While the technology sector experiences a rebound in stock prices, there are a few high-quality stocks that currently trade at a discount. These stocks, despite their involvement in the thriving artificial intelligence (AI) industry, have faced recent downturns. However, these setbacks may present a golden opportunity for investors. Let’s take a closer look at three such stocks.
1. CrowdStrike:
Cybersecurity leader CrowdStrike recently faced a significant setback when a software update crashed Windows systems running its software. This incident caused widespread disruptions and a 35% pullback in the stock. However, the incident was not a result of a cyberattack but rather an operational error in CrowdStrike’s testing department. This suggests that the problem is fixable. Prior to the incident, CrowdStrike was gaining prominence in the cybersecurity industry, offering innovative solutions powered by big data and AI. The company’s growth and profitability track record indicate its potential for future success. While the incident will have near-term costs, long-term investors should consider this pullback as an opportunity.
2. Alphabet:
Alphabet, the parent company of Google, faced a blow when a Federal judge ruled that Google maintained a monopoly through exclusive distribution contracts with vendors like Apple. This ruling, along with a post-earnings decline, caused Alphabet’s stock to fall 16% from its all-time highs. However, the stock now trades at a discount with a price-to-earnings ratio of just 23. While the possibility of a breakup remains, most analysts do not expect drastic measures to pass the appeals process. Potential changes may include Google no longer paying Apple to become the default search engine on iPhones. Despite concerns about capital expenditures in AI investment, Alphabet’s strong position in core AI technologies and its attractive valuation make it an appealing investment opportunity.
3. Kulicke & Soffa Industries:
Kulicke & Soffa Industries, a leader in advanced packaging for electronic devices, experienced a decline in demand during the pandemic. While the company’s core ball-bonder equipment market has not fully recovered, it is expected to rebound next year. Additionally, Kulicke & Soffa has ventured into the high-growth area of advanced packaging for chiplet semiconductors, which is set to grow significantly. The company’s thermocompression bonding tools for this application are forecasted to contribute to strong growth in 2025. With a low valuation and a history of cyclical earnings, Kulicke & Soffa presents an opportunity for investors.