Bouncing Back in a Tumultuous Market: Nvidia and Microsoft
Nasdaq Stock Dip: Two Artificial Intelligence Stocks Offering Discounts in 2025
The tech-heavy Nasdaq Composite has taken a hit in 2025, shedding around 10% of its value. Amid fears of a potential U.S. recession and the impact of new trade policies, investor confidence is low, and the market is experiencing volatility. Yet, within this dip, there lies an opportunity to invest wisely in some fundamentally strong stocks that have seen a correction, like Nvidia (NVDA 5.27%) and Microsoft (MSFT 2.58%). Let's delve into why these stocks deserve attention.
Nvidia
Nvidia's fiscal 2025 earnings, reported on Feb 26, reveal a robust financial performance with revenue growth of 114% year over year to $$130.5 billion and operating income jumping 147% to $$81.5 billion. The space explorer faces some gross margin pressures due to the ramp-up of Blackwell architecture chips, but expects these to revert to mid-70s levels in fiscal 2026.
The Blackwell architecture chips, designed for AI inference and reasoning workloads, have been a major growth catalyst for Nvidia. These chips offer 25 times higher token output and 20 times lower cost compared to previous H100 chips. Major cloud service providers, such as Microsoft, Meta Platforms, and Alphabet, have taken advantage of these efficiencies by incorporating Blackwell graphics processing units (GPUs) for their AI workloads.
Nvidia owns a staggering 92% share of the data center GPU market (AI hardware market) in 2024, reinforced by its strong moat established through the Compute Unified Device Architecture (CUDA) software stack. This comprehensive parallel programming development environment, already well-adopted by developers and AI researchers, makes switching to competitors' chips a costly proposition for client organizations, expanding the territory for Nvidia's hardware-software offerings into new areas like agentic AI, robotics, sovereign AI, and autonomous vehicles.
Despite these impressive aspects, investors have been disappointed by Nvidia's decelerating data center growth and margin pressures amid a challenging macroeconomic environment. Consequently, Nvidia's shares have dropped by nearly 28% from their 52-week high ($149.43 as of Jan 6).
However, with a price-to-earnings ratio (P/E) of 20, significantly lower than its historical five-year average of 26.2, and a price-to-earnings-to-growth (PEG) ratio of just 0.25, Nvidia's corrected valuation makes it an enticing buy now.
Microsoft
Shares of Microsoft have dropped about 10% in 2025, but the decline provides an intriguing entry point for savvy investors. Microsoft's financial performance for the second quarter of its fiscal 2025 was impressive, with revenue climbing 12% year over year to $$69.6 billion and net income increasing 10% to $$24.1 billion.
However, the stock underperformed due to investor concerns about weak third-quarter guidance and a slowdown in Azure cloud services business due to capacity constraints. Yet, Microsoft seems poised to benefit from the Jevons Paradox, in which increased price performance gains for AI hardware and software in inference workloads would lead to exponentially greater access and demand for AI hardware and software services.
Additionally, Microsoft's strategic partnership with OpenAI has been a cornerstone of its AI strategy. OpenAI's application programming interfaces (APIs) currently run on Azure, attracting more clients to the cloud platform. The tech titan is also at the forefront of the ongoing agentic AI revolution with its CoPilot offerings, which are witnessing strong adoption across enterprises of all sizes.
Microsoft's shares trade at just over 30 times trailing-12-month earnings, which seems expensive for a company with moderate growth numbers. However, the valuation is lower than its historical five-year average of 33.2. The company returned a substantial $9.7 billion to shareholders through dividends and share repurchases in the second quarter, further sweetening the investment opportunity.
The tech industry is fraught with uncertainty, but Nvidia and Microsoft stand tall amidst the market turbulence. Their robust financials, technological prowess, strategic partnerships, and commitment to sustainability make them attractive investment choices for those seeking long-term growth opportunities in the tech sector.
- Despite the weak macroeconomic environment in 2025, investor attention should be directed towards Nvidia and Microsoft, two tech giants that have experienced a dip in their shares but exhibit strong financial performance and the potential for growth.
- Nvidia's impressive fiscal 2025 earnings reveal a revenue growth of 114% and an operating income jump of 147%, with the Blackwell architecture chips driving a significant portion of this growth. These chips offer efficiency gains and have been adopted by major cloud service providers such as Microsoft.
- Microsoft's financial performance for the second quarter of its fiscal 2025 was impressive, with a 12% increase in revenue and a 10% increase in net income. The tech giant's strategic partnership with OpenAI and commitment to agentic AI through its CoPilot offerings make it poised to benefit from the Jevons Paradox and the increased demand for AI hardware and software services.
- With Nvidia's corrected valuation—a price-to-earnings ratio (P/E) of 20 and a price-to-earnings-to-growth (PEG) ratio of just 0.25—and Microsoft's lower valuation compared to its historical five-year average, both companies offer enticing investment opportunities in the tech sector for those seeking long-term growth.
