AI Stocks Bruised But Not Broken: Long-Term Winners Emerge | Image Source: www.etftrends.com
NEW YORK, 2 April 2025 – The artificial intelligence (AI) sector, long regarded as the gold goose of modern investment, has recently taken a blue in the markets. Despite the promise of three-dollar contributions to the global economy, AI’s shares – even the biggest names like Nvidia, Microsoft and AMD - are struggling under the weight of market corrections, economic uncertainty and an increasing chorus of investor skepticism. However, under the effect of falling stock prices is a history of opportunity, innovation and recalibration that could pave the way for a new bullfighting.
Why do AI actions fall despite strong foundations?
It’s a fair question: if AI is the future, why do your greatest players have a hemorrhagic value? According to the economist and evaluation expert Aswath Damodaran of the NYU Stern School of Business, the euphoria of AI reached last year and has since suffered what he calls a “bar mitzvah moment” – an awakening where investors begin to ask difficult questions about monetization and real world applications. Damodaran pointed out in the CNBC that “the activity of AI products and services, which is ultimately what you have to pay for all this, has not grown”
Investors are no longer looking for buzzing words. They see a rapid increase in capital spending as companies pay billions of infrastructure, especially data centres, without clear or immediate returns. Essentially, the market is entering a phase of maturity, from hypocrite to performance, and only the strongest will prosper.
Is this the end of Nvidia’s rule?
No, but the image is more nuanced than before. Nvidia (NASDAQ: NVDA), long considered the undisputed champion of AI chips, faced unusual headwinds. Despite the CEO Jensen Huang’s optimism, investor sentiment remains cautious. Paul Hickey, co-founder of Bmúke Investment Group, told CNBC that “until investors change course and start buying again in Nvidia’s story, volatility will likely persist.”
Nvidia’s evaluation had increased so much that I priced perfectly. Now, as geopolitical tensions, tariffs and the supply chain increase, even small occupations cause heavy losses. However, with 193 hedge funds invested and their presence in ETFs such as QQQ and QQM, Nvidia is deeply rooted in the AI financial ecosystem. The road may be rocky, but far from a dead end.
Is AMD the underdog to watch?
Yes, and rightly so. Advanced Microappliances (NASDAQ: AMD) could negotiate close to 46% below their 52-week level, but their artificial intelligence titles are far from low. According to the company’s reports, AMD’s data centre revenues were 94 per cent last year to $12.6 billion, and while growth slowed slightly, there was a healthy 69 per cent increase after last quarter.
Unlike Nvidia, which dominates the training phase of AI with its powerful GPU, AMD’s strength lies in inference: the deployment of models trained in real-time applications such as autonomous vehicles, fraud detection and cybersecurity. These are the areas where AI meets daily utility. AMD chips are also generally more cost-effective, which could provide an advantage as AI adoption develops through cost-conscious industries.
His leadership in the CPU market is another strength. AMD now orders more than 50% market share between hyperclimates – massive cloud providers like Amazon Web Services and Microsoft Azure. This is a strong sign of its relevance in the conversation about infrastructure AI.
How Microsoft turns AI correction into an opportunity?
Microsoft (NASDAQ: MSFT) is one of the few companies that seems to double in AI – and get right. Its Intelligent Cloud segment grew by 19% year after year, but more impressively, AI’s revenues jumped by 157%, according to its second quarter report for fiscal year 2025. This level of growth would have been higher, if not due to capacity constraints, that the company is now tackling a significant expansion of the data centre.
Microsoft’s strategy is multiple. It offers OpenAI and DeepSeek AI models across Azure and has built industry-specific custom artificial intelligence tools in collaboration with global giants such as Siemens, Bayer and Rockwell Automation. According to Morningstar Tori Brovet’s analyst, “Microsoft’s vast AI portfolio is not only a technology company, but also an AI enhancer in several sectors”
The company’s RPO – or remaining performance bonds – increased by 36% per year to $298 million, indicating a backlog of long-term contracts and businesses. With AI-driven cloud services that are expected to grow by almost 40% per year by 2030, Microsoft is positioned not only for survival, but also for domination.
And the other participants in the ETF AI universe?
Beyond the three big ones, AI’s universe of action includes names such as Meta Platforms (NASDAQ: META), Alphabet (NASDAQ: GOOG) and Adobe (NASDAQ: ADBE). Each plays a unique role in the IA ecosystem and is currently dedicated to what analysts see as attractive assessments. According to Morningstar, Meta is undervalued by 23% against its estimated fair value of $770, due to its massive user base and increased advertising revenue flow.
Alphabet, on the other hand, takes advantage of AI to improve Google search and optimize advertising – two of its largest money manufacturers. With features such as AI-generated panoramas and best orientation, it uses AI not as a gigmmick, but as a spine for its central activity. Adobe, although often beyond the AI conversation, integrates generating capabilities into tools such as Photoshop and Premiere Pro, noting that even creative workflows are remodeled by AI.
Should investors be worried or excited?
That’s the question of a billion dollars, and the answer depends on your time horizon. In the short term, CEW actions may remain volatile. Composite Nasdaq has already dropped by more than 14% in December 2024, placing it in correctional territory. The US economy is showing signs of a slowdown, and investors are naturally atrocious. But this does not deny the long-term disadvantage.
According to McKinsey, AI could contribute $23 billion a year to the global economy by 2040. It’s not just a number; It is a northern star that guides corporate strategies and government investments around the world. As companies discover how to monetize IA applications - and as the support infrastructure for these applications becomes more robust – payment could be huge.
For now, intelligent money seems to change the hypocritical approach to value. Stock like AMD and Microsoft, which combine solid fundamentals with forward-thinking strategies, can be better than the more volatile names trading at high multiple.
What are analysts preparing for the future of the AI sector?
Despite current turbulence, analysts continue to harass the long-term trajectory of AI. For example, Microsoft is expected to publish a 12% increase in revenue during the year and could reach $17.65 per share in a few years. If it simply aligns with the price-benefit ratio of Nasdaq-100 of 29, suggesting a future price of $512, a profit of 36% of current levels.
Similarly, AMD advanced P/E of 22 appears to be a market due to its market share gains and AI-specific potential. Investors also monitor other dumped AI games, particularly those included in high-quality ETFs such as QQQ and QQM, which now house several four- and five-star shares through Morningstar methodology.
In short, as the AI action rally stopped, the structural winds remained strong. The shock can even be beneficial, separating the substance from the hypocrite and giving investors a clearer picture of the companies building the AI-led future.
