Let’s be clear: the Nasdaq index has done very well in 2023. The emergence of generative AI has propelled the leading tech firms much higher this year, leading to strong returns. However, valuation concerns remain, and that has affected stocks of late. Since its peak in July, the Nasdaq has fallen by 9% as of writing. That isn’t the 20% required to meet the definition of a bear market, and with overall fears easing, it poses a reason to consider investing.
Many strong Nasdaq stocks are undervalued and inexpensive. If the lull reverses, they become even more attractive as the index rises and investors seek bargains, raising demand.
Cheap Nasdaq Stocks: Teradyne (TER)
Teradyne (NASDAQ:TER) sells test equipment in the semiconductor industry along with robotic systems. Its shares are roughly 33% undervalued, depending on where you look. The company has done what it should, delivering strong earnings consistently exceeding analyst ranges over the last several quarters.
The company serves high-profile firms, including Qualcomm (NASDAQ:QCOM), which is currently undervalued. Teradyne is a secular play on continued growth in all things chips. There’s good reason to believe that will be the case, as the opportunity in AI has just begun. The early adoption phase has cooled, and the markets are digesting its meaning. That means the next phase will soon arrive, presenting a demand for test equipment like that which Teradyne makes.
There isn’t a lot to dislike about the company. Its financial strength, profitability, and growth are all strong, and the chip sector is poised to grow for many years. AI, IoT, EVs, and continued digitization require chips, chips, and more chips that all require testing.
Cisco Systems (CSCO)
Cisco Systems (NASDAQ:CSCO) is all about IP networking and is a workman tech stock. It’s not as drastically undervalued as Teradyne or other tech stocks, but it is cheap nonetheless. It’s also not as inherently interesting as AI chip stocks as it offers much slower growth.
That’s sort of the point of investing in CSCO shares: It benefits from the continued push toward greater connectivity that provides sustained growth and predictability. It does so while offering more than a 10% upside per average consensus price, a dividend, and secular exposure.
CSCO shares won’t expose you, the investor, to much volatility at all. They will expose you, the investor, to broad tech opportunities while paying an additional 2.9% in dividends. What I also like about Cisco Systems is that the company executes on what is, in my opinion, one of the primary objectives of any business: Creating returns from invested capital in excess of the cost of that capital.
AMD (AMD)
AMD (NASDAQ:AMD) remains second in the AI chip war. Nvidia (NASDAQ:NVDA) is far and away the leader. Its double-digit earnings and revenue beats reiterated that truth, which was never in doubt to begin with.
That doesn’t mean that AMD should be ignored, though. I’d argue the opposite and have done just that over and over throughout the past few months. AMD has a lot to offer investors, especially concerning AI. The company has made strides to bolster its organic AI offerings and is now looking to grow through acquisitions. The company intends to purchase Nod.ai in a clear effort to strengthen its overall AI positioning.
Investors can get very granular in dissecting the AI chip war between Nvidia and AMD. That’s fine and warranted. However, that’s a tiresome task and one that’s best left to analysts charged with covering those respective firms. For everyone else, simply place some money behind AMD because just about everyone is positive that it will continue to pose a major threat to Nvidia into the future.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
