With the US Federal Reserve set to raise interest rates and bond yields rising, technology shares are having a hard time right now. Recently, the Nasdaq Composite index – which tracks a wide range of stocks listed on the Nasdaq Stock Exchange – fell into ‘correction’ territory (meaning it’s more than 10% below its recent highs). And right now, it’s not that far off ‘bear market’ territory (20% off its highs).
As a long-term investor, I’m looking at the weakness across the tech sector as a buying opportunity. And yesterday, I mentioned that I had recently picked up some shares in Microsoft and Kainos. These aren’t the only tech shares I’ve had a nibble at recently however. Here’s a look at two more stocks I’ve bought in the recent tech correction.
Investing alongside ‘Britain’s Warren Buffett’
Another tech stock I’ve added to in the recent market volatility is Amazon (NASDAQ: AMZN). I picked up stock near the $3,150 mark, roughly 16% below its 2021 highs.
Amazon is experiencing a few challenges in its e-commerce division right now. Supply chain issues are one problem. Higher costs are another. I expect these issues – which are predominantly related to Covid-19 – to moderate sooner or later. And when they do, Amazon’s profits should get a boost.
Looking further out, I’m excited about the potential in the company’s cloud computing division. This market is projected to grow by nearly 20% per year between now and 2028 and Amazon currently has a 40%+ market share. So I think there’s a lot of growth potential here.
Even after recent share price weakness, Amazon still has a high valuation. At present, the forward-looking P/E ratio is just under 60. I’m comfortable with this valuation however, given Amazon’s dominance in e-commerce and cloud computing.
It’s worth pointing out that fund manager Terry Smith (aka ‘Britain’s Warren Buffett’) has recently been buying Amazon stock for his flagship fund Fundsmith. So I’m not the only one buying at current levels.
Enormous growth potential
I’ve also taken the opportunity to add to my position in semiconductor company Nvidia (NASDAQ: NVDA). I picked up some more shares around the $255 mark, roughly 25% below its 2021 highs.
In the past, Nvidia was a play on the video gaming industry as its high-power graphics cards were predominantly used in gaming. Today however, the company is much more than this. Indeed, thanks to the power of its chips, it has become a major player in cloud computing, artificial intelligence (AI) and autonomous vehicles – all of which are projected to grow significantly in the years ahead.
What really excites me here is the company’s plans for the ‘Omniverse.’ This is an advanced technology platform that brings together Nvidia’s expertise in AI, simulation, and graphics and can be used to create virtual avatar characters, interpret speech, and create new 3D worlds. CEO Jensen Huang believes the Omniverse has the potential to benefit businesses in a wide range of industries.
Now Nvidia is a high-risk, volatile stock that has a high valuation (the P/E ratio is about 50). It’s certainly not a stock for those who prioritise capital preservation as its share price can fluctuate wildly. We’ve seen this in recent weeks.
As a long-term investor with a higher-than-average risk tolerance, I’m comfortable with the volatility here however. This is a stock I plan to hold for the long term.
John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares in Amazon and Nvidia and has a position in Fundsmith. The Motley Fool UK has recommended Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
