Could the Nasdaq be due for a Correction?, Suggesting Three Prominent AI Stocks to Purchase if Prices Drop.
The tech sector's been on a roll, thanks to the introduction of artificial intelligence (AI). Top AI stocks are soaring, with the Nasdaq Composite hitting new highs. However, 2025's started off a bit rocky. Investors are spooked by the Fed's interest rate policy and rising 10-year Treasury rates. The Nasdaq has dropped 5% below its all-time highs, but remember, nobody can accurately predict market movements. A correction might be on the horizon, but it's also an opportunity to buy high-quality stocks at lower prices.
Three top AI stocks worth considering in a downturn are Palantir Technologies (PLTR - 3.65%), Advanced Micro Devices (AMD - 2.55%), and CrowdStrike Holdings (CRWD - 1.76%).
Palantir's Soaring Valuation
Palantir's stock has skyrocketed by 300% in the past year. But, its valuation leaves room for concern. While fast-growing companies often have high P/S and PEG ratios, Palantir's 61x and 1.45x respectively are still astronomical. However, its rapid growth makes it difficult to set an exact price.
AMD: A Discounted AI Stock?
AMD has dropped significantly since last March due to competition from Nvidia and issues in its gaming and embedded segments. But if these challenges get resolved, the stock could be a steal at its current valuation.
CrowdStrike's Competitive Moat
Despite a major IT outage in 2024, CrowdStrike has continued to perform well. Its competitive moat is evident from its expansion beyond endpoint security, impressive revenue growth, and strong customer base, even amid stock price volatility.
While it's tempting to panic during market downturns, it's essential to keep a long-term perspective. If these AI stocks continue to fall, they might present excellent investment opportunities.
Enrichment Data:
Palantir's extraordinary valuation metrics (P/S of 64.7x and forward P/E of 203x) have raised concerns among analysts and investors. Its reliance on government contracts, decelerating growth, and massive insider selling are contributing factors to potential market downturns for Palantir's stock price. Most analysts view Palantir as significantly overvalued, with a median target price of $39 per share, implying more than 50% downside from its current share price of $81. A market correction could further impact Palantir's share price, potentially leading to further underperformance in 2025 and beyond.
Investors might want to consider diversifying their finance portfolio in light of Palantir's high valuation, as its reliance on government contracts and potential market downturns could affect its stock price. Additionally, the opportunity to purchase discounted AI stocks like AMD during a market correction could provide attractive investment possibilities.
