The current stock market downturn is providing some compelling opportunities for astute investors.
After running hard for more than two years, the current bull market is finally taking a well-deserved breather. The Nasdaq Composite has slipped into correction territory, defined as a decline of 10% or more from a recent peak. While it can be unsettling to watch the value of our investing accounts slump, savvy investors will recognize the opportunity that the current downturn represents. We don’t yet know if the market has further to fall, but investors with the appropriate long-term outlook and the intention to hold for the coming five to 10 years have the chance to pick up quality businesses at discounted prices.
One of the biggest secular tailwinds right now is the rampant adoption of artificial intelligence (AI). While estimates abound, AI could contribute as much as $15.7 trillion to the global economy by 2030, according to accounting firm PricewaterhouseCoopers (PwC).
Given the magnitude of the opportunity, seasoned investors should consider viewing the current downturn as a chance to pick up some of the biggest names in AI at a discount.
Image source: Getty Images.
Alphabet
When it comes to internet search, there’s Alphabet (GOOGL -1.10%) (GOOG -1.09%), then there’s everyone else. Google revolutionized search with its cutting-edge algorithms and accounts for 90% of the worldwide search market, according to web analytics company StatCounter. The company’s dominant position in search acts as a springboard for its industry-leading digital advertising, controlling roughly 26% of the market in 2024.
Let’s not forget Google Cloud, the world’s third-largest provider of cloud infrastructure services, controlling 11% of the market, according to data compiled by market analyst Canalys.
Alphabet has long deployed AI solutions to inform its search results and ensure that its digital advertising reaches its target market. More recently, however, the company has compiled a suite of the most popular AI models for its cloud users. Furthermore, Alphabet’s homegrown Gemini is among the most widely used chatbots, gaining share on market leader, ChatGPT.
What makes Alphabet a no-brainer, however, is its valuation. The stock is currently selling for just 20 times earnings, well below its five-year average multiple of 26. Valid concerns about the state of the economy, the potential for a recession, and a remedy from its antitrust case continue to weigh on the stock, which could still have further to fall. But for those with a long-term outlook, Alphabet is a steal at this price.
Meta Platforms
When it comes to social media, Meta Platforms (META 1.29%) is in a class by itself. In addition to its former namesake, Facebook, the company also owns Instagram, WhatsApp, Messenger, and Threads. Its offerings bring in roughly 3.35 billion visitors per month, a user base that is unmatched. This captive audience forms the basis for the company’s digital advertising success, with 21% of the market — second only to Google.
However, Meta’s foray into AI was a master stroke, thanks to decades of data on its billions of users. Its Large Language Model Meta AI (LLaMA) products have joined the ranks of the world’s most widely used large language models (LLMs). While these open-source offerings are free to researchers, the company charges hyperscalers and cloud operators to offer them on their respective platforms. Meta is also offering premium subscriptions to its Meta AI assistant, banking on the future of agentic AI.
Like Alphabet, investors have concerns about how Meta will fare if the economy stumbles. That said, for those planning to own for years, if not decades, the opportunity is clear. The stock is currently selling for 25 times earnings, an attractive price for an industry leader with a wealth of opportunity.
The Trade Desk
While it might not be a household name, The Trade Desk (TTD -2.44%) is a leading demand-side platform in the programmatic advertising arena. The company provides a self-serve platform that helps advertisers buy ad space and create, manage, and measure the success of their ad campaigns.
The Trade Desk has a long track record of innovation. The company developed its Unified ID 2.0 as the growing industry standard. The system uses encrypted consumer data to provide targeting and measurement, ensuring advertisers reach their target market without sacrificing data security. The Trade Desk also developed OpenPath, which gives advertisers direct access to publishers’ premium ad inventory. Later this year, the company will roll out Ventura, its connected TV operating system, which will provide even more granular data.
Perhaps most importantly, The Trade Desk recently debuted its AI-powered Kokai platform, which “brings the full power of AI to digital marketing,” according to the company. Kokai can access 13 million ad impressions every second, helping advertisers reach the right audience with the right ad at the right time.
In a rare misstep, The Trade Desk missed its own guidance for the first time in more than eight years. While transitioning existing customers from Solimar — its existing platform — to Kokai, the company hit a few snags. That, combined with the broader market uncertainty, sent The Trade Desk into a slump, with the stock falling more than 50% since it peaked late last year. But one quarter does not a trend make. The stock is currently selling for 33 times forward earnings, its cheapest valuation in nearly five years. This gives astute investors the opportunity to buy a company with a superb track record at a discounted price.
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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Meta Platforms, and The Trade Desk. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and The Trade Desk. The Motley Fool has a disclosure policy.
