For a group that led the market out of the March 2020 crash, mega capital letters have certainly not been getting their money’s worth lately.
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With growth-oriented technology and consumer names bearing the brunt of this year’s downturn, the impact on capitalization-weighted indices is clear.
Take the S&P 500, for example, where the top six stocks are each down at least 20% year-to-date, while the index is down about 18% overall. Tech companies love Apple† Microsoft† Alphabetand Metaplatforms have performed unusually poorly. Ditto for consumer durables Amazon and Tesla.
As the closely watched benchmarks live and die by their biggest voters, mega cap names will likely have to make a comeback before the market has a chance to finish higher by the end of the year.
In the longer term, this hefty six-pack and its $200 billion sidekicks all have their investment benefits. But in the short term, some seem to be closer to the bottom than others. Don’t wait too long to jump on these three mega pullbacks.
Is the NVIDIA Downturn a Buying Opportunity?
NVIDIA Corporation (NASDAQ: NVDA† trading more than 50% off its November 2021 peak. It’s a stunning turnaround for a company on the cutting edge of some of the world’s most promising technologies – and a glorious opportunity to start or add a position.
The long-term growth potential of the founder-led company remains excellent. It operates in four major, growing end-markets: automotive, data centers, gaming and professional visualization. Three powerful NVIDIA platforms focused on high power computing (HPC), artificial intelligence (AI) and Omniverse will continue to drive innovation in the coming years.
Together, NVIDIA’s full-stack technology is positioned to serve industries worth $1 trillion. More than 3 million developers around the world use the platform to create new software. Dozens of blue-chip companies rely on NVIDIA connectivity solutions to power their data centers, such as Pepsi, Salesforce and T-Mobile.
The stock’s downturn has everything to do with a valuation reset rather than a fundamental flaw. In fact, the growth story has only solidified since the beginning of the year after NVIDIA launched groundbreaking products for AI infrastructure and deep learning. As these and other growth prospects come out, the stock’s valuation will be reset. upwards.
Will Amazon.com Recover Stock?
Less than a year away from hitting the $3,700 level, Amazon.com, Inc. †NASDAQ: AMZN† flirts with a price of less than $2,000 that would bring it back to where it was at the start of the pandemic. This would also effectively wipe out the credit the inventory received for the hyper online shopping activity caused by Covid-19.
If the e-commerce giant does fall below $2,000, it will likely be a major psychological milestone that sparks renewed interest in a stock that is in the negative for the first time since 2014. Yes, the big loss in the first quarter was disappointing, as was the current quarterly outlook. Higher wages and shipping costs affect most businesses today. But they are temporary challenges that Amazon will work through and that will work out just fine.
The Amazon brand remains synonymous with online shopping as google is similar to searching online. The company gained even more market share during the pandemic and is still the go-to website for American households. After doubling the size of its fulfillment network to keep up with demand, Amazon is entering a new phase in identifying cost efficiency and productivity gains. It’s a good situation to be in with sales still growing from the crazy 2021 level.
Investors should also be encouraged by Amazon’s cloud computing business, which is a global leader and highly profitable. AWS revenue grew twice as fast as Amazon’s e-commerce revenue and operating profit rose 57% to record levels in the first quarter.
Eventually, the e-commerce business will recover and Amazon will once again have two high-growth profitable businesses. Investors buying into the weakness can set themselves some Prime returns.
Will Tesla Stock Return to $1,000?
tesla, inc. †NASDAQ: TSLA† has nearly halved its share price since November. It’s a valuation adjustment that was probably long overdue and, according to some, should be continued.
However, like its fearless CEO, Tesla is a different animal. The valuation is almost irrelevant given the well-choreographed growth trajectory and the immense investor interest in the stock.
Lately, Tesla’s downturn has been just as much about Elon Musk’s Twitter circus, which apparently has more encore performances in the offing. Whether the conclusion comes down to an impressive grand finale or a major failure, it will eventually disappear from the headlines. This will allow the market to refocus on the strong growth story seen during the first quarter update.
Valuation reasons aside, it’s astonishing that the sell-off continues on the heels of an exciting Q1 report. Profits have more than tripled thanks to the surge in electric vehicle production and deliveries. Margins rose even as most companies saw margins deteriorate significantly during this inflationary period.
Tesla is a risky buy here, as the stock is sensitive to factors other than fundamentals, such as tweets. The truth is that the fundamentals are strong and that’s what you want to see as a long-term investor. Ignore the sound. Not far from the road, this will be another $1,000 share.
Tesla is part of the businesstraverse.com Index, which tracks some of the largest publicly traded companies founded and run by entrepreneurs.
