With the recent market sell-off, a number of high-quality technology stocks are well off their recent highs. While market corrections aren’t fun to experience, they also create opportunities for long-term investors.
Let’s look at three tech stocks that investors can buy on this correction and hold for the next decade.
Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG) is an inexpensive growth stock that investors have been underestimating, and the recent market sell-off has made the stock even cheaper. The company is best known for its Google search engine, where it holds a dominant position with about 90% of global market share. However, the company is so much more than just search.
Alphabet has proven to be a great tech innovator over the years while also making smart acquisitions. YouTube, which it acquired in the fall of 2006, has grown to become the most watched video-streaming platform in the U.S. and the fourth-largest digital-advertising platform in the world. Meanwhile, it has used the video platform to train its Veo 2 text-to-video artificial intelligence (AI) application, making it the most realistic in this emerging field.
Its cloud-computing unit, Google Cloud, is the company’s fastest growing segment, seeing 30% revenue growth last quarter. This segment benefits from increasing demand for AI services, where customers use its Gemini foundational model as a starting point to develop their own AI models and applications. Alphabet has also developed its own custom AI chip with the help of Broadcom to help improve inference times and reduce power consumption, thus lowering costs.
The company also has two promising early-stage technology bets in autonomous driving (Waymo) and quantum computing. These ventures won’t be profit contributors for quite some time, but they add additional optionality to an Alphabet investment. Meanwhile, investors get all these market-leading and emerging businesses for a forward price-to-earnings ratio (P/E) ratio of only 18.5 time this year’s analyst estimates.
Image source: Getty Images.
Another great tech stock to pick up in the bargain bin is Taiwan Semiconductor Manufacturing(NYSE: TSM), also known as TSMC. The company is the leading semiconductor contract manufacturing in the world, counting the world’s leading chip designers as its clients. Manufacturing advanced semiconductor chips is not an easy endeavor and requires a lot of technological expertise. As competitors Intel and Samsung floundered, TSMC has become a valuable partner to chip designers and an integral part of the semiconductor value chain.
Chip designers are always looking to shrink the size of their chips to increase transistor density, which leads to faster processing speeds and lower power consumption. TSMC has been at the forefront of pushing down chip sizes, with its latest node (chip generation) at 3 nanometers. Nearly three-quarters of its revenue now comes from chips that are 7nm or less. This has allowed it to become the dominant leader in advanced chips for AI applications and chips used in smartphones.
It has gives the company the ability to consistently raise prices, which is also helping it expand its gross margins. At the same time, TSMC continues to built out new manufacturing facilities around the globe in order to keep up with demand. Soaring demand, strong pricing power, and expanding margins are a great combination to have.
At the same time, the stock is attractively valued with a forward P/E of 19 times. Its forward price/earnings-to-growth ratio (PEG), meanwhile, is only 0.7, which is below the 1 times ratio investors typically look for when trying to find undervalued stocks.
The leader in customer relationship management (CRM) software, Salesforce(NYSE: CRM) is the company that helped bring the software-as-a-service (SaaS) model to the mainstream, which ultimately changed the software industry forever. Today the company is looking to lead the way in the emerging field of agentic AI. While many people have started to become familiar with and use generative AI apps, such as OpenAI’s ChatGPT or Alphabet’s Gemini, agentic AI takes it one step further. With agentic AI, AI agents will go out and perform tasks with little need for human supervision based on set guidelines and guardrails put in place.
Salesforce is diving head first into this emerging AI field with its Agentforce platform, which gives customers a selection of already programmed agents as well as no-code and low-code tools built within the platform to customize these AI agents or create new ones from scratch. It has also recently introduced AgentExchange, an AI agent marketplace where it is initially partnering with 200 companies. The marketplace expands Agentforce use cases by adding hundreds of new actions and templates for its AI agents.
Agentforce has grown quickly out of the gate, with the company signing 5,000 deals since its launch last fall, including over 3,000 paid deals. At the cost of $2 per conservation, this is a huge opportunity for this software leader.
The market sell-off, meanwhile, has left the stock very attractively valued with a forward P/E of 24.5 times and a PEG of just 0.33. SaaS companies, meanwhile, tend to carry higher valuation multiples given their recurring revenue stream and predictive nature. As such, Salesforce looks like a very solid stock to buy and hold for the long term.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet and Salesforce. The Motley Fool has positions in and recommends Alphabet, Intel, Salesforce, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short May 2025 $30 calls on Intel. The Motley Fool has a disclosure policy.
Market Sell-Off: 3 Tech Stocks You Can Buy and Hold for the Next Decade was originally published by The Motley Fool
Patricia Allen is a writer who loves to travel and explore new places. She's also passionate about fashion and style, so she often writes about cars and fashion on her blog.
She earned her degree in English Literature from Stanford University, where she studied under some of the most renowned writers of our time. After graduating, she moved to New York City to pursue her career as a writer. She has since written for several publications on topics ranging from arts to automotive news.
