As the technology sector experiences its cooldown, investors shouldn’t hit the panic button. Instead, it may be a good idea to nibble away at popular firms before the next phase of the artificial intelligence (AI) boom hits. Of course, it’s never easy to be a buyer for dips. It’s far easier to buy after a strong bull run. That said, the latest pullback, I believe, is not a reason to be concerned.
At the end of the day, there’s not too much negative news we didn’t already have on our radar that was presented this September. Rates are still going higher, and they could stay higher until inflation backs down more, perhaps to normalized levels.
All considered, long-term investors should rejoice as shares of top tech innovators experience double-digit percentage point declines. In this piece, we’ll have a look at two massive year-to-date winners that make for great bets on the current decline.
Of course, have a game plan in case the selloff extends by a couple more months. Rate expectations and localized bubbles may need to be corrected before the broader tech scene can return to its market-beating ways.
In any case, let’s give Canadian e-commerce stud Shopify (TSX:SHOP) and Microsoft (NASDAQ:MSFT) a closer look for investors looking to take advantage of the latest pullback in the hottest corner of tech.
Shopify stock is in the midst of a nasty sell-off right now, down around 15% over the past week. As the free fall continues, shares look to be surging into the no-fly zone. Despite the painful fall, I think shares are worth stashing on your radar, as the company looks to opportunistically pursue various innovative initiatives to improve its platform. Yes, AI is one of the tools it could leverage.
The stock may still be a tad on the expensive side at more than 10 times price-to-sales (P/S), and though Shopify may still have farther to fall, I think long-term investors should be comfortable averaging down into weakness.
Shopify’s a boom-and-bust type of play. Once the economy returns to normal, it’s hard to imagine Shopify stock not participating in the recovery gains to be had. I think it’s just a matter of time before e-commerce tailwinds take charge of the stock once again.
Microsoft is a magnificent software behemoth that’s betting big on the rise of generative AI. Recently, the firm has been busy rolling out AI across its suite, with the likes of AI image generator Dall-E being integrated into its Bing chatbot, which is powered by ChatGPT.
Microsoft is the go-to AI stock, and I think the recent pullback has made the stock a must-buy, even for Canadian investors who aren’t too enthused to exchange Canadian dollars for U.S. ones.
At 32.75 times trailing price to earnings, MSFT stock stands out as one of the best AI plays that’s hiding in plain sight. Even if a 10% pullback is modest versus the massive run it had in the first half, I think the premium price tag is more than warranted.
Better buy: MSFT or SHOP stock?
Microsoft seems like a better pick-up right here, given its exposure to the rise of AI. Shopify has a lot of negative momentum behind it and could be at risk of falling to much lower levels over the near term.