With the recent stock market crash, a number of tech stocks have suddenly gone on sale with attractive valuations. While there remains a lot of uncertainty in the market about what happens now that tariffs have been implemented, these stocks should do well over the long term.
Let's look at three cheap tech stocks in which investors can start building positions right now. You don't need to rush to buy full positions all at once. You can gradually start buying and look to add more shares on any further stock market dips.
1. Nvidia
It's difficult to discuss cheap tech stocks without mentioning Nvidia(NASDAQ: NVDA). While its forward price-to-earnings ratio (P/E) of 21.5 times this year's analyst estimates is attractive in its own right, it is the stock's 0.4 price/earnings-to-growth (PEG) ratio that squarely places it in the bargain bin. Stocks with PEGs below 1 are typically considered undervalued.
In a more normal environment, investors would likely be hard-pressed to find a stock growing as quickly as Nvidia with such a cheap valuation.
The company continues to be the king of artificial intelligence (AI) infrastructure, where its graphic processing units (GPUs) are one of the main components used to provide the processing power needed to run AI workloads. Nvidia has created a wide moat in the GPU space over its next closest competitor, Advanced Micro Devices.
This is due to Nvidia's CUDA software platform, which is the program developers learned to program these chips. Since introducing its software program in 2006, about 10 years before AMD developed its competing platform, Nvidia has also built a leading collection of AI libraries and tools that continue to set it apart from the competition.
With AI still being viewed as a once-in-a-generation opportunity, spending on AI infrastructure continues to grow. To advance, AI models need increasing power to be trained on, while cloud computing companies need to increase their capacity to keep up with the growing demand for their AI services. This is all leading to Nvidia expecting AI data center capital expenditures to reach $1 trillion by 2028. If this happens, the stock will be a big winner.
2. Broadcom
Perhaps the company next best positioned with the ongoing AI data center buildout is Broadcom(NASDAQ: AVGO). The company participates in this buildout in two ways. The first is through its portfolio of networking equipment, such as ethernet switches. Switches help manage data flow and are becoming more important as AI chip clusters increase in size.
Its bigger opportunity, though, is with custom AI chips. Broadcom has begun to help customers design their own custom AI chips called ASICs (application-specific integrated circuits). These custom chips don't have the flexibility of GPUs and take time to design, but they perform better on the specific tasks for which they were created and use less power.
Given the initial up-front costs, the current trade war is unlikely to have a big impact only on customers in the process of designing these custom chips.
For its part, Broadcom sees its three customers furthest along having a $60 billion to $90 billion serviceable market opportunity in its fiscal year 2026 (ending October 2026). While some of this market will go to Nvidia and its off-the-rack GPUs, it is still a big opportunity for Broadcom.
Broadcom also has other custom AI chip customers earlier in the design process, including Apple.
Trading at a forward P/E of under 23.5 times, the stock is cheap, considering the opportunities ahead. Meanwhile, given its cheap stock price, the company just announced a $10 billion stock buyback.
Image source: Getty Images.
3. Taiwan Semiconductor Manufacturing
While semiconductors are exempt from the U.S.'s tariffs on Taiwan, Taiwan Semiconductor Manufacturing's (NYSE: TSM) stock has nonetheless also taken a big hit. After its sell-off, the stock is on sale, trading at a forward P/E of just 16 times this year's analyst estimates and a PEG of under 0.6.
Even though tariffs and the current trade war create uncertainty, what is certain is that TSMC has become a vital cog in the semiconductor value chain that cannot easily or quickly be replaced. It is the leader in manufacturing advanced chips for customers such as Nvidia, Broadcom, and Apple, among others. TSMC has technological, scale, and skilled worker advantages that its competitors just cannot match.
This has made the company a vital partner to leading semiconductor designers and given it strong pricing power, which is leading to not only robust revenue growth but also expanding margins. Meanwhile, TSMC is investing to develop manufacturing facilities across the globe, including in the U.S.
TSMC continues to be a major AI infrastructure winner that will also benefit from Nvidia's and Broadcom's success.
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Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
