The stock market landscape is shifting, as low-tech value plays take the lead in propelling the S&P 500 ahead of the tech-heavy Nasdaq 100. This transition signifies a significant rotation from mega-cap tech to other areas of the market, potentially providing a respite for both the Magnificent Seven and the sizzling semiconductor firms.
Despite these developments, cloud computing stocks present an intriguing opportunity for a rebound, especially for those trading near 52-week lows or multi-year lows. As top cloud innovators leverage artificial intelligence (AI), the less-recognized cloud laggards might benefit from the market’s diversification in the latter half of the year.
Exploring Snowflake (SNOW)
At present, data warehousing firm Snowflake (NASDAQ: SNOW) finds itself near multi-year lows, trading at $136. The stock has faced significant pressure following revelations of recent data breaches impacting some of Snowflake’s clients, notably including AT&T (NYSE: T). These breaches, tied to exposed credentials, have created a challenging environment for Snowflake as it seeks to reverse its fortunes.
With the stock reaching oversold levels, it may attract investors hunting for bargains. Snowflake, a part of the Berkshire Hathaway portfolio, remains a cloud AI play that could surprise investors with its potential.
Examining Zscaler (ZS)
Despite a recent downturn, Zscaler (NASDAQ: ZS), a security firm with a market cap close to $30 billion, has seen over 33% growth in the past year. While its forward price-to-earnings ratio sits at 60.9, Zscaler’s unique growth drivers, including collaborations with Nvidia (NASDAQ: NVDA) and a focused go-to-market strategy, position it as a compelling investment option in the cybersecurity space.
Even amidst softer IT cloud budgets, Zscaler’s security solutions remain attractive, given the prevailing cybersecurity concerns. If the company successfully leverages AI, it could justify its premium valuation.
Evaluating Alibaba (BABA)
Chinese tech giant Alibaba (NASDAQ: BABA) emerges as a cost-effective cloud and AI stock with substantial potential, trading nearly 74% lower than its 2020 peak. Despite geopolitical risks, Alibaba’s trailing price-to-earnings ratio of 18.19 discounts its AI capabilities. With the introduction of new AI translation tools for international merchants, Alibaba’s strength in the Chinese market positions it as a viable long-term investment.
Considering the significant discount and Alibaba’s expanding AI initiatives, investors may find value in purchasing BABA stock, even amid potential market headwinds.
Overall, the cloud computing sector presents compelling opportunities for investors seeking growth in an evolving market. By identifying undervalued stocks with strong potential for recovery and innovation, investors can position themselves for long-term success in this dynamic industry.