It’s been an interesting few years for the technology industry. The arrival of artificial intelligence (AI) has injected growth momentum into companies and raised long-term expectations, causing the stock prices of leading artificial intelligence stocks to soar and technology stocks to hit new highs. Nasdaqsynthetic index.
However, as 2025 begins, the fundamentals of the stock market are somewhat shaky. Investors are worried about what the Federal Reserve’s interest rate policy might look like this year amid concerns about a return to inflation. In addition, interest rates on the 10-year Treasury note, which determines how much consumers and businesses pay on their debt, continued to rise.
Will the Nasdaq Index correct? Since December, the index has fallen as low as 5% from its all-time high. Remember, no one can predict how much (or when) the stock market will rise or fall.
What’s more, stock market declines are normal and provide excellent opportunities to buy quality stocks at better prices.
If these three top AI stocks continue to fall, consider buying: Palantir Technology(NASDAQ: PLTR), AMD(NASDAQ:AMD)and CrowdStrike Holdings Inc.(NASDAQ: CRWD).
Jake Lerch (Palantir Technologies): I’ve made no secret of how much I love Palantir stock,grateful it is Place in the Artificial Intelligence Revolution. However, now that the share price is up over 300% in the last 12 months, I can’t help but discuss the stock’s lofty valuation.
have Several ways to measure stock valuationinclude Price-to-earnings ratio (P/E), price-to-sales ratio (P/S) and PEG ratio.
For a fast-growing company like Palantir, I prefer the P/S ratio to the PEG ratio.
Let’s start by checking Palantir’s P/E ratio, in this case I’m using trailing twelve months (TTM) sales.
As of this writing, Palantir trades at 61 times earnings. That’s down from the peak of nearly 75 times, but still an astronomical figure. In contrast, NVIDIAThe king of artificial intelligence stocks, a stock with an increase of more than 2,000% in the past five years, price-to-earnings ratio of 30 times. Away from the red-hot field of artificial intelligence, most stocks trade at price-to-earnings ratios in the low single digits.
In other words, Palantir stock is expensive on a price-to-sales basis alone.
However, price-to-sales ratio doesn’t explain Palantir’s rapid growth.
The PEG ratio (which divides a company’s price-to-earnings ratio by its expected growth rate) does.
PLTR PEG ratio data provided by YCharts
Here you can see Palantir’s PEG ratio stand As of this writing it is 1.45. That’s down from a high of 1.77, and it suggests Palantir stock isn’t as expensive as its price-to-earnings ratio suggests. Still, the stock’s valuation is high even by P/E standards.
as a general rulea PEG ratio between 0 and 1 represents an undervalued company; a PEG of approximately 1 represents a stock that is reasonably priced; a PEG ratio above 1 represents a stock that is overvalued.
Obviously, if Palantir stock falls in value (all else remaining equal), its PEG ratio will shrink to closer to 1 — can represent An excellent opportunity for investors who are bullish on the company over the long term.
Will Healy(Advanced Micro Components): Fortunately, investors looking to buy discounted artificial intelligence stocks may have an opportunity to buy AMD now. The stock has lost nearly half its value since March last year amid competition with Nvidia in the artificial intelligence accelerator market and challenges in specific parts of its business.
In addition to its customer business, which makes chips for PCs, AMD’s data center business, where it designs artificial intelligence accelerators, is thriving despite competition from Nvidia.
Revenue in the data center sector surged 107% in the first three quarters of 2024. That’s helped AMD’s $18 billion in corporate revenue grow 10% annually during that period.
So why the lackluster overall performance? Unfortunately, AMD’s gaming and embedded segments are to blame for its lackluster revenue growth. The revenue of these segments will decline significantly in the first nine months of 2024, with gaming revenue falling by 58% annually and embedded revenue falling by 38% annually in the first nine months of this year.
In the field of gaming, Microsoft and sony As AMD prepares to release a new generation of Radeon GPUs, it cuts channel inventory. In addition, inventory standardization measures taken by customers have led to difficulties in the embedded space.
However, shifts in these areas could happen quickly. New Radeon GPUs should reinvigorate its gaming business, and AMD said its embedded business will bottom out in the first quarter of 2024.
Additionally, valuations are looking increasingly favorable. Although AMD’s trailing P/E ratio is still above 100, its forward P/E ratio is only 24 times. Additionally, AMD’s price-to-book ratio is slightly above 3, while Nvidia’s price-to-book ratio is slightly above 50.
Ultimately, AMD isn’t immune to the struggle. Still, given that its growth prospects are brightening across all segments, investors may consider buying AMD stock while it’s selling at a discounted valuation.
Justin Pope (CrowdStrike Holdings): Artificial intelligence is proving to be a game-changer in cybersecurity. Companies such as CrowdStrike develop technology that uses machine learning and artificial intelligence to find potential threats in computer systems. CrowdStrike has become a leader in the next generation of security companies. It’s received numerous industry accolades and delivered substantial (and profitable) revenue growth. Today, CrowdStrike’s customer base includes 300 Fortune 500 companies, an impressive feat in such a competitive field.
The company is focused on endpoint security, but it is steadily expanding its platform. About two-thirds of CrowdStrike customers use at least five product modules. The business generated $3.7 billion in revenue over the past 12 months, including a 28% annual increase in the most recent quarter. I think it’s reasonable to expect double-digit revenue growth over the next few years. Management believes CrowdStrike’s total addressable market will grow to $250 billion by 2029.
Up-and-coming companies like CrowdStrike don’t always have clear competitive moats. CrowdStrike was tested at scale in July 2024, when a faulty update caused an IT outage on millions of devices around the world. The company has received a lot of negative attention, and many fear it will open the door for competitors to steal customers.
However, CrowdStrike has performed well so far, with only a small downward revision to its revenue forecast for next year. It shows the stickiness of CrowdStrike’s product, which bodes well for the company’s ability to continue growing its revenue and profits over the long term. The company’s strong performance is reflected in its stock, which generally trades at a higher valuation (price-to-sales ratio) than its peers. If the stock does decline amid a broader market downturn, investors would be wise to jump in on the opportunity.
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Jake Lerch works at CrowdStrike and Nvidia. Justin Pope has no position in any of the stocks mentioned. Will Healy works at Advanced Micro Devices and CrowdStrike. The Motley Fool owns and recommends Advanced Micro Devices, CrowdStrike, Microsoft, Nvidia and Palantir Technologies. The Motley Fool recommends the following options: Long January 2026 Microsoft calls at $395 and short January 2026 Microsoft calls at $405. The Motley Fool has a disclosure policy.
Will the Nasdaq Index undergo a correction? 3 Promising Artificial Intelligence Stocks to Buy If Prices Fall. Originally published by The Motley Fool
