Nervousness on the stock market is spreading quickly. Just a few weeks after the major market indices have reached their peak, share prices are plummeting, Nasdaq-Composite (NASDAQINDEX: ^IXIC) was already in a correction phase (a decline of more than 10% from the recent high).
Stock prices fell sharply for the third day in a row on Monday as investors grappled with gloomy economic data and a shock in Japan after the Nikkei fell by double digits when the Bank of Japan surprised investors with a rate hike. The move triggered a massive unwinding of a global “carry trade” in which investors borrowed yen at near-zero interest and invested elsewhere.
Experienced investors know that while sell-offs in the stock market are scary, they also present good buying opportunities. No one knows how long this correction will last, but it’s a good idea to have a list of stocks on hand to buy if the decline continues. Read on to see three top stocks currently on sale.
1. Alphabet
alphabet (NASDAQ:GOOG) (NASDAQ:GOOGL) has been one of the top technology stocks for over a decade, a star member of both the FAANG stocks and the “Magnificent Seven,” and its preeminent position shows no signs of changing despite the disruption brought about by generative AI technology.
Alphabet has overcome initial doubts about its AI capabilities and has continued to deliver strong growth in recent quarters. It has also expanded margins, thanks in part to a wave of layoffs last year. Its core digital advertising business, led by Google Search, continues to post solid growth, and its cloud computing business has increased profits after years of losses.
As of Monday, Alphabet’s share price is 17 percent below its high a few weeks ago, and with a price-earnings ratio of 23, the stock already seems to be a good deal.
Even if the economy falls into recession, Alphabet’s competitive advantages will remain intact and the stock should eventually recoup its recent losses and return to new heights. The second-quarter earnings report included 14% revenue growth and a 26% increase in operating income, showing there is still plenty of growth potential for the tech giant.
2. Taiwanese semiconductor manufacturing
Semiconductor manufacturing in Taiwan (NYSE:TSM)or TSMC, is the world’s largest contract semiconductor foundry. In normal times, it is a vital cog in the global economy, but in the AI revolution, it has become even more valuable, as it produces around 90% of the world’s most advanced chips. It has built a competitive advantage through its technology, customer relationships with companies like Apple, NVIDIA, AMDAnd Broadcomlarge capacity and an execution history.
Like the rest of the semiconductor industry, TSMC is subject to cyclical fluctuations. But after a downturn in the sector a year ago, business is back on the upswing. In the second quarter, revenue rose 40 percent, or 33 percent in dollar terms, to $20.8 billion, while net profit rose at a similar rate.
Taiwan Semi’s share price has fallen 25% since its peak a few weeks ago and is trading at a modest P/E of 28, which seems like a great price for a company with its competitive advantages and growth rate.
3. Advanced micro devices
Advanced micro devices (NASDAQ:AMD) may not seem as resilient as the other two stocks on this list, but the chipmaker deserves a closer look after a strong earnings report last week.
AMD has fallen more than 40 percent since its March peak, when excitement about its new AI chips seemed to be peaking. But the stock has also fallen 28 percent since its Nasdaq peak just a few weeks ago, even though the stock’s earnings report last week impressed investors.
However, AMD now appears to be benefiting from the AI boom. As shares fell sharply on Friday, AMD closed flat and closed Monday up 2%, even as the Nasdaq lost 3.4%. Part of the reason for these gains is the breakup of rival Intelwhich announced last Thursday evening that it would cut at least 15% of its workforce and stop paying dividends. Intel’s quarterly results and forecasts also fell short of expectations, showing that the company continues to suffer from ongoing challenges in the foundry business and beyond.
This presents an opportunity for AMD, and the company already appears to be capitalizing on the AI data center market with its new Mi300 chip. In the second quarter, AMD reported a 115% jump in revenue to $2.8 billion in data centers, the segment driving the AI boom. While weakness in the embedded and gaming segments weighed on overall revenue growth, momentum in the data center market bodes well for future results.
Based on adjusted earnings per share, the stock trades at a P/E ratio of 49, which seems like a good price given the rapid growth of data centers. Given Intel’s weakness and rising revenues in key areas, AMD seems like a good buy given the weakness caused by the market panic.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has a position in Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and Intel and recommends the following options: long January 2025 $45 calls on Intel and short August 2024 $35 calls on Intel. The Motley Fool has a disclosure policy.
Nasdaq Stock Market Sell-Off: 3 Stocks to Put on Your Buy List was originally published by The Motley Fool
