After making headlines in stock and business conversations for the past few years, artificial intelligence (AI) stocks are still generating a buzz, albeit for less favorable reasons. In the first quarter of this year, many prominent AI and tech stocks have seen declines.
Some investors suggest that this downturn in the AI bubble is simply a correction, while others believe it’s an indication that they’re leaning towards safer investments due to economic uncertainty.
Regardless, some AI stocks are appearing more appealing after recent sell-offs. Though there’s no certainty about a quick recovery, it might be wise to consider investing now before they bounce back.
1. Microsoft
Among the so-called ‘Magnificent Seven’ stocks, Microsoft has had a particularly rough patch. Its stock has dropped over 21% as of April 6, with a market cap now around $2.7 trillion. It’s arguable that Microsoft’s valuation was steep before this decline, but the current market conditions are indeed challenging for the company.
Investors have raised concerns about Microsoft’s plans for AI investment and a potential slowdown in Azure’s growth, which could affect its stock price. Yet, Microsoft is still regarded as one of the most strategically sound companies globally, across various sectors, including enterprise software and cloud computing.
Thousands of organizations depend on Microsoft for their operations, which enhances its appeal for long-term investors. By investing in Microsoft, one could tap into technology growth while enjoying the stability typically seen in established blue-chip stocks.
Most recently, Microsoft reported positive financial results for the quarter ending December 31, showing a revenue increase of 17% to $81.3 billion, with a 21% rise in operating income to $38.3 billion and a 60% spike in diluted earnings per share (EPS) to $5.16.
The company intends to invest over $100 billion in capital expenditures this year, much of it directed towards AI infrastructure. This long-term approach, coupled with a price-to-earnings ratio of around 23.3 times, makes the stock increasingly attractive.
2. CrowdStrike
Unlike many other software companies, CrowdStrike’s stock has faced challenges recently, particularly due to a new tool introduced by Anthropic, the creator of the well-known tool Claude. The launch of Claude Code Security, a cybersecurity solution, has the potential to impact CrowdStrike’s business.
Following the announcement in February, CrowdStrike saw its stock price decline over 17% from February 19 to February 23, with a current year-to-date drop of about 12% as of April 6.
Recognized as a leader in AI-native cybersecurity, CrowdStrike’s Falcon platform was launched back in June 2013. Its ability to gather and utilize vast amounts of data gives it a significant edge in enhancing its AI models, something competitors can’t easily match.
This depth of data collection is a long-term asset, and switching cybersecurity providers can be quite challenging for large companies, given the established relationships many have with existing providers.
While CrowdStrike isn’t completely shielded from market disruptions, its foundation contributes to its resilience, positioning it as a solid long-term investment. The stock currently trades at approximately 21.4 times expected sales for the next year, a rate that, though not inexpensive, is below the historical average.
