Nasdaq Index Faces Correction, Highlights Investment Opportunities in AI

The Nasdaq index, which saw significant gains over the past two years, faced challenges throughout March. The benchmark recently entered correction territory, reflecting a decline of over 10% from its peak in December. This downturn is largely attributed to investor concerns regarding President Donald Trump’s proposed tariffs on imports, which could impede domestic growth. Stocks inherently tied to growth were notably impacted, responding quickly to increasing uncertainty in the economic landscape.

However, recent commentary from Trump indicates a potential leniency in the implementation of these tariffs, leading to a resurgence of investor optimism. This renewed confidence has sparked a recovery in the Nasdaq, enabling it to exit the correction zone earlier this week, despite some intermittent setbacks.

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While the Nasdaq has regained some ground, many of its constituent stocks still trade at attractive prices, particularly in the burgeoning sector of artificial intelligence (AI). Below, I outline three AI-focused stocks worthy of consideration before their values potentially surge.

Image source: Getty Images.

1. Palantir Technologies

Palantir Technologies (NASDAQ: PLTR) has demonstrated remarkable momentum in recent years. Last year, the AI software firm registered the highest gain in the S&P 500, with a 340% increase, peaking in February. The dual revenue streams from government and commercial sectors have excited investors, backed by consistently strong double-digit growth.

Palantir provides clients with AI-powered platforms that enhance data management and utilization. The resulting efficiencies and cost savings are often substantial. The company excels in balancing growth with profitability, as evidenced by its Rule of 40 score. A score above 40% indicates a favorable growth/profit balance; Palantir’s recent score of 81% signifies exceptional performance.

Currently, Palantir’s forward price/earnings-to-growth (PEG) ratio stands at 0.8, suggesting the stock may be undervalued. After a 24% decline from its peak, now presents an opportune moment for investors.

2. Amazon

Amazon (NASDAQ: AMZN) is effectively leveraging AI, both to enhance its operations and to offer AI products through its cloud-computing arm. This strategic use of AI is contributing to reduced service costs in e-commerce and generating substantial revenue in the cloud segment, Amazon Web Services (AWS).

With AWS holding a dominant position in the cloud market and vast growth potential in AI, Amazon stands to benefit significantly as the AI narrative unfolds. Currently, the application of AI in everyday business practices is still developing, indicating that AWS’s growth associated with AI could continue for the long term. Given that AWS is the main profit driver for Amazon, this trend is crucial.

Presently, Amazon shares are priced at 32 times forward earnings estimates, down from 45 times only a few months ago, representing a favorable entry point for investors looking to capitalize on positive developments in AI.

3. Meta Platforms

Meta Platforms (NASDAQ: META) is widely recognized for its suite of popular apps, including Facebook, Messenger, WhatsApp, and Instagram, which boast over 3.3 billion daily users. This vast user base is enhancing Meta’s capabilities in AI, highlighted by the launch of Meta AI in 2023, the most utilized AI assistant globally.

Meta aims to integrate AI within its ecosystem and enhance user experiences through tailored AI assistants. This strategy may increase user engagement on its platforms, attracting advertising dollars. To bolster its AI initiatives, Meta is investing heavily, planning expenditures of up to $65 billion this year to establish extensive data centers and augment its AI chip inventory. Additionally, Meta’s development of an open-source large language model could position the company as a leader in the AI sector.

Currently, Meta stock is trading at 24 times forward earnings estimates, down from its recent peak of 29 times. This valuation presents an attractive buying opportunity as this potential AI frontrunner could see significant appreciation soon.

Seize This Opportunity for Potential Gains

Hesitate no longer if you’ve feared missing out on high-performing stocks. Our analysts occasionally issue a “Double Down” Stock recommendation, highlighting companies poised for growth. If you’ve been on the fence, now is an optimal time to invest before conditions change again. Consider the impressive returns:

• Nvidia: An investment of $1,000 in 2009, when we issued our double down, would now be worth $312,980!
• Apple: If you had invested $1,000 in 2008, it would be valued at $42,421!
• Netflix: A $1,000 investment made in 2004 would bring you $537,825!

We are currently issuing “Double Down” alerts for three remarkable companies, presenting a significant opportunity that may not arise again soon.

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*Stock Advisor returns as of March 24, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of 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 a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Palantir Technologies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.