Tech stocks have been red hot in 2024. Powered by artificial intelligence (AI) demand and expectations that this incredible tech shift is still in the early stages of unfolding, megacap tech companies including Nvidia, Apple, Microsoft, and Palantir have rocketed to new valuation highs. In turn, these explosive gains have powered incredible returns for major indexes.
The S&P 500 index is up an impressive 28% across this year's trading. Meanwhile, the even more tech-heavy Nasdaq Composite index is up 32% across the stretch. But even though a bull market is in swing and many high-profile companies are notching incredible performance, there are actually some great companies with explosive return potential that are down big from previous highs.
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With those potential investment opportunities in mind, read on to see why two Fool.com contributors think that buying these stocks would be a smart move right now.
One vital AI company is actually down big in 2024
Keith Noonan (ASML): Access to high-performance semiconductors has never been more important than it is right now. For example, the chips that Nvidia designs for its advanced graphics processing units (GPUs) are the foundational hardware that's making the AI revolution possible. High-end semiconductors are central to data centers and cloud computing performance, and they're also central to computing devices at the consumer level.
And when it comes to the production of chips that are pushing technology forward, almost no company on Earth is more important than ASML(NASDAQ: ASML).
ASML is the world's leading provider of lithography machines used for the fabrication of semiconductors. When it comes to the extreme ultraviolet lithography (EUL) machines that are used to manufacture the world's most advanced chips, the company is essentially the only player in the game.
ASML's proprietary EUL technology makes it possible to print the world's most advanced semiconductors at levels of precision that no other semiconductor equipment manufacturer can match.
But despite clear leadership in a market category that looks primed for strong demand trends, ASML's stock has actually lost ground amid the massive run-up for AI stocks this year. The company's share price is down 35% from its high.
So what's behind the big pullback? Due to rising tensions between the U.S. and China, ASML is facing restrictions that are preventing its advanced lithography machines from being exported to China. Due to these pressures and some demand weakness in lower-end chip manufacturing markets, the company has cut its near-term performance guidance.
But while the company's results could see some unevenness due to geopolitical developments and cyclical trends in the semiconductor industry, ASML stands as one of the world's most important and most influential businesses. When it comes to the EUL machines that make the manufacturing of advanced AI chips possible, no comparable alternative to the company's offerings exists.
Over the long term, I expect that ASML's clear tech advantage will lead to business performance that powers the stock to market-crushing returns.
Investment in machine vision is only getting started
Lee Samaha (Cognex): Machine vision equipment and solutions company Cognex(NASDAQ: CGNX) has a bright future. Despite suffering from a decline in demand over the last couple of years due to a combination of temporary factors, the company's long-term growth prospects remain undiminished. Meanwhile, its share price is down roughly 60% from its lifetime high.
The temporary weakness relates to a cyclical slowdown in Cognex's key end markets -- automotives, consumer electronics, and logistics (e-commerce warehousing) -- as interest rate rises have crimped consumer discretionary spending. That's caused automakers and consumer electronics companies to cut back on investment in assembly lines and, in turn, the machine vision technology that helps optimize them.
In addition, spending on e-commerce warehousing has scaled back due to the slowdown in consumer spending and a natural correction from the pull forward in investment caused by the pandemic.
That said, the underlying demand trends for machine vision remain in place. It's a complementary solution for investment in automation that will help reshore production from low-labor-cost countries. Furthermore, it's a technology whose benefits are enhanced by the movement toward digital manufacturing, as it helps monitor and control automated production more efficiently than humans can.
As such, the rate of adoption of machine vision is only likely to grow in end markets that are traditionally early adopters of automation (such as automakers) and likely to spread into other industries that use automated assembly line production.
Management's long-term annual growth rate target is 15%, and when its cyclical end markets turn, it should be able to at least return to that rate.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:if you invested $1,000 when we doubled down in 2009,you’d have $350,239!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $46,923!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $492,562!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Keith Noonan has no position in any of the stocks mentioned. Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Apple, Cognex, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
