The world’s stock markets have fallen in 2022 and growth stocks have taken the brunt of the blow. Year to date, the share prices of many growth companies are down 30% or more.
I don’t know when growth stocks will stage a recovery. But I’m certain that at some stage in the not-too-distant future they will. That’s because growth industries such as cloud computing, semiconductors, and artificial intelligence (AI) are set to get much bigger in the years ahead. With that in mind, here’s a look at two ‘monster’ growth stocks I’d buy for my portfolio before the market rebounds.
A global giant
One stock I see as a bit of a ‘no-brainer’ buy is Alphabet (NASDAQ: GOOG), the owner of Google and YouTube. After a big fall this year, it can be snapped up on a price-to-earnings (P/E) ratio of under 20. This is an attractive valuation, in my view, given the company’s dominance.
Alphabet is already a monster of a company (its market cap is $1.4trn). But in the years ahead I expect it to grow substantially. One growth driver is likely to be YouTube, one of the most popular content platforms on the planet. Today, it’s the second-most visited website globally. The most visited, by the way, is Google.
Other key growth drivers for Alphabet include cloud computing (where revenues are rising by around 40% per year) and AI. Over the next decade, we can expect to see its AI technology applied across a wide range of industries including healthcare, robotics, and transportation.
The main risk here, to my mind, is that in the short term, advertising revenues could be weaker than anticipated due to economic conditions. This could put pressure on the share price temporarily.
Taking a long-term view, however, I’m very bullish on Alphabet.
Powering the metaverse
Another growth stock I’d snap up while the market is down is Nvidia (NASDAQ: NVDA). It’s a leading designer of high-power computing hardware (graphics processing units, or GPUs).
Nvidia has grown at an incredible rate in recent years (five-year revenue growth of nearly 300%). And I expect it to continue generating strong growth in the years ahead. That’s because its products have become crucial to a number of high-growth industries including video gaming, cloud computing, data centres, AI, and autonomous driving.
It’s worth noting that the metaverse could be a major driver here. For this exciting new immersive virtual world to become a reality, we’re going to need a lot of high-powered GPUs for 3D graphics. This means the company could potentially be a key ‘enabler’ of this powerful new tech platform. I’ll point out that Nvidia is planning its own version of the metaverse – the Omniverse. This appears to have a lot of growth potential.
It’s a very volatile stock that’s prone to massive price swings, which is an issue. I have a high tolerance for risk, however, so I’m comfortable with the volatility here.
The stock is currently trading on a P/E ratio of about 27, which I think is great value, given the high level of growth.