In 2025, AI stocks have seen significant declines, with a 30% drop in key players like Palantir and Tesla. This dip creates opportunities for long-term investors, particularly in stocks like Alphabet and Applied Materials. Alphabet shows solid financial growth amidst competitive pressures, while Applied Materials is crucial for semiconductor production, offering attractive buyback and dividend plans.
In recent years, the allure of artificial intelligence (AI) stocks captivated the market, especially in 2023 and 2024. However, as 2025 dawned, the landscape shifted dramatically, leading to a sharp decline of 30% in AI stocks, including Palantir Technologies and Tesla. Investors are increasingly wary of diminished spending amidst broader market weaknesses and concerns surrounding a potential recession alongside tariff implementations under the Trump administration.
Amidst this turbulent backdrop, savvy long-term investors might find golden opportunities in buying the dip of two standout AI stocks. First on the list is Alphabet, famed for Google and YouTube, which alternates between being hailed as a leader in innovation and facing skepticism over competition from emerging players like OpenAI. Despite the pessimism weighing down the stock, Alphabet’s impressive financial resilience shines through: a revenue increase of 15% year-over-year in 2024 and operating income rising by 33%, signaling robust growth. Its ongoing innovations, such as integrating AI into its services and advancing projects like Waymo, solidify its foundation.
With Alphabet shares down by 20% from their peak, its price-to-earnings ratio (P/E) stands at a favorable 20, considerably below the S&P 500 average of 28. This moment represents a prime chance for investors to scoop up shares and weather short-term competitive threats for future rewards.
The second compelling option is Applied Materials, a vital player in the semiconductor manufacturing space that powers AI innovation. Unlike Alphabet, Applied Materials operates behind the scenes, providing the machinery essential in crafting cutting-edge chips. As semiconductors are crucial for AI operations, Applied Materials has emerged as a pillar in the AI supply chain, thriving within a growing semiconductor market.
Over the past decade, Applied Materials has remarkably boosted its sales by nearly 200%. The management’s commitment to returning value through share buybacks—reducing outstanding shares by 34%—reflects a long-term strategy for growth. Anticipations of continued profit from the AI spending surge and an additional $10 billion in buybacks reinforce its attractiveness as a growth stock with a solid capital returns approach, especially with its P/E ratio dipping below 20.
The recent downturn in AI-related stocks has created enticing buying opportunities for those willing to invest for the long haul. With Alphabet demonstrating resilience through robust growth and an innovative spirit, and Applied Materials positioning itself as a critical supplier in the AI supply chain, both stocks present compelling cases. As economic challenges loom, these companies are well-poised for future gains, making them worthwhile additions to investment portfolios.
Original Source: www.fool.com
