Some of the best opportunities can be found in beaten-down giants.
That’s because it’s oftentimes temporary weakness.
Look at Microsoft (SYM: MSFT), for example.
The other day, Microsoft plunged on poorly-received quarterly earnings results. More than $357 billion in value was wiped out, making it the worst day for the software icon and AI innovator since the 2020 stock market crash.
It was also overkill – and investors may want to use the weakness as an opportunity – once the stocks falling knife finds some sort of support.
Helping, analysts at Piper Sandler named Microsoft its top pick in software.
Even with concerns about growth in Azure and other cloud offerings, the analysts believe investors are overreacting to the news. They also believe MSFT is a big winner with AI.
“We see Microsoft as perhaps the best pure-play on AI adoption today,” wrote analyst Billy Fitzsimmons, as quoted by CNBC. “We believe Microsoft is best positioned to benefit from the elevated AI infrastructure spending. We also believe Microsoft is in a better financial position than some peers to make the necessary capital expenditures, with a robust balance sheet and expectations that free cash flow remains soundly positive over the next few years.”
Helping, Deutsche Bank reiterated a buy rating on MSFT with a $575 price target. The firm noted that MSFT “reported another solid result for F2Q, but it ultimately fell short of more lofty market expectations, in particular for Azure growth,” as quoted by CNBC.
Analysts at Citi also have a buy rating with a price target of $660. RBC Capital analysts also have a buy rating with a $640 price target.
From its current price of $413.40, we’d like to see it rally back to $475 initially.
Nvidia (SYM: NVDA)
Nvidia has been flat since the year began.
Some of that is because of a Wall Street Journal report that Nvidia’s $100 billion plan to partner with OpenAI stalled because of internal doubts about the size and structure of the transaction and questions about OpenAI’s business discipline and competitive risks.
But here, too, investors may want to take advantage of temporary weakness.
For one, Nvidia makes GPUs, the most popular computing units to deploy with AI workloads. Nvidia continuously innovates and is launching a new chip architecture that provides huge improvements over last year's model. Two, it’s one of the key parts of the AI story, which shows no clear signs of slowing any time soon.
Remember, after the global AI market surpassed $230 billion in 2024, analysts now see a clear path to multi-trillion-dollar expansion—and the next five years may deliver the strongest gains yet. Forecasts now place AI’s value between $1.7 and $3.5 trillion by the early 2030s, with the most aggressive estimates topping $7 trillion by 2035. And judging by the surge in corporate investment, the market is moving toward the high end of those projections.
Even better, analysts are bullish.
Analysts at RBC just initiated coverage of Nvidia with an outperform rating and a $240 price target. The firm cited NVDA’s $500 billion+ backlog, inferencing demand, and surging enterprise demand as reasons for further growth.
Analysts at Rothschild Redburn reiterated a buy rating on NVDA with a price target of $268. The firm believes NVDA will remain a positive outlier with regard to size, growth, and profitability. They also believe its moat will continue to become even stronger than expected.
Again, these two tech giants are down on temporary weakness.
Related Reading: Mag 7’s relentless assault on Nvidia’s future
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Written by Ian Cooper