Artificial intelligence (AI) stocks have roared higher over the past couple of years as investors piled in, aiming to invest early in the next big game-changing technology. Through AI, companies may become more efficient and develop exciting new products faster — and all of this could mean a major earnings boost over time. Some players already are generating significant revenue from this technology, from chip designers to cloud service providers, and investment in the area remains strong.
Yet in recent weeks, AI stocks have stumbled, leading declines in the three major indexes. On Thursday, the Nasdaq Composite (^IXIC -0.83%) entered correction territory, marking a 10% decline from its peak on Dec. 16. This is amid investors’ concerns that certain U.S. policy decisions and tariffs on imports from China, Canada, and Mexico may weigh on economic growth — and even directly on earnings of companies that produce their goods outside the U.S.
Though we could see some pressure in these areas now, it’s important to think long-term when investing. Strong companies have a track record of overcoming short-term challenges and going on to win over time. So, with that in mind, let’s check out two top AI stocks to buy in the Nasdaq correction.
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1. Meta Platforms
You may know Meta Platforms (META -2.38%) best for something you or people all around you use every day: social media. The company owns Facebook, Messenger, Instagram, and WhatsApp, and more than 3.3 billion people use at least one of these apps daily. This has helped the company build a mighty revenue stream through advertising across these platforms.
Advertising, driving the lion’s share of revenue, brought in $160 billion last year, and Meta’s revenue and profit have steadily advanced over time. The company even announced its first-ever dividend last year.
But Meta isn’t only about social media. The company aims to become a powerhouse in AI, and it’s on the way. Meta has made AI its investment priority over the past few years, and just recently announced as much as $65 billion in investment this year, and part of this will go toward building a massive data center.
How will all of this translate into growth? The company has developed its own large language model, Llama, to power its AI efforts. Meta aims to use AI throughout its apps — for example, it already has introduced an AI assistant — and the more time we spend on these apps, the more advertisers will keep coming back to reach us there. We also may expect more AI-driven products and services from this tech giant down the road.
After a one-month drop of 11%, Meta trades for 24 times forward earnings estimates, down from 28 times just a few weeks ago, making it a bargain AI buy right now.
2. Broadcom
Just to give you an idea of what a giant Broadcom (AVGO 1.67%) is, consider this: Broadcom’s networking technology handles more than 99% of all Internet traffic. The company makes thousands of products involved in connectivity from data centers all the way down to your own home.
And today, Broadcom is seeing explosive demand from cloud service providers as they ramp up their AI capabilities. In the quarter that ended Feb. 2, Broadcom’s AI revenue jumped 77% to more than $4 billion, and infrastructure software revenue climbed 47% to more than $6 billion. That helped overall revenue increase 25% to a record of nearly $15 billion.
All of this is thanks to demand from big cloud service providers for connectivity systems and Broadcom’s XPUs, or chips to accelerate workloads. Broadcom is responding to this demand by creating next-generation accelerators, and it’s also preparing to send out samples of its next-generation Tomahawk switch.
Looking further into the future, the situation seems promising. Three large cloud customers that Broadcom is working with right now represent a serviceable addressable market of $60 billion to $90 billion in fiscal 2027. And this doesn’t even include four additional cloud players that are asking the company to help them create their own accelerators.
Broadcom stock slipped 26% from late January through March 6, before it reported these latest earnings figures. Before new earnings came out Thursday, it was trading for 28 times forward earnings estimates. While analysts may still be digesting the news, the stock would still be safely below its valuation of more than 37 times earlier this year. So now, on the dip, is a fantastic time to get in on this stock that’s well positioned to roar higher in the AI boom.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
