Since late January, most stocks have declined, with Microsoft (MSFT 0.64%) leading this downward trend. Overall, shares of the software giant have dropped 27% from their peak in October, which is significant.
Nonetheless, this could be an instance of excessive blame due to industry affiliation. Many large-cap stocks have experienced setbacks similar to Microsoft’s as they heavily invest in artificial intelligence (AI). For example, the so-called “Magnificent Seven” stocks have lost about 10% in value since late December. This decline is notable, especially given the impressive gains these stocks showed prior to that period.
Savvy investors realize that this exaggerated downturn presents a long-term buying opportunity. With that in mind, here are three heavily discounted megacap stocks worth considering now.
Broadcom
The computing processor manufacturer Nvidia may have been at the forefront of AI’s mainstream emergence, but it heavily relies on Broadcom (AVGO +1.43%) for critical technological infrastructure. Broadcom creates essential components that connect processors within data centers into comprehensive neural networks, including Ethernet switches and software solutions.
As one of the largest firms in this sector, Broadcom reported $63.9 billion in revenue for its last fiscal year, a 24% increase from the previous year, largely driven by AI-related hardware. Furthermore, the company anticipates a 28% revenue growth for the current quarter and a forecasted 64% growth for the year, followed by a 47% increase in the next year as demand for AI remains exceptionally high.
Oracle
While hardware manufacturers like Nvidia and Broadcom have garnered significant media attention, Oracle (ORCL +1.81%) also merits consideration as a promising investment. The company’s cloud-based solutions for software, apps, and data storage have substantial potential for growth.
Despite experiencing a significant decline of over 50% since its high in September, Oracle’s prospects remain strong. This decline followed an initial surge founded on optimism about its AI-driven cloud services, but subsequent profit-taking provoked a swift downturn. Fortunately, recent analyst upgrades and reassuring quarterly results confirm the company’s solid future trajectory.
Microsoft
Lastly, Microsoft hasn’t just influenced the broader market but has also become a potential buying prospect in light of recent sales. Following an extensive drop since October, much of this downturn began in late January when Microsoft announced a significant investment in AI despite slowing growth in its cloud sector.
It’s important to emphasize that the decline isn’t due to a lack of demand—as Microsoft’s order backlog surged to $625 billion—but rather a capacity challenge in meeting rising needs in AI infrastructure. Despite the struggles the company faces, Microsoft is expected to achieve around 16% revenue growth in the coming year, which is considerable for a corporation of its size.
