With the artificial intelligence (AI) trade suddenly and viciously pulling the brakes over the past week, dip-buyers may finally have their chance to pounce. Indeed, the latest pullback in the Nasdaq 100 may still have room to go as investors dig deeper into a worst-case scenario for semis should geopolitical tensions begin to mount.
Even if China-Taiwan tensions take a slight turn under a Donald Trump presidency, the latest sell-off in chip and AI stocks seems to suggest overly anxious investors are catastrophizing over a low-probability event whose odds of occurrence aren’t markedly higher than a week ago.
After Trump’s latest commentary, there’s just a bit more uncertainty on Taiwan’s part about whether it can rely on the U.S. in the unlikely event of a Chinese invasion. That has AI chip investors feeling quite uneasy. In any case, I wouldn’t panic over recent Trump comments, given what’s at stake if Taiwan’s chip production capacity goes down.
In this piece, we’ll scavenge through the recent tech wreckage to uncover intriguing, underrated tech stocks that could be worth watching as the sell-off continues.
Taiwan Semiconductor (TSM)
Taiwan Semiconductor (NYSE:TSM) is pretty much the heart and lungs of the global chip market. In the early days of the pandemic, we got a glimpse of the magnitude of chaos that unfolded when COVID-19’s impact disrupted the $891 billion fab behemoth. This shows how essential the one company is to the health of the tech sector and the world economy.
When the chip supply chain got upended a few years ago, the latest electronics and other non-tech devices that relied heavily on modern-day hardware were challenging to get a hold of. Though Donald Trump is a tough, even aggressive, negotiator when it comes to getting better deals for America, I’m not sure he’ll allow Taiwan Semiconductor to fall into China’s hands if he is to become the next president.
Of course, some geopolitical risk will always be associated with TSM stock, even when such risks are perceived to be lower. But if you’re okay with the risk of such a detrimental but low-probability event (e.g., a Chinese invasion of Taiwan), perhaps Taiwan Semiconductor is one of the more underrated tech stocks while it’s off 10% from its high. A strong second-quarter beat is also being overshadowed by geopolitical jitters.
Coursera (COUR)
Coursera (NASDAQ:COUR) is a vastly different type of AI play that’s well insulated from geopolitical risks. The lesser-known $1.1 billion mid-cap online course and degree provider is leveraging new technologies, like generative AI, in several intriguing ways.
With COUR shares close to all-time lows of $7 and change per share, the underrated tech stock also looks like a great value buy for investors looking to bet on an AI-driven edu-tech revolution.
Indeed, it’s a tad far-fetched to think that AI will be teaching the digital colleges and universities of the future. However, higher education is one of those ripe-to-disrupt industries that can profoundly benefit from cost savings provided by next-gen AI tech.
On the front of generative AI, Coursera can offer students personalized learning experiences while staying on top of new technologies constantly being launched in this rapidly advancing AI age.
Netflix (NFLX)
Netflix (NASDAQ:NFLX) is a video streamer leader that will be incredibly difficult, if not impossible, for its peers to catch. It just keeps pumping out the must-watch content, and until the pipeline runs dry (it’s not about to anytime soon, with its new, intriguing sports content added to the mix), subscribers just won’t be able to hit the cancel button.
Netflix isn’t just a super-sticky service; it boasts immense pricing power because of its content strategy, which continues to be head and shoulders above its closest competitors.
Earlier this week, the company posted a solid second quarter. With another 8 million new subscribers aboard, Netflix has shown it can still grow despite its towering size. As the firm invests more in AI personalization and content creation tools, perhaps the streaming giant can further distance itself from other streamers. For now, Netflix’s crown is safe.
Sure, NFLX stock isn’t cheap at 44.5 times trailing price-to-earnings (P/E), but that’s the price of admission to a dominant AI-leveraging entertainment titan that could prove incredibly resilient come the next period of economic stagnation.
On the date of publication, Joey Frenette did not hold (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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
