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Here are 9 cheap but solid names to buy now as AI stocks enter bear market territory

Here are 9 cheap but solid names to buy now as AI stocks enter bear market territory

  • 21.03.2025 08:45
  • businessinsider.com
  • Keywords: AI, Market Volatility

AI stocks are declining as market volatility increases and investor caution grows. Companies like Microsoft, Adobe, and ServiceNow are now in fair-value territory, offering opportunities for investors to focus on growth or explore leading-edge sectors like robotics.

Meta ServicesAmazon NewsAmazon ServicesNvidia ServicesMicrosoft ServicesMSFTsentiment_satisfiedADBEsentiment_satisfied

Estimated market influence

Microsoft

Microsoft

Positivesentiment_satisfied
Analyst rating: Strong buy

Mentioned as a solid name in AI stocks.

Adobe

Adobe

Positivesentiment_satisfied
Analyst rating: Buy

Highlighted for its potential despite fears of GenAI competition.

Context

Analysis and Summary: Business Insights and Market Implications

Key Market Trends

  • AI Stock Decline: AI stocks have entered bear market territory, with declines exceeding 20% from recent highs.
  • Market Volatility: Increased volatility and investor caution are driving the downturn.
  • Broad Market Impact: The broader market is now supporting the index, rather than being driven by AI stocks.

Competitive Dynamics

  • Big Tech Struggles: Major tech companies like Microsoft, Adobe, and ServiceNow are facing pressure.
    • Microsoft: Down ~14% YTD.
    • Adobe: Down ~17% YTD.
    • ServiceNow: Down ~25% YTD.
  • AI Integration Shift: Investors are shifting focus from pure AI plays to companies integrating AI into their products and services.

Strategic Considerations

  • Investment Options:
    • Growth Stocks: Focus on companies with strong revenue growth and sustainable business models.
    • Robotics and Automation: Emerging sectors with potential for significant growth, though riskier due to reliance on future success.
  • Portfolio Strategy:
    • Option 1: Invest in AI stocks with long-term integration potential.
    • Option 2: Focus on "picks and shovel" companies supporting AI adoption.
    • Option 3: Explore speculative opportunities in leading-edge sectors like robotics.

Industry Implications

  • Software Sector: Companies like Adobe and ServiceNow are undervalued despite market declines.
    • Adobe: Down ~10% YTD, with concerns over GenAI competition but strong fundamentals (e.g., FireFly AI tools).
    • ServiceNow: Q4 revenue up 21.34%, stock down ~22% YTD.
  • Robotics and Automation: Potential for significant growth, with combined sectors expected to contribute 35% of global GDP by 2040 (VettaFi estimate).

Expert Opinions

  • Dan Romanoff (Morningstar): Emphasizes the importance of revenue growth and sustainable business models in software companies.
  • Zeno Mercer (VettaFi): Highlights the need for strategic evaluation of robotics companies based on technological leadership, market positioning, and partnerships.

Long-Term Effects and Opportunities

  • AI Integration: Companies successfully integrating AI into their operations are expected to drive future growth.
  • Robotics Growth: The robotics and automation sector presents a trillion-dollar opportunity, though it requires careful evaluation due to its speculative nature.

This analysis provides a concise overview of the current market dynamics, strategic considerations for investors, and long-term implications for businesses in the AI and robotics sectors.