We have seen a sharp shift in sentiment this year. Animal spirits and bull market enthusiasm have evaporated quickly, especially with technology stocks. The Nasdaq Composite index has fallen sharply from all-time highs, with plenty of stocks down 20%, 30%, or more in just a few short weeks.
This provides contrarian investors with a buying opportunity in technology stocks. It may sound risky to buy when everyone is panicking, but these are the exact moments when your best investments can be made.
Here’s why two top technology stocks — Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) — are well worth buying and holding for the next decade.
Alphabet, the parent company of Google, YouTube, and Google Cloud, is currently in a 20% drawdown to start 2025. This is providing investors an opportunity to scoop up shares on the cheap.
Some investors fear that Google Search will be disrupted in the age of artificial intelligence (AI), with applications such as ChatGPT growing quickly in usage. However, Alphabet is fighting back and innovating at a blistering pace. It has launched AI overviews in Google Search, Circle to Search, and Google Lens to help broaden the amount of ways people can search for things through Google. Gemini — the company’s personal AI assistant — is now available on smartphones and is growing in usage quickly.
We can’t see any disruption in Alphabet’s financials, either. Google Search revenue grew to $54 billion in Q4 2024 compared to $48 billion in the same period in 2023. YouTube revenue keeps climbing, and the company is making major inroads with its Waymo self-driving taxi network. However, the most promising might be Google Cloud, which is taking advantage of all the demand for AI tools from third-party software providers. Google Cloud revenue grew 30% year over year last quarter to $12 billion and is now generating $2 billion in quarterly operating income.
Growth shows no signs of slowing down at Alphabet. Today, you can buy shares of Alphabet at a price-to-earnings ratio (P/E) of 20.5, which is well below the S&P 500 average of 28.3. This makes Alphabet stock an easy buy for your portfolio right now.
Amazon stock does not look as cheap as Alphabet with a P/E ratio of 35, but it may be even cheaper when you factor in forward earnings potential.
The e-commerce titan and leader in cloud computing hit a staggering $638 billion in revenue in 2024, making it one of the largest businesses by revenue in the world. Cloud computing revenue at Amazon Web Services (AWS) grew 19% year over year in 2024 to $107.6 billion, making the division significantly larger than Google Cloud. International and North American retail sales both saw solid growth in the period, posting 9% and 10% year-over-year growth, respectively, in 2024.
