The S&P 500 index started the week with a bang after staying under pressure for a few days. There was a realization that Wall Street may have overestimated the impact of tariffs. Once the dust settles, the market will continue to go higher, just like the US economy which continues to grow despite challenges.
When the broader market corrects itself due to uncertainty, such as the one brought about by Trump’s tariff wars, mega-cap stocks also get affected. This provides investors, especially the ones that invest at regular intervals, to take another bite of these impressive stocks. The same situation happened during the last week, and we believe that after Monday’s impressive recovery, the trend is about to reverse.
Mega cap stocks like the ones in our list have driven the market in recent months and are therefore likely to be the ones leading it again. We decided to come up with the top 10 mega-cap stocks in the S&P index that have lost a considerable chunk of value in the last month and are now trading at a discount, a valuation gap that could quickly be recovered during this week’s trading.
To come up with the list of 10 oversold S&P 500 Mega-Cap Stocks To Trade This Week, we only looked at stocks with a market cap of at least $200 billion that have lost the most value in the last month.
A trader on the floor of a bustling stock exchange, surrounded by a sea of monitors.
10. Tesla, Inc. (NASDAQ:TSLA)
Tesla, Inc. is a manufacturer, designer, seller, developer, and lessor of energy storage and generation systems and electric vehicles. The company operates through Energy Generation and Storage and Automotive segments.
After a meteoric rise post the US presidential elections, Tesla investors have had a reality check. Matters have been made worse by the fact that Elon Musk’s involvement in politics is resulting in boycotts of his company’s products.
Figures coming out of Europe show that the EV maker’s sales in the continent went down 40% YoY, resulting in a paltry market share of just 1.8%. This happened despite the fact that total EV sales went up by 26% during the same period. Meanwhile, BYD, which is now the leading EV maker in the world, reported a 94% YoY increase in vehicles registered despite having to deal with increasing tariffs on Chinese EVs.
Despite losing a significant portion of the gains registered after the US elections, investors are still optimistic about the company. Cathie Wood of ARK Invest has said that she hasn’t changed her outlook on the stock, reiterating that she still sees the stock at $2,600 in 5 years.
Tesla has lost one-third of its value so far this year but Cathie Wood’s ARK Autonomous Technology and Robotics ETF (with Tesla weightage at 10% of total holdings) is only down 6%. Clearly, Tesla is dragging down the performance of her ETF, but the current EV downturn does not bother her. She sees Tesla’s valuation realization through robotaxis:
“We think that robotaxis will account for 90% of the value of the company in five years.”
9. Broadcom Inc. (NASDAQ:AVGO)
Broadcom Inc. develops, designs, and supplies different semiconductor devices. The company is focused on III-V analog products and mixed-signal complementary metal oxide semiconductor (CMOS) devices. It operates through the Infrastructure Software and Semiconductor Solutions segments. The stock is down 5.69% in a month, though holding out better than a lot of other tech stocks during the same period.
One reason for this stability is AVGO’s strategic acquisitions in the recent past as well as its AI positioning in the wake of custom chips’ demand. The company faced a lot of criticism for the way it bundled VMWare products into its existing portfolio post-acquisition. However, management was quick to rectify the mistakes and listen to the customers, so much so that 70% of the largest VMWare customers now opt for its most expensive bundle.
Since these bundles work on a subscription-based model, the recurring revenue strengthens the company’s cash flows. When one combines this financial strength with the unique positioning in custom chip design for AI training models, the current dip in share price looks as enticing as ever.
8. Costco Wholesale Corporation (NASDAQ:COST)
Costco Wholesale Corporation operates a chain of membership-based warehouses. It provides a wide range of private-label and branded merchandise. It offers a variety of merchandise, including appliances, health and beauty aids, candies, sundries, sporting goods, and other products.
There are a few things that are always true for Costco. It always trades at an expensive valuation, it has a unique economic moat, and it makes money with a reliability that no other business in its industry can replicate. The 10% dip in the last month can therefore easily be considered a buying opportunity.
Another thing investors noticed in its quarterly earnings report earlier in the month was that it continues to grab market share from retailers like Target and Walmart on a comparable store basis when it comes to e-commerce, an area that grew 20% in the quarter.
The current market valuation afforded to the stock is indeed high. However, a 10% dip in share price over a period of one month already reflects the uncertainty in the economy. As long as investors believe the stock will trade at a premium to its peers, there is no reason not to buy the stock.
7. Apple Inc. (NASDAQ:AAPL)
Apple Inc. operates as a manufacturer, designer, and marketer of personal computers, wearables, smartphones, tablets, and accessories. The company provides iPhone, iPad, Mac, and wearables. It also offers AppleCare support and cloud services.
Like any other good company, Apple stock continues to trade at a ridiculous valuation despite a 10% downturn in price within a month. According to a recent report published by Morgan Stanley, Apple is among a handful of stocks that are ideally placed to sustain an economic downturn. However, the fact that it is also expensive makes it a tough decision for long-term investors.
There are quite a few things that should soothe investors when talks of a bubble come around. A major difference between the current high valuations and the ones during the dot-com bubble is that valuations then were based on non-financial metrics like viewers and clicks. Today’s valuations are much more solid as they are based on the actual earnings of the companies.
Moreover, the AI revolution is bringing about a change way more significant than the internet. And Apple is at the forefront of it. The company is considering adding cameras to its smartwatches so that they can be equipped with Visual Intelligence features. The same could be added to AirPods soon.
Apple is behind other tech companies when it comes to AI innovation, but it has the advantage of a vast ecosystem that it can use to its advantage. Investors may want to do the same and back this winner before it regains the lost share value.
6. NVIDIA Corporation (NASDAQ:NVDA)
NVIDIA Corporation operates as a computing infrastructure company and offers compute & networking and graphic solutions. The company operates in two segments: Compute & Networking and Graphics. Its products are used in data centers, gaming, automotive, and professional visualization markets.
Nvidia recently held a Q&A at its GTC event and that prompted analysts to continue their bullish view on the company. For instance, Morgan Stanley reiterated its $162 price target on the company, saying it was more positive on its prospects than before.
Nvidia also bought the synthetic data company Gretel for an undisclosed amount, though the figure is expected to be somewhere between $350 million and $500 million. As AI training models use up human-generated data, synthetic data is in demand, and Nvidia is positioning itself to benefit from that.
The stock continues to trade at an expensive valuation, though it has come to more reasonable levels recently. It now trades at a P/E ratio of 41, well below its 5-year average of 72. The price-to-cash-flow ratio of 41 is also at a significant discount to the 5-year average of 55.46.
5. Meta Platforms, Inc (NASDAQ:META)
Meta Platforms, Inc. develops products that enable people to connect and share with their family and friends through PCs, augmented reality, mobile devices, wearables, and virtual reality and mixed reality headsets. The company operates in the Reality Labs (RL) and Family of Apps (FoA) segments.
At one point earlier this month, Meta stock had lost 20% of its value after registering multiple weeks of daily gains. The stock regained a lot of that value in the last 5 trading days but there is still a lot more to go. The company announced recently that its Llama AI models had now been downloaded a billion times.
“From top tech companies to universities, people and organizations all over the world are using Llama to innovate, drive scientific advances, and unlock new economic opportunities.”
This is in line with Mark Zuckerberg’s vision of creating the largest open source AI model in the world. He is not shying away from spending enormous amounts of money to build these models, a plan that was dealt a reality check after China’s emergence with similar models at a much lower cost.
AI continues to represent the biggest opportunity when it comes to Meta. Apart from the AI models, the company has used its AI technologies perfectly in advertising. Users have started spending more on advertising as they start seeing better results thanks to AI. But that is just a small part of the bullish thesis.
If Google continues to lose advertising market share at the current pace, there could come a point where people realize they can’t reach their target market as effectively with Google as they can with Meta. That’s when the real shift will happen.
4. Oracle Corporation (NYSE:ORCL)
Oracle Corporation provides services and products to address enterprise information technology environments. The company also offers cloud and license business infrastructure technologies, cloud-based industry solutions for various industries, Oracle license support services, and Oracle application licenses. The stock is down 8.6% in a month.
Oracle boasted a surging cloud demand right before the recent dip in share price. Enterprise demand for AI-powered cloud services is likely to keep going up as AI applications go mainstream. Oracle is setting itself up for this demand by partnering with tech companies like Nvidia, AMD, xAI, and OpenAI.
Many people focused on the earnings themselves, but shrewd investors would have noticed how active the company management was in making new deals, something that will reflect in its finances in the coming quarters.
Speaking of upcoming quarters, Q4 revenue is anticipated to come in 8-10% higher than the same period last year. The bottom line is expected to report a similar growth. The stock is currently valued higher than its 5-year average on various metrics, but that is expected with the strong growth prospects. A dip in the stock price is a buying opportunity.
3. Salesforce, Inc. (NYSE:CRM)
Salesforce, Inc. is a customer relationship management (CRM) technology provider. Its technology connects customers and companies. The company provides Data Cloud, Salesforce Starter, Agentforce, Industries AI, Slack, MuleSoft, and Tableau.
Software stocks are expected to drive the next AI bull run and Salesforce is one of the most likely stocks to lead that rally. The company has a wide range of AI products, as recently pointed out by Evercore analysts, calling the stock the most resilient if AI and software spending were to slow down.
The company is also making its mark on a global level after recently announcing a $1 billion investment in Singapore. This will further help the company strengthen its AI offering, Agentforce, which is gaining traction by the day and cashing in on a good chunk of the AI growth.
The stock trades at a PE ratio of 45, less than half its 5-year average PE ratio of 93.47. It offers an impressive opportunity for investors wanting to place a bet on software companies.
2. Walmart Inc. (NYSE:WMT)
Walmart Inc. operates a chain of wholesale and retail stores and clubs, mobile applications, and eCommerce websites. It operates in Sam’s Club, Walmart International, and Walmart U.S. segments. The company also operates digital payment platforms and markets lines of merchandise.
WMT has lost 13% of its value in a month, a rather big dip for a stock that has raised its dividend for 52 consecutive years. There’s more than one reason to take this dip as a buying opportunity. We will focus on the company’s AI initiatives, as the rest of the business has historically been run impressively.
Walmart has launched its AI assistant called Wallay to help businesses stock their shelves. The assistant has been trained on the company’s proprietary data. It will help merchants automate processes like data entry and stocking calculations. It will also help offer how to support and identify, and diagnose why some products do not perform as well as others.
The only problem for investors here is that, despite the dip, the stock is still trading at an elevated valuation compared to its 5-year averages. But then, which good stock isn’t? It is time to buy one of the strongest retailers in the US.
1. Alphabet Inc. (NASDAQ:GOOG)
Alphabet Inc. provides different platforms and products in the US, Canada, the Asia-Pacific, Latin America, and Africa. The company operates in Google Cloud, Google Services, and Other Bets segments.
Google is down 9.79% this year so far compared to the S&P’s decline of 1.58%. This underperformance is causing concern, especially when one sees Google lose market share to emerging AI-powered search engines like ChatGPT and Perplexity. A consequence of losing this market share is that the company may also lose out on advertising revenue to competitors like Meta Platforms. But there are reasons to be optimistic.
The company has successfully used AI-powered recommendations to increase viewing time on YouTube. AI Overviews, a search engine feature that gives users a direct answer to their query using generative AI, has significantly improved search quality. This is an example of how Google is a company that can not only fit AI products into its existing offerings but also distribute them to users without any additional burden.
This is why Google has had amazing shareholder returns in the last two decades, something that is unlikely to stop as it reduces its reliance on search engine revenue, a portion of its business supposedly under threat from competitors.
Alphabet is 4th on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 234 hedge fund portfolios held GOOG at the end of the fourth quarter, which was 202 in the previous quarter. While we acknowledge the potential of GOOG as a leading investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is as promising as GOOG but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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