Although the stock market has sold off a bit, it’s not as bad as some people think. A few negative days in a row can be worrying, but S&P 500 it’s down just a few percentage points from its all-time high, so it’s not fair to call this a complete market selloff.
Now, if you want to turn it into a tech stock sellout, it’s more like that. Many tech stocks are down significantly from their recent highs, but most don’t have a good reason to be there. I think these are the best stocks to buy right now and I have three on my buy list. I think each of these stocks will deliver excellent returns over the next few years and should be bought immediately.
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Microsoft(NASDAQ: MSFT) it was once the main artificial intelligence (AI) stock it holds. Its Azure cloud computing server powered several AI workloads, including those for ChatGPT. While it’s still doing that and delivering great results (Azure revenue grew 39% year-over-year), the market seems to want more. Apparently, a 17% increase in company-wide revenue to $81.3 billion and a 21% increase in operating income to $38.3 billion is not enough.
I think the market has gotten a little greedy about what it expects from big tech and will eventually go back to valuing Microsoft at the higher premium it should be trading at.
MSFT PE Ratio data (before) by YCharts
This is the lowest forward price-to-earnings ratio that Microsoft has traded at in the last three years, and now is the time to make a move and get it out on the cheap.
If you think Microsoft does well and looks like a bargain, then you’re going to love it Nvidia(NASDAQ: NVDA). Nvidia trades for just 24 times forward earnings — not much more than the S&P 500, which trades at 21.8 times forward earnings. At those valuation levels, you might think that Nvidia’s rise is over, but that’s far from the case.
Just this week, investors found out Amazon will spend $200 billion on capital expenditures, Alphabet will spend up to $185 billion and Meta platforms will spend up to 135 billion dollars. That’s more than $500 billion in capital spending from just three companies, and Nvidia will get a good chunk of that revenue.
Wall Street analysts forecast 52% growth for fiscal 2027 (ending January 2027). When is the last time you could buy a stock with a clear bull case that is up more than 50% and trading at an average market valuation? It’s a rare opportunity, and as a result, investors should buy Nvidia stock.
Those AI hyperscalers have other compute unit options to choose from, so not all of that money will go to Nvidia. However, whatever computing chip they choose will likely have chips from Taiwan Semiconductor Manufacturing(NYSE: TSM) in it because it is the most important chip foundry in the world. Companies like Nvidia don’t make any chips; it just projects them. Taiwan Semiconductor is the leading chip maker and its revenue exceeds other foundries around the world.
Taiwan Semiconductor also expects strong growth in 2026, with management guiding revenue growth of nearly 30% in US dollars this year. However, AI chips are expected to deliver particular growth, as management believes that AI chip revenues will grow at a compound annual growth rate (CAGR) of nearly 60% between 2024 and 2029. This projection conveys strength not only to Taiwan Semiconductor but also to Nvidia, which is a major driver of this demand.
As recent capital expenditure budgets for hyperscalers show, we are still in the early days of AI implementation. There’s still plenty of growth to come, and these three stocks are brilliant ways to capitalize on that growth.
Before buying shares in Microsoft, consider the following:
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Keithen Drury has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
Selling the Stock Market: 3 Stocks I’m Still Buying Now was originally published by The Motley Fool
