The stock market correction seems well underway, with the S&P 500 now down close to 5% from its peak. For tech-heavy investors, the market rumbles may have felt far worse, with the Nasdaq 100 off just shy of 9%.
Indeed, a market correction was bound to happen at some point. And though this may or may not be “the big one,” it’s never too early to start thinking about the types of names you’d like to buy as prices begin to get marked down at a rapid pace.
After a horrid Wednesday and Thursday of trade, much of the frothiness has been taken off the top of the market. But depending on where you look, valuations may still be a tad on the high side, especially when it comes to the large-cap tech firms that have quadrupled down on AI. Let’s explore three overvalued stocks to buy only after they have crashed.
Alphabet (GOOG, GOOGL)
It’s nice to be excited about artificial intelligence (AI) and its effect on firms and the economy. However, the latest post-earnings reaction in Alphabet shares (NASDAQ:GOOG, NASDAQ:GOOGL) suggests investors are becoming mindful of the risks associated with deep-pocketed AI investments. After all, you cannot have a reward without risk.
Google stock is correcting with fury after its latest quarterly earnings, which weren’t as bad as the post-reveal reaction would suggest. Shares could easily crumble further. But today’s valuation—22.3 times forward price-to-earnings (P/E)—is a fair price to pay for the best in AI innovation.
After the underwhelming quarterly reveal, Alphabet Chief Executive Officer Sundar Pichai stated that “underinvestment” risks outweigh “overinvestment” risks.
On the one hand, such a comment indicates that Alphabet will be one of the firms proactively leading the charge on AI. However, it may suggest that the firm may be less concerned about achieving a respectable return from its early AI bets.
Either way, Pichai is right that Google needs to go big or risk going home, as scary AI rivals, like OpenAI, go after the search market with new offerings like SearchGPT.
Nvidia (NVDA)
Source: Muhammad Alimaki / Shutterstock.com
It may be hard to buy stocks after they crash because, as investors, we will never truly know where the bottom is. Further, it can be hard to draw a line between a healthy correction and a devastating crash.
Regarding Nvidia (NASDAQ:NVDA), which is down 17% from its all-time high, the recent weakness seems too violent to get behind. Though shares may soon flirt with a bear market, the stock will still be markedly higher than it was just three months ago!
The higher they climb, the more room they have to fall, right?
Despite the horrors surrounding the AI trade, I view NVDA stock as a name that’s unfairly being punished. It’s been selling tons of chips to multi-trillion-dollar heavyweights like Alphabet, which plans to keep spending furiously on all things AI.
If I had to guess, the next-gen Blackwell chips will also sell once they hit the market as more firms adopt Alphabet’s philosophy that underinvesting is riskier than overinvesting.
All considered, I expect NVDA stock will get hit even harder. But it will likely be a magnificent buying opportunity.
Apple (AAPL)
Source: Moab Republic / Shutterstock
Apple (NASDAQ:AAPL) will reveal its quarterly earnings on the first of August. The number could undoubtedly have massive implications for the rest of the market. If the quarter delights, perhaps the rest of the market will be ready to rebound with a fury. However, if it falls short, the Apple quarter could act as salt in the wounds of tech-heavy investors as the Nasdaq 100 approaches a summertime bear market.
Will the Apple numbers save the rest of tech? I’m not so sure. Baird recently raised its price target on AAPL stock, highlighting the sales boost that could come courtesy of, you guessed it, Apple Intelligence.
At this juncture, Apple Intelligence is nothing new. And while the Baird upgrade saved AAPL stock a bit of pain on Thursday’s ugly session, I do think Apple is a name to watch closely as it gives up more of the parabolic gains it enjoyed in June and early July.
Ultimately, having more analysts get behind Apple Intelligence is a good sign. But at 29.5 times forward P/E, the valuation bar is still quite high. Perhaps a continuation of the sell-off could bring forth an opportunity to buy at closer to $200 per share.
On the date of publication, Joey Frenette held long positions in Apple and Alphabet (Class C). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.
More From InvestorPlace
Legendary Investor Predicts: “Forget AI… THIS Technology Is the Future”
The post 3 Overvalued Stocks to Buy After They Crash appeared first on InvestorPlace.
The stock market correction seems well underway, with the S&P 500 now down close to 5% from its peak. For tech-heavy investors, the market rumbles may have felt far worse, with the Nasdaq 100 off just shy of 9%.
Indeed, a market correction was bound to happen at some point. And though this may or may not be “the big one,” it’s never too early to start thinking about the types of names you’d like to buy as prices begin to get marked down at a rapid pace.
After a horrid Wednesday and Thursday of trade, much of the frothiness has been taken off the top of the market. But depending on where you look, valuations may still be a tad on the high side, especially when it comes to the large-cap tech firms that have quadrupled down on AI. Let’s explore three overvalued stocks to buy only after they have crashed.
Alphabet (GOOG, GOOGL)
It’s nice to be excited about artificial intelligence (AI) and its effect on firms and the economy. However, the latest post-earnings reaction in Alphabet shares (NASDAQ:GOOG, NASDAQ:GOOGL) suggests investors are becoming mindful of the risks associated with deep-pocketed AI investments. After all, you cannot have a reward without risk.
Google stock is correcting with fury after its latest quarterly earnings, which weren’t as bad as the post-reveal reaction would suggest. Shares could easily crumble further. But today’s valuation—22.3 times forward price-to-earnings (P/E)—is a fair price to pay for the best in AI innovation.
After the underwhelming quarterly reveal, Alphabet Chief Executive Officer Sundar Pichai stated that “underinvestment” risks outweigh “overinvestment” risks.
On the one hand, such a comment indicates that Alphabet will be one of the firms proactively leading the charge on AI. However, it may suggest that the firm may be less concerned about achieving a respectable return from its early AI bets.
Either way, Pichai is right that Google needs to go big or risk going home, as scary AI rivals, like OpenAI, go after the search market with new offerings like SearchGPT.
Nvidia (NVDA)
Source: Muhammad Alimaki / Shutterstock.comIt may be hard to buy stocks after they crash because, as investors, we will never truly know where the bottom is. Further, it can be hard to draw a line between a healthy correction and a devastating crash.
Regarding Nvidia (NASDAQ:NVDA), which is down 17% from its all-time high, the recent weakness seems too violent to get behind. Though shares may soon flirt with a bear market, the stock will still be markedly higher than it was just three months ago!
The higher they climb, the more room they have to fall, right?
Despite the horrors surrounding the AI trade, I view NVDA stock as a name that’s unfairly being punished. It’s been selling tons of chips to multi-trillion-dollar heavyweights like Alphabet, which plans to keep spending furiously on all things AI.
If I had to guess, the next-gen Blackwell chips will also sell once they hit the market as more firms adopt Alphabet’s philosophy that underinvesting is riskier than overinvesting.
All considered, I expect NVDA stock will get hit even harder. But it will likely be a magnificent buying opportunity.
Apple (AAPL)
Source: Moab Republic / ShutterstockApple (NASDAQ:AAPL) will reveal its quarterly earnings on the first of August. The number could undoubtedly have massive implications for the rest of the market. If the quarter delights, perhaps the rest of the market will be ready to rebound with a fury. However, if it falls short, the Apple quarter could act as salt in the wounds of tech-heavy investors as the Nasdaq 100 approaches a summertime bear market.
Will the Apple numbers save the rest of tech? I’m not so sure. Baird recently raised its price target on AAPL stock, highlighting the sales boost that could come courtesy of, you guessed it, Apple Intelligence.
At this juncture, Apple Intelligence is nothing new. And while the Baird upgrade saved AAPL stock a bit of pain on Thursday’s ugly session, I do think Apple is a name to watch closely as it gives up more of the parabolic gains it enjoyed in June and early July.
Ultimately, having more analysts get behind Apple Intelligence is a good sign. But at 29.5 times forward P/E, the valuation bar is still quite high. Perhaps a continuation of the sell-off could bring forth an opportunity to buy at closer to $200 per share.
On the date of publication, Joey Frenette held long positions in Apple and Alphabet (Class C). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Joey Frenette is a seasoned investment writer specializing in technology and consumer stocks. Contributing to the Motley Fool Canada, TipRanks, and Barchart, Joey excels in spotting mispriced stocks with long-term growth potential in a fast-paced market.More From InvestorPlace
Legendary Investor Predicts: “Forget AI… THIS Technology Is the Future”
The post 3 Overvalued Stocks to Buy After They Crash appeared first on InvestorPlace. Read MoreNASDAQ:AAPL,NASDAQ:NVDA,NASDAQ:GOOG,NASDAQ:GOOGL, Stocks to Buy
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