Wall Street's concerns over tariffs and how President Donald Trump's trade wars will impact the U.S. economy have sent the Nasdaq Composite down by around 18% year to date, and it's off more than 20% from its peak. But if you have some extra cash available that you won't need to spend in the near term or use for other financial priorities like reducing debt, the market's current sell-off offers a great opportunity to invest.
Shares of the best companies in the world are trading at prices that may significantly undervalue their future growth. For less than $500, you can buy one share each of Amazon(NASDAQ: AMZN) and Apple(NASDAQ: AAPL). These are two of the strongest consumer brands, and both are in great positions to benefit from the growing use of artificial intelligence (AI).
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1. Amazon
The first stock I would buy with $500 is the leading cloud service and online retail brand. The market sell-off has taken Amazon down to $166 per share at the time of this writing. Amazon generated record profits and cash flow last year, which last summer brought its price-to-free-cash-flow valuation down to the lowest level in over 15 years.
Since 2005, on a price-to-cash-from-operations basis, Amazon stock has traded at multiples ranging from 12 to 48. Today, it's trading at just 15, which is a steal of a price for investors, particularly considering that it doubled its cash from operations over the last five years.
The cloud infrastructure services market was worth $330 billion in 2024, and it's growing at a rate of more than 20% annually, according to Synergy Research. Amazon Web Services (AWS) is well positioned for long-term growth as spending on AI continues to grow. More than 1,000 generative AI applications have already been built using the tools available on AWS.
Amazon's AI revenue is growing at a triple-digit percentage annually. The operating profit from that segment of the business totaled nearly $40 billion in 2024, comprising 58% of the company's top line. AI is a once-in-a-generation opportunity, and it's a key growth driver for Amazon's business and share price.
Amazon could be one of the biggest beneficiaries of AI over the long term. It's an expensive technology in part because it must be powered and trained using high-end chips, the majority of which come from a single supplier (Nvidia), and demand for them is outpacing supply.
But Amazon is in the process of reducing the cost of AI for enterprise customers by investing in developing its own AI chips. As it becomes more cost-efficient to use AI supported by AWS, that could drive even more demand for the cloud service.
With a business that is producing a gusher of profits as AI takes off, Amazon is one of the best growth stocks to buy in the wake of the recent market correction.
2. Apple
Not long ago, Apple shares were trading at premium price-to-earnings multiples based on high expectations that the new AI features it was rolling out would boost sales of its newest iPhones and computers. However, the stock has fallen by 24% from its recent highs, bringing the share price under $200 for the first time in about a year. It's trading at a more reasonable earnings multiple, which should position those who buy it now for a rewarding result over the long term.
At its recent peak, the stock was trading over 35 times this year's earnings estimate. It is now trading at a more reasonable valuation of 26 times forward earnings. Trump's tariffs could increase iPhone prices and put pressure on sales -- the smartphone again accounted for more than half of Apple's total revenue last quarter -- but over the long term, the company's growth prospects look solid.
Apple Intelligence could drive more growth for the company. It has seen stronger sales of the iPhone 16 in markets where the AI offering is available, but it's early. Over the long term, Apple Intelligence will get smarter and could open up growth opportunities that are not reflected in the stock's current valuation.
The consumer tech giant has a massive installed base of more than 2.3 billion active devices. The iPhone is its most popular device, and it's a product customers carry with them everywhere they go. AI features can make these devices even stickier and drive more sales of services (e.g., apps and subscriptions) -- Apple's fastest-growing revenue opportunity.
Apple is generating huge profits, with $96 billion in trailing-12-month net income on $396 billion of revenue. There's no doubt it's going to benefit tremendously from Apple Intelligence.
Buying Apple shares at their recent prices should lead to solid returns over the next decade. Analysts' consensus estimate is that the company's earnings will grow by just over 10% annually. Given its opportunities to drive more sales by marketing its latest products with their new AI features, investors can be confident that the most valuable brand in the world will grow more valuable over time.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy.
