In the world of technology stocks, it’s common to see market leaders priced at premium valuations, particularly during bull markets. However, even the best tech companies experience downturns, often due to short-term challenges like regulatory scrutiny or geopolitical tensions. While these factors may create volatility, they can also present attractive opportunities for investors willing to look beyond the noise and focus on long-term growth.
Below, we’ll discuss three top tech stocks currently facing adversity but still poised for significant growth in the coming years. Despite their current struggles, these companies are in dominant positions within their respective industries, and now may be the right time to consider buying them at discounted prices.
1. Alphabet: Dominating Digital Ads Despite Regulatory Scrutiny
Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), the parent company of Google, is no stranger to regulatory challenges. In August 2024, Alphabet lost an antitrust lawsuit that has led to significant scrutiny from regulators. There have been calls for the company to sell its Google Chrome browser and impose restrictions on deals that protect YouTube and Gemini, its AI platform, from competition. These developments have caused some uncertainty around Alphabet’s future, particularly in its dominant digital advertising business, which makes up the bulk of the company’s revenue.
However, despite these regulatory hurdles, Alphabet remains undervalued. Currently trading at just 20 times forward earnings, Alphabet’s stock is priced attractively compared to its long-term growth potential. Analysts forecast the company’s earnings to grow by 17% to 18% annually over the next few years. Additionally, the potential sale of Chrome could bring in up to $20 billion, providing Alphabet with a cash infusion.
Alphabet’s cloud business is also rapidly growing, which could further bolster its future performance. Investors may look back at this period of regulatory uncertainty as a prime buying opportunity, with the company still well-positioned for growth in both advertising and cloud computing.
2. ASML: A Monopoly in Semiconductor Manufacturing Facing Geopolitical Tensions
ASML Holding (NASDAQ: ASML) is the world’s only manufacturer of extreme ultraviolet (EUV) lithography machines used to produce the high-end semiconductors necessary for AI applications. The Dutch company holds a monopoly in this critical technology, but its position has made it a pawn in the ongoing geopolitical rivalry between the United States and China.
The U.S. government has pressured ASML to halt sales of its machines to China, a key market for the company. This geopolitical tension, combined with recent tepid guidance from ASML, has caused the stock to fall nearly 40% from its summer highs. However, despite the short-term challenges, ASML remains a key player in the semiconductor industry, and its monopoly on EUV machines ensures its role in future chip innovation.
Analysts predict that ASML’s earnings will grow by 16% to 17% annually over the next three to five years, making it an attractive investment at its current valuation of 32 times earnings. While the semiconductor market may experience cyclical downturns, ASML’s technological edge and position in AI chip production provide a solid foundation for long-term growth.
3. Taiwan Semiconductor: A Key Player in AI Despite Geopolitical Risks
Taiwan Semiconductor Manufacturing Company (NYSE: TSM), or TSMC, is the world’s largest chip foundry, responsible for manufacturing about 62% of the world’s third-party semiconductor production. TSMC is vital to the technology sector, producing chips for companies like Nvidia and Apple. However, the company faces significant geopolitical risks due to its location in Taiwan, which is claimed by China as part of its territory.
While tensions between China and Taiwan have raised concerns about potential conflict, the U.S. has supported Taiwan and is working with TSMC to diversify its manufacturing into the U.S. with a $65 billion investment to build new factories in Arizona. This strategic shift could help mitigate some of the geopolitical risks, but investors must remain aware of the potential long-term challenges.
Despite these risks, TSMC remains a key player in AI and semiconductor manufacturing, and its valuation is compelling. Trading at a forward P/E of 27, the company is priced attractively given its expected 31% annual earnings growth over the next three to five years. The demand for high-end chips, particularly those used in AI applications, ensures that TSMC will remain a critical part of the global semiconductor supply chain.
Why These Tech Stocks Are Worth Considering Now
Despite facing short-term headwinds—whether from regulatory scrutiny, geopolitical tensions, or cyclical downturns in their respective industries—the three companies highlighted above are still well-positioned for long-term growth. Alphabet’s dominance in digital ads, ASML’s monopoly on EUV machines, and TSMC’s leadership in semiconductor manufacturing all offer strong growth potential for investors willing to look past current market volatility.
With their attractive valuations and solid growth prospects, these stocks could represent great buying opportunities for investors who are patient and have a long-term outlook. While risks remain, the fundamentals of these companies suggest they are likely to thrive in the years to come.