Nasdaq Correction: 1 Magnificent Stock Down 20% From Highs to Buy Now and Hold Forever

The Nasdaq Composite Index has been on a rollercoaster ride, falling into correction territory as of March 25, 2025. The index is down roughly 13% from its previous high, wiping out $4 trillion in market value since its peak last month. The market's volatility is driven by uncertainty surrounding President Donald Trump's trade policies and growing economic concerns. The S&P 500, which also entered correction territory, is down less than 8% from its previous all-time high. The tech-heavy Nasdaq Composite gained 2.27% to settle at 18,188.59 on Monday, March 24, 2025, after a rally on optimism that President Trump may hold back from implementing some of his wide-ranging tariff plans.

Despite the market's gyrations, many underlying fundamentals are positive. Consumers are in a good spot, companies are flush with cash, and the pace of change has given companies and consumers a lot to take in over a short period of time. However, the recent focus on new tariff policies is a critical market factor, according to Eric Freedman, chief investment officer for U.S. Bank Asset Management. "There’s been a lot for the market to absorb with the on-and-off status of tariffs, their size, the countries affected and mechanisms by which tariffs will be enacted," says Freedman.

The Nasdaq correction is not unprecedented. Over the last 10 years, the index has fallen by at least 10% from its previous high six times, averaging one correction every 1.67 years. For example, in July and August of 2024, the Nasdaq slid more than 10% but quickly rebounded, ending the year up nearly 29%. Similarly, in mid-2019, the Nasdaq fell by more than 10% and immediately reversed course, fully recovering by early July. However, not all corrections are brief. In late 2021, the Nasdaq began a sharp decline that evolved into a full-blown bear market, taking more than two years to regain all losses.

The current Nasdaq correction is driven by several factors, including uncertainty surrounding President Donald Trump's trade policies and growing economic concerns. The market's decline appears to reflect worries about the potential impact of Trump's tariff plans, which have spooked investors and led to a stock market sell-off. The CBOE’s Volatility Index, often referred to as the "fear index," peaked above 27 just before the market fell into correction territory and has since retreated but remains above 20, indicating weaker market sentiment. The University of Michigan’s Consumer Sentiment Index dropped 11% in March from February, and 27% below its year-ago level, further contributing to investor uncertainty.

Despite the market's volatility, there are still opportunities for investors to buy high-quality stocks at a discount. One such stock is Alphabet, the parent company of Google. Alphabet is part of the "Magnificent Seven" — seven of the world's most valuable companies. As of this writing, it trades at less than 19 times its forward earnings estimates, making it the cheapest of the seven and cheaper than the average for the S&P 500, which trades at more than 26 times forward earnings estimates, according to YCharts.

Alphabet has several key growth prospects and competitive advantages that make it an attractive investment. One of the most significant growth prospects for Alphabet is its position in the artificial intelligence (AI) market. The company has launched AI Overviews, which merges generative AI with search, and is available in more than 100 countries. This innovation is driving user satisfaction and Google search engine usage, according to Alphabet CEO Sundar Pichai. Additionally, Alphabet's Google Cloud is growing faster than its two larger rivals, with Google Gemini, Alphabet's large language model (LLM) that competes neck-and-neck with ChatGPT, being a major factor behind this growth.

Another competitive advantage for Alphabet is its Waymo self-driving car unit. Waymo is the leader in the autonomous ride-hailing (robotaxi) market and is set to expand into new cities soon. Deepwater Asset Management managing partner Gene Munster thinks Waymo could be worth as much as $850 billion by 2030. Even if that estimate is overly optimistic, Waymo is expected to become a significant growth driver for Alphabet.

In terms of valuation, Alphabet is objectively the cheapest among the "Magnificent Seven" — seven of the world's most valuable companies. As of this writing, it trades at less than 19 times its forward earnings estimates. This is not only the cheapest of the seven but also cheaper than the average for the S&P 500, which trades at more than 26 times forward earnings estimates, according to YCharts. This below-average valuation, combined with Alphabet's high-growth businesses in advertising and cloud computing, makes it an attractive investment opportunity.



Investors who fail to buy above-average companies at below-average prices, such as Alphabet stock, usually regret it in the end. For this reason, Alphabet stock is at least worth some consideration right now, down 20% from its high. The Nasdaq correction may be short-lived, but it turns out that there are plenty of high-quality S&P 500 stocks that are down 20% or more. Included among the underperformers are Alphabet, Vistra, Dollar General, and Airbnb. These stocks have excellent growth prospects and are trading at attractive valuations, making them worth considering for long-term investors.