This value says you are buying a dip on this Nasdaq stock

Recent stock market volatility has created some interesting buying opportunities. Actions of Advanced microdevices (AMD -0.50%) and Alphabet (GOOG 0.86%) (GOOGL 0.89%) trade down 25% and 15% from recent all-time highs, respectively, but their forward price-to-earnings (P/E) ratios based on 2025 earnings estimates look modest.

The momentum these two Nasdaq stocks are seeing in their businesses this year could see them recover in share prices next year. Let’s take a closer look at why you should consider buying each stock on the decline.

1. Advanced microdevices

AMD’s 25% decline in stock price has reduced the stock’s P/E ratio to 28 based on 2025 earnings estimates. This ratio is still slightly higher than the Nasdaq-100’s average forward P/E of 25.4, but Wall Street analysts expect AMD’s earnings to grow at an annualized rate of 41% over the next few years. When you buy a stock with outstanding growth prospects at a P/E that’s not much higher than the average stock, you’re setting yourself up for great returns.

AMD makes chips for a variety of consumer and industrial markets, but the data center segment generates most of its sales. Data center revenue more than doubled year over year to $2.8 billion in Q2 on strong demand for its Instinct graphics processing units (GPUs) and EPYC central processing units (CPUs).

AMD is clearly benefiting from the move to GPU-based computing systems for AI workloads. Data centers are upgrading their hardware to handle the processing power demands of training and using AI. Future AI models will require significant increases in computing power, which AMD will benefit from.

While AMD runs a distant second for Nvidia in the GPU market, it is growing its data center revenues at equally high rates. Nvidia saw 154% year-over-year data center growth compared to AMD’s 115%. AMD expects to launch its new Instinct MI325X accelerator in Q4. The current MI300X chip has been a key driver of data center growth this year, and the new version will bring better performance that should keep the momentum going.

Analysts expect AMD’s earnings to grow 60% next year. The stock’s forward P/E multiple of 28 is low enough that investors can expect the stock price to rise with the underlying growth of the business. Given these earnings estimates, AMD stock could deliver incredible returns in 2025 and beyond.

2. The alphabet

Alphabet is well positioned for growth in the age of AI. The company uses this technology to benefit its Google search business, where it leads the digital advertising market. The stock currently trades at an attractive forward P/E of 18 based on 2025 earnings estimates, which looks like a bargain relative to Wall Street consensus expectations for double-digit percentage earnings growth this year future.

The recovery in the digital advertising market has benefited Google. Advertising revenue rose 11% year-over-year in Q2. Wall Street analysts expect the company to report revenue growth of 13% in 2024, with earnings expected to rise 31%.

This year’s increase follows the launch of Google’s Gemini AI model in late 2023. Gemini can understand text, images, audio and video. It powers six Alphabet products that have more than 2 billion monthly users each. And it will make significant improvements to the way people interact with Google Search, which could benefit the company’s ad revenue.

Gemini will also benefit from Alphabet’s enterprise cloud service, where it can help developers with coding and other tasks. Google Cloud continues to gain share in a $300 billion market. Importantly, it’s starting to turn a healthy profit, with operating income tripling from the year-ago quarter to $1.1 billion.

The company’s legal battles over antitrust issues are overshadowing its opportunities. Analysts expect earnings to rise 14% next year to $8.70 per share. The stock’s relatively low P/E ratio sets the stage for a sharp rebound in the stock price in the coming year. Assuming Alphabet can meet its long-term earnings growth estimate of 16% on an annual basis, the stock could double by 2029.