanced Micro Devices, strive to offer alternatives. While analysts predict a sharp decline in revenue from China, ongoing worldwide investments in AI should bolster strong GPU sales throughout 2025.
The AI revolution is still in its infancy, with Nvidia well-positioned to capitalize on this rapidly expanding market. The company has diversified its offerings beyond core GPU products into networking, software, and services, greatly broadening its addressable market. With shares trading at the lowest valuations seen in years, investors have a rare chance to acquire this leading AI company at prices that undervalue its long-term prospects given the ongoing global adoption of AI, despite prevailing geopolitical uncertainties.
Meta Platforms: Social Media Giant with AI Potential
Meta’s shares have dropped 33% from their peak 52-week prices amid the broader market sell-off, creating an enticing entry point for those looking to invest in this social media behemoth. Currently, its stock trades at merely 19 times forward earnings estimates, down from 24 a year prior. With approximately 4 billion monthly active users across platforms like Facebook, Instagram, WhatsApp, and Messenger, Meta enjoys unmatched scale in the social media market, capitalizing on the ongoing shift toward digital advertising.
Additionally, Meta recently introduced Llama 4, its next-generation large language model, which can comprehend and create content across multiple formats such as text, images, and video. This multimodal AI system places Meta in competitive alignment with leading models from Anthropic, Alphabet, and OpenAI, yet it is Meta’s unparalleled distribution network that provides a significant competitive edge.
As competition in AI shifts focus from model development to distribution and monetization, Meta’s vast user base serves as an ideal platform for deploying these technologies at scale, potentially offering enhanced engagement and effectiveness in advertising. Although tariff-driven economic slowdowns could dampen advertising expenditures, Meta could benefit from the uncertainty surrounding TikTok’s U.S. operations, prompting advertisers to seek alternative platforms. The company’s dual approach emphasizes refining user engagement through innovations like Stories and Reels, while also enhancing ad targeting algorithms for improved outcomes.
While Meta must navigate regulatory hurdles, including a monopoly lawsuit in the U.S., and its Reality Labs division continues to consume substantial capital, the current price level appears to account for these risks. For investors seeking exposure to both digital advertising and AI advancements, Meta provides a logical mix of profitability and growth potential.
Should You Invest $1,000 in Nvidia Right Now?
Before purchasing stock in Nvidia, consider the following:
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Reflect back on when Netflix was listed on December 17, 2004… a $1,000 investment then would be worth $532,771 now! Or take Nvidia from April 15, 2005… a $1,000 investment at that time would now amount to $593,970!
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Suzanne Frey, an executive at Alphabet, serves on The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook, and sister to Meta Platforms CEO Mark Zuckerberg, is also a member of The Motley Fool’s board. George Budwell holds positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Meta Platforms, and Nvidia. The Motley Fool has 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.
