Identifying Bargain Buys in Tech Amid Market Sell-Off
The recent market downturn has significantly impacted tech stocks more than other sectors, prompting a keen interest in potential bargain-buying opportunities. Regardless of trade tensions, the competition in the artificial intelligence (AI) sector is unlikely to slow down. Companies will continue their AI investments, viewing market shifts as chances to outpace rivals.
This ongoing commitment assures that leading firms will remain robust over time. Currently, I am focusing on four companies as attractive buys during this market dip: Nvidia (NASDAQ: NVDA), Taiwan Semiconductor Manufacturing (NYSE: TSM), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and Amazon (NASDAQ: AMZN).
High Demand for Leading Chip Suppliers
What specifically makes these companies noteworthy? Each plays a critical role in the AI arms race.
Taiwan Semiconductor’s chips are integral to nearly every high-tech device. As a chip foundry, TSMC manufactures designs provided by companies like Nvidia. Concerns about potential tariffs from President Trump’s administration worried many investors, but TSMC’s recent $100 billion investment in U.S. manufacturing capacity alleviates some of these fears.
TSMC’s CEO, C.C. Wei, clarified that this expansion was not a reaction to tariff threats. His company recognizes significant U.S. chip demand and aims to build factories where this demand exists. Wei projected that AI-related chip revenue for TSMC would experience a substantial 45% compound annual growth rate (CAGR) over the next five years.
Overall revenue for TSMC is expected to grow nearly 20% during the same timeframe, indicating a bright outlook for the chipmaker. This market sell-off doesn’t change the fundamental demand for TSMC’s products.
Nvidia’s Growth Story Continues
Nvidia relies heavily on TSMC, as its graphics processing units (GPUs) are produced using TSMC’s chips. These GPUs have become pivotal in the AI sector due to their parallel computing capabilities, which are essential for training AI models. Nvidia’s exceptional growth trajectory shows no signs of slowing, with a Q1 revenue growth estimate of 65%, reaching $43 billion. Wall Street analysts predict a 56% growth for Nvidia over the year, bringing total revenue to $204 billion.
In its Q4 earnings call, Nvidia management sidestepped questions about tariffs, expressing uncertainty about government plans. Nevertheless, the insatiable demand for their GPUs persists, and the stock currently trades at an appealing 25 times forward earnings, making it an opportune time to consider Nvidia.
Cloud Computing Powers AI Investments
Amazon and Alphabet both rely on cloud computing to bolster their AI initiatives. Each company seeks to expand its cloud capabilities, which serve numerous clients by providing the necessary computing power.
Cloud computing is increasingly vital in the AI landscape, as businesses prefer not to invest heavily in building data centers filled with costly Nvidia GPUs. Instead, they outsource these needs to cloud providers like Amazon Web Services (AWS) and Google Cloud. This shift indicates a growing demand for cloud services, which shows no signs of abating.
Long-term prospects for cloud computing are promising for both companies, with each sector growing faster than their overall businesses. In Q4, Google Cloud reported a 30% year-over-year increase in revenue, while overall revenue for Alphabet grew by 12%. Similarly, AWS experienced a 19% year-over-year growth versus total company growth of 10%.
GOOGL PE Ratio (Forward) data by YCharts
As an added incentive to buy these stocks, both Alphabet and Amazon are trading at their lowest valuations in years. With appealing price-to-earnings ratios, they represent strong buy candidates, alongside Nvidia and Taiwan Semiconductor.
Is Nvidia a Smart Investment Right Now?
If you’re contemplating investing in Nvidia, here are some points to consider:
The Motley Fool Stock Advisor team recently identified the 10 best stocks for investors, and Nvidia was not included. However, the recommended stocks have the potential to yield significant returns.
For perspective, if you had invested $1,000 in Nvidia when it was recommended on April 15, 2005, your investment would now be worth $666,539!*
Stock Advisor offers a straightforward investment guide, including portfolio-building advice and monthly stock picks from analysts. Their service has consistently outperformed the S&P 500 since 2002, achieving returns more than quadruple that of the index.* To access the latest top 10 list, consider joining Stock Advisor.
*Stock Advisor returns as of March 10, 2025
Disclosure: John Mackey, former CEO of Whole Foods Market, is a member of The Motley Fool’s board. Suzanne Frey, an executive at Alphabet, also serves on The Motley Fool’s board. Keithen Drury holds shares in Alphabet, Amazon, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends these companies and has positions in them. For a complete disclosure policy, please refer to The Motley Fool.
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
