The Nasdaq has entered a correction. A stock market correction means a decline of between 10% and 20% from all-time highs (a 20% decline officially triggers a bear market). As of this writing, after hours on March 11, the Nasdaq-100 index (QQQ 1.13%) is down 12.6% from its highs, triggering an official stock market correction.

Stock market downturns are not fun. You might feel like it is time to shy away from the market until the storm passes. However, that is the exact wrong instinct to have if your goal is to buy and hold high-quality stocks at a reasonable price. Smart investors embrace market corrections. Today, I see two bargain opportunities with blue chip stocks that are down over 20% from highs: Alphabet (GOOG 1.82%) and American Express (AXP 2.10%).

Could buying these two stocks set you up for life?

Premium credit card spending

American Express is one of the largest credit card issuers around the world. It also operates the third-largest payments network in the United States, giving it a vertical integration advantage vs. the credit card competition.

With an enviable selection of offerings focused on travel, entertainment, and food, American Express serves a premium customer base mainly focused in the United States. It makes money on card swipe fees, credit card loan balances, and annual fees charged for using its cards. Wall Street is worried about how these revenue streams will be impacted if we experience a consumer spending recession. For example, huge American Express partner Delta Airlines pre-announced a reduction in its Q1 revenue guidance from 7% to 9% annual growth down to 3% to 4% growth due to a recent decline in consumer confidence.

While this is a scary headline, reading the fine print can help alleviate concerns over American Express, which issues all of Delta’s credit cards. According to Delta Airlines, its premium, international, and loyalty revenue are growing in line with previous expectations. These are all the line items that American Express has exposure to, which shows how resilient its premium customer base is compared to the average spender. Now, you can buy the stock at a discounted price-to-earnings ratio (P/E) of 18, with the stock down 20% from highs.

Even if a recession arrives and American Express sees a temporary hit to its earnings per share (EPS), that will be a further buying opportunity for this storied brand. The company has been a mainstay in the United States for close to 200 years and has weathered all sorts of geopolitical and economic calamities. It will get through whatever the economy throws its way this decade and make it through to the other side, creating wealth for shareholders in the process.

AXP PE Ratio data by YCharts.

An overblown AI threat

Like American Express, Alphabet is a high-quality business that is experiencing stock market pain due to concerns about its forward earnings power. However, unlike American Express, investors are hung up on a competitive threat instead of macroeconomic impacts on the business. The theme of the last few years has been artificial intelligence (AI) and how it might disrupt Alphabet’s business.

The owner of Google, YouTube, and Google Cloud has indisputably contributed the most to AI progress but is currently under threat from OpenAI and other generative AI start-ups. There is a fear that people will switch from Google Search to more conversational informational tools like ChatGPT. Less usage of Google Search would mean fewer advertisements clicked on by users, which would mean less revenue for Alphabet. Google Search and related services still generate over half of Alphabet’s consolidated revenue.

So far, these slowdown fears are not matching up with the reality on Alphabet’s financial statements. Google Search revenue grew from $48 billion in Q4 of 2023 to $54 billion in Q4 of 2024. As the company embeds more and more AI tools into Google Search in order to compete with ChatGPT, it is actually seeing an increase in search queries, which is the opposite of what Wall Street fears.

Let’s not forget the fast growth at Google Cloud and YouTube, either. Google Cloud hit an annual revenue run rate of $48 billion last quarter and is growing 30% year over year. Combining advertising and subscriptions, YouTube is now generating over $50 billion in annual revenue. Combined, these segments can help balance out any revenue declines in Google Search that come from AI competition, if they even occur.

At a P/E of 20 and revenue growing over 10% per year at a consolidated level, Alphabet stock looks like a slam-dunk buy-and-hold investment during this stock market correction.