Investors continue adjusting to the notion that interest rates may not come down as much as expected in 2024. That mindset shift is manifesting as something of a panic in the markets. As a result, contrarian tech stock picks are falling; the S&P 500 has fallen for five straight days as I write this.
However, investors shouldn’t panic. Instead, I think there is an opportunity because while this April has been a difficult one, it’s historically one of the two strongest months for the stock market, along with December. That truth implies room for a rebound in the latter portions of this month.
Furthermore, investors are more likely to adapt to the idea of higher rates for longer than they are to abandon the massive opportunity in artificial intelligence. To me, that suggests lower tech share prices are an opportunity.
Microsoft (MSFT)
I can’t understand why investors should logically be concerned about Microsoft (NASDAQ:MSFT) stock overall. I don’t have any precise statistics to back up this notion. However, buying Microsoft every time it drops 5% would be a winning strategy.
That’s exactly what happened between April 15 and April 19 — following my logic, that makes Microsoft a stock to scoop up while the crowd panics over rate cuts and rising Treasury yields.
While Microsoft certainly meets those short-term criteria, the company’s long-term growth expoalm investors’ nerves. The value of the AI Tech Market was estimated at $200 billion in 2023. It is expected to grow to $1.8 trillion in value by 2030. Microsoft is one of the leading firms best exposed to that growth. That truth is evident in the 24% growth in its Cloud business during the most recent quarter. The company has invested massively in AI, especially in the business segment.
That brings me to my next point: the cloud. That particular market is expected to grow at a compound annual rate of 16.4% between 2024 and 2029. There, too, Microsoft is a leader.
The sky is not falling, and Microsoft will continue to appreciate.
Nvidia (NVDA)
If investors need reassurance about Nvidia (NASDAQ:NVDA) stock, it can be found in the news from Taiwan Semiconductor Manufacturing (NYSE:TSM).
Investors are currently worried that markets may be amid a giant AI bubble. Combine that with the fact that rate cuts that would spur their growth may not now occur in 2024. The result is fear manifesting as exits from once red hot Nvidia shares.
Recent news from Taiwan Semiconductor Manufacturing provides the perfect counterpoint to that notion. The world’s biggest foundry announced that first quarter revenue was boosted by demand for AI chips. Furthermore, the company noted that AI chips should account for 10% of overall revenue this year, rising to 20% by 2028.
That should be an immediate boon to Nvidia as it is the leading chip producer overall. Demand for its semiconductors should be expected to rise on the TSMC news. Based on TSMC forecasts, AI chip demand should double by 2028. That, too, should be a boon to Nvidia, although that longer time frame opens the door to competition. It’s logical to assume that other firms could erode Nvidia’s competitive advantage by 2028. The TSMC news should be enough to halt Nvidia’s downward trajectory for now.
AMD (AMD)
The logic for Nvidia also applies to AMD (NASDAQ:AMD) and its stock. The crowd has panicked. AMD shares trade for $155 as I write this. They were trading as high as $211 five weeks ago. That sharp reversal is indicative of the fear that now dominates.
Yet, I would caution investors to ignore that fear based on the abovementioned information. Demand for AI chips is going to remain strong throughout 2024. TSMC produces roughly 50% of all AI chips, so its opinions are particularly pertinent. Its conviction that AI chip revenues will account for 10% of its business in 2024 is a strong vote of confidence for AMD and others.
AMD is also currently engaged in a pitched battle against Nvidia to dominate AI chips. It remains a dark horse in the race but is also a firm with significant advantages, especially in pricing. TSMC Raised concerns about prices in that recent announcement. That’s important for AMD because the company produces chips at lower prices and a high value. If the market suddenly perceives value as a primary factor, then AMD will shoot up.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) is an excellent stock for several reasons. It is suffering, and prices have fallen as the crowd panicked over the last week. However, there are multiple reasons to remain optimistic about Amazon.
Firstly, investors should have confidence in Amazon’s e-commerce business. The company continues to grow at a double-digit rate precisely because of its dominance over the e-commerce space. That’s the company’s main driver, and it will continue to grow. Amazon provides low-cost options that make it relevant for the next decade and beyond. Consumers will always want the lowest-cost option; it is as simple as that.
Yet, Amazon is so much more than e-commerce alone. In the most recent shareholder letter, Amazon management noted that the company is increasingly confident in Prime Video as a standalone business. Amazon is also developing its in-house chips, a big trend that every investor should follow at all major tech companies.
Amazon has also invested $150 billion into AI data centers over the next 15 years. It isn’t easy to envision a future in which Amazon doesn’t continue to thrive.
Google (GOOG,GOOGL)
Google’s (NASDAQ:GOOG,GOOGL) stock perfectly exemplifies something I mentioned above about Amazon’s in-house chip development efforts.
Most investors are well aware of the pushback against high chip prices from leading suppliers, including Nvidia. Big Tech is a major buyer of those chips. They can’t afford to pay those high prices because the war for AI computing power is in full swing.
However, Google and others are unwilling to remain a captive audience for Nvidia indefinitely. Google has been developing AI chips for a decade. The company recently expanded its in-house chip development efforts. It’s crystal clear that Google aims to reduce its reliance on major chip makers. That’s true across all of big tech.
Google understands what it needs in a chip best. At some point, it and other big tech firms may very well develop superior chips for their own purposes.
While that proof probably doesn’t matter much about the current market panic, it’s one reason to consider scooping up Google.
Broadcom (AVGO)
Broadcom (NASDAQ:AVGO) stock is an excellent investment in general and particularly well-suited to the current market.
The company is an integral part of the AI supply chain and benefits from secular opportunities moving forward. Broadcom develops semiconductor infrastructure software. In everyday speech, the company helps chip firms derive greater power And AI output from a given chip.
That should position Broadcom to benefit for a long time as AI continues to develop. Currently, it manifests as a very strong fundamental. Top-line results increased by 34% in the most recent quarter. The company also repurchased and eliminated approximately $8.3 billion worth of shares.
Broadcom stock includes a steady dividend, making it a more stable investment in AI. There’s a lot to like overall, including that revenues are expected to increase by 40% in 2024.
Micron (MU)
Micron (NASDAQ:MU) stock has been especially battered by the current panic in the market. However, it’s an excellent opportunity to pick up shares.
The same reason Micron has fallen so precipitously is the same reason that it previously rose so quickly. It’s also why you should remain steadfast as an investor or buy if you haven’t.
Micron has been handpicked as a supplier of high bandwidth memory (HBM) by Nvidia. That was why it shot up so quickly in the last month. The HBM market is dominated by Micron and two South Korean firms, Samsung and SK Hynix. Continued reshoring efforts should benefit Micron, and its current relationship with Nvidia is strong.
Taiwan Semiconductor Manufacturing reassured the market that AI chip demand remains strong. In turn, Nvidia should continue to be strong, which, in turn, makes Micron strong as an integral supplier to Nvidia.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
