While the broader stock market has bounced back somewhat following its recent sell-off, many tech stocks are still well off their highs and trading at cheap valuations. Let’s look at three cheap tech stocks you can buy right now.
1. Nvidia
Trading down almost 23% from its highs, Nvidia (NVDA -5.59%) is an attractively valued growth stock. The company has been able to more than double its revenue each of the past two years, while analysts expect the company’s revenue to increase by more than 50% this year.
Despite that, Nvidia’s stock only trades at a forward price-to-earnings ratio (P/E) of under 27 times this year’s analyst estimates and a price/earnings-to-growth (PEG) under 0.5. Stocks with PEGs below 1 are usually considered undervalued, so a PEG of 0.5 certainly puts Nvidia in value territory.
Nvidia’s chips have become the backbone of artificial intelligence (AI) infrastructure, and it has developed a wide moat through its CUDA software platform. As such, how Nvidia’s stock performs moving forward will largely be dependent on how AI infrastructure continues to develop.
Right now, spending is still on the rise. The big three cloud computing companies are all increasing their AI-related capital expenditure (capex) budgets this year, while a consortium of companies led by OpenAI and Softbank also plan a massive data center buildout over the next few years. For its part, Nvidia management sees data center capex topping $1 trillion by 2028.
As long as AI infrastructure spending continues to ramp up, Nvidia is a cheap stock that investors should look to buy right now.
Image source: Getty Images.
2. Taiwan Semiconductor Manufacturing
Another cheap tech stock to buy right now is Taiwan Semiconductor Manufacturing (TSM -4.09%), or TSMC for short. The stock is also down about 22% from its highs and now trades at a forward P/E of 20 times and a PEG of 0.7.
Like Nvidia, TSMC is a big winner from the AI infrastructure buildout, as well as the proliferation of semiconductors being used more and more in devices we use every day, like automobiles, appliances, and smartphones. The company is the leading semiconductor contract manufacturer in the world, where it has a commanding market share for making advanced chips.
The company has become an integral partner to its customers, including Nvidia and Apple, given its technological expertise. TSMC has continued to increase chip density, which means its customers can design more powerful chips with lower power consumption. This has also allowed TSMC to increase its prices, leading to expanding gross margins.
Right now, the company is investing heavily to increase capacity to meet surging demand. The combination of capacity growth, pricing power, and margin expansion make TSMC a bargain growth stock at current levels.
3. Alphabet
With its stock trading nearly 19% below its highs, Alphabet (GOOGL -3.17%) (GOOG -3.23%) is another cheap tech stock. Its forward P/E is just above 18.5 times.
The company is the leader in search, commanding around 90% of the market share. Meanwhile, AI is a potential opportunity, as its Google search engine uses the technology to improve search results while also offering AI overviews for certain search queries. The company should have a nice opportunity to eventually monetize these AI overviews through new ad formats, as it has both a huge user base as well as an ad partner network. In fact, the company is already the largest digital advertising company in the world, and both Google and YouTube are two of the biggest platforms. It serves ads on third-party sites as well.
Alphabet also owns a number of other promising businesses and is in the process of adding fast-growing cybersecurity company Wiz to its fold as well. Its cloud computing business, Google Cloud, is the most prominent of these businesses, where it is seeing strong growth as it helps customers develop their own AI models and applications using its Gemini foundation model. The company also developed its own AI chip to help improve inference times and lower costs.
The Wiz acquisition will add an additional way Google Cloud differentiates itself from the competition, by offering top-notch cloud detection and response (CDR) security. The cybersecurity company has been growing quickly, and that should continue, especially with Alphabet providing many cross-sell opportunities.
In addition, Alphabet has been leading the way in the autonomous driving market with Waymo. While it’s taken awhile for the ride hail service to catch on in its home market of San Francisco, it has begun to gain market share since last year. Waymo has plans to enter Atlanta this year and Miami next year and is beginning tests in other U.S. cities.
Finally, the company is at the forefront of quantum computing, where it made a big breakthrough with its Willow chip last year. While quantum computing is still a long way off, this adds even more long-term optionality to Alphabet’s stock.
Altogether, Alphabet has one of the most attractive collections of market-leading and emerging businesses out there.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.
