Two Impressive AI Stocks to Consider Purchasing Before April 30
Earnings Season Overview: Focus on Major Tech Stocks
As the earnings season approaches, significant attention is directed toward major technology companies, particularly the so-called "Magnificent Seven." As of market close on April 22, all these stocks experienced negative price returns for 2025. Among this group, Microsoft (MSFT) and Meta Platforms (META) have seen the smallest declines, dropping 13% and 14.5% respectively. Both companies are set to release their financial results for the first quarter of 2025 on April 30.
Potential Challenges for Microsoft and Meta
Impact of Tariffs on Operations
One of the most pressing challenges facing technology firms today is the introduction of new tariff policies. Both Microsoft and Meta are investing substantial amounts in artificial intelligence (AI) infrastructure, including advanced components like Nvidia chips and custom hardware solutions.
The complexities of these tariff regulations mean that both companies could face increased costs in their AI-related projects. It is uncertain how these tariffs will affect their business operations in the long run. There’s a possibility that companies may need to tighten their budgets in sectors such as cloud computing, cybersecurity, and advertising. This potential scaling back can lead to slower sales growth for both Microsoft and Meta, which could negatively affect their profitability.
One strategy to manage declining profits could involve reducing investments in AI. However, investors might react unfavorably to such a decision since AI is a core component of both companies’ future growth.
Microsoft: A Long-term Investment Opportunity
Despite the ongoing downturn in the tech sector, I see this as a chance to invest in robust companies at lower prices. Currently, Microsoft’s forward price-to-earnings (P/E) ratio stands at 28, slightly below its three-year average.
Even though IT budgets are under scrutiny, I believe companies will find ways to save on items that are less critical, such as non-essential software and services. While I don’t anticipate a groundbreaking quarter for Microsoft, I remain hopeful for positive results in their cloud computing division, particularly Azure. Microsoft’s diverse product offerings, which encompass personal computing, social networking (via LinkedIn), and gaming, position it to withstand potential economic shifts stemming from tariff concerns.
Meta: Strength in Advertising and AI
Meta does seem to face significant pressures, primarily stemming from two growth areas: advertising and the metaverse. While its aspirations in the metaverse are yet to gain widespread acceptance or profit, the competition in digital advertising is robust, featuring rivals like Alphabet, TikTok, and Snap.
Despite these challenges, Meta’s relatively stable stock performance may indicate that investor confidence in the company’s future growth remains intact. Unlike Microsoft, tariff policies may not significantly hinder Meta’s operations. Although temporary revenue growth slowdowns might occur, I don’t see these as catastrophic.
Meta benefits from having leading platforms such as Facebook, Instagram, and WhatsApp, allowing it to monetize its extensive user base effectively. Furthermore, its advancements in AI are shaping new opportunities for growth in consumer markets.
Currently, Meta’s valuation aligns with its three-year average P/E ratio, despite substantial progress in AI development over the past few years. However, it seems the market isn’t fully recognizing this growth potential yet.
The Importance of a Long-term Perspective
Investors should remember that tariff policies can change swiftly. Even if trade issues cause temporary economic slowdowns, such cycles are rarely permanent.
As uncertainty looms over the market, many are shedding growth stocks. However, with reasonable valuations currently seen in Microsoft and Meta, this presents a valuable opportunity for investors. It’s advisable to consider buying these stocks while they remain at lower prices with an eye on long-term gains.
