3 stocks you can confidently buy even after a market downturn

2023 was a year of recovery after the 2022 recession triggered a sharp sell-off. Nasdaq Composite A 33% plunge. During difficult times, recurring revenue declines have exposed vulnerabilities in many companies’ business models.

But macroeconomic headwinds have also demonstrated the strength of companies that have successfully navigated market downturns. In 2023, the Nasdaq Composite Index rose more than 40%, driven by growth in several major stocks.

Technology stocks have played a key role in the market recovery, with Wall Street particularly strong due to advances in areas such as artificial intelligence (AI) and cloud computing. Technology is one of the most reliable industries, and stocks don’t stay down for long. As a result, the period following a market downturn can be one of the best times to invest in profitable industries.

Here are three stocks you can confidently buy after a market downturn.

1. Nvidia

stock of nvidia (NVDA 4.17%) Consumer spending in the PC market and other technology sectors plummeted by 50% in 2022 as surging inflation curbed consumer spending. However, it achieved an impressive turnaround last year, with its stock price soaring about 240%.

A leading chipmaker, Nvidia’s hardware is used to power a wide range of devices and systems, from cloud platforms to artificial intelligence (AI) models, video game consoles, laptops, custom PCs, and more. Demand for these products rarely falls for long. As a result, a market downturn could be the perfect time to buy Nvidia’s stock at bargain prices and reap long-term rewards.

Nvidia’s business model is diverse. But for now, the biggest growth catalyst is likely to be AI. According to Grand View Research, the AI ​​market is expected to exceed $1 trillion by at least 2030, growing at a CAGR of 37%.

Meanwhile, NVIDIA has achieved a strong role in this field with its graphics processing units (GPUs), the chips needed to train and run AI models. In 2023, NVIDIA’s GPUs became the preferred chips for AI developers around the world, leading to a surge in profits. In the third quarter of 2024 (ending October 2023), operating profit increased by 1,600% thanks to a surge in chip sales, recording sales growth of 206% compared to the same period last year.

Data from YCharts

This chart shows that Nvidia’s earnings could reach $24 per share by fiscal 2026. Multiplying this number by the forward price-to-earnings ratio of 45 implies a potential stock price of $1,080. If the predictions are accurate, the stock will rise 95% over the next two years.

The company has performed strongly since the market downturn, making the stock a great long-term investment.

2. Amazon

Amazon‘S (AMZN 1.20%) E-commerce businesses have also been hit hard by macroeconomic headwinds in 2022. The consumer slump has caused retail profits to plummet and stock prices to plummet. However, the company’s performance over the past year has proven why it is one of the most reliable stock investments over the long term, as it has strategically steered the business back to growth.

Poor market conditions led Amazon to introduce a variety of cost-cutting measures, including closing or canceling construction of dozens of warehouses, laying off thousands of employees, and closing unprofitable divisions such as Amazon Care. The restructuring paid off, with the company’s free cash flow soaring 427% over the past year.

Amazon’s ability to successfully navigate difficult economic times makes it an excellent choice following market downturns. The company is using its significant cash reserves to invest in AI and its highly profitable cloud platform, Amazon Web Services (AWS).

The company’s price-to-sales ratio is currently an attractive 2.8, which indicates that the company’s stock is trading at value and is a no-brainer at the moment.

3. Microsoft

microsoft (MSFT 1.22%) It’s a great option during a downturn as well as after a market downturn.

Data from YCharts

In 2022, companies across technology felt the pain of poor market conditions, but Microsoft was not spared. However, if you look at the chart above, you can see that it was one of the few companies that still outperformed the Nasdaq Composite Index, and is showing a more modest decline than many of its competitors.

The company’s increased focus on commercial and digital markets such as productivity software and cloud computing has made it less vulnerable to economic downturns than its competitors.

Moreover, in 2023, it emerged as one of the leading AI players and its stock price soared by 57%. In a significant investment in the market, Microsoft has acquired a 49% stake in ChatGPT developer OpenAI, giving it exclusive access to some of the most advanced AI models in the industry.

Microsoft has so far used OpenAI’s technology to deliver AI upgrades across its product lineup, including Bing, Azure, and its popular Office productivity programs. The large user base of these platforms makes the company the choice for all consumers and businesses looking to increase efficiency through AI.

The company’s stock trades at a premium, with a price-to-earnings ratio of 36. But with proven stability and $63 billion in free cash flow, Microsoft deserves a high price tag. This is a screaming buy for anyone looking for a consistent long-term investment.