The Nasdaq Composite Index took a steep fall in early 2025, falling 8% from its January high through March 31, 2025. Higher interest rates, geopolitical tensions, and profit-taking following a tech-heavy rally triggered the correction. History, however, indicates that market downturns are followed by rebounds, especially in cutting-edge industries such as artificial intelligence. Three AI stocks are undervalued bets in this downturn, set to reap huge gains as the Nasdaq rebounds.
Nasdaq's decline began in mid-February 2025 in response to Federal Reserve signals of sustained high interest rates to rein in inflation, which is at 3.9%. Tech shares, being susceptible to the cost of funding, saw mounting pressure for selling, as the index fell from 18,500 to 17,020 points. Previous corrections, like the 10% fall in 2022, registered subsequent bounces in six months on the back of sectoral advances like AI, appreciating 25% per year on Bloomberg estimates. The fall, though steep, is part of the cycle corrections and provides a time window to select shares ahead of momentum reverting to the rally.
Nvidia Corp (NVDA) remains a pillar of AI infrastructure, trading at $115 a share after falling 12% from its $130 high. The company's H200 Tensor Core GPUs, which it launched late 2024, power generative AI models for the likes of Google and OpenAI, where demand outpaces supply. Q4 2024 revenue was $30 billion, 94% year-over-year, in earnings reports. Goldman Sachs analysts predict a 20% stock jump by July 2025 as data center expenditures gain pace. The stock is priced because of market overreaction, not fundamentals, so Nvidia is a great pick for a spike.
Palantir Technologies (PLTR) has dropped to $42 from a high of $50, a 16% decline amid the Nasdaq sell-off. Famous for its data analysis through AI, Palantir's Foundry platform secured $1.5 billion in contracts in 2024, including a $480 million contract with the U.S. Army. The company turned profitable in 2023, with Q4 2024 net income of $210 million, up 50% from the same year-earlier quarter, according to SEC filings. Morgan Stanley has it as a "buy" with a target price of $55, citing untapped commercial growth in healthcare and finance. The decline in the stock underestimates its long-term AI potential, highlighting upside as sentiment eases.
C3.ai (AI) is at $25, 20% below the $31 price, more negatively impacted by the Nasdaq drop as its lower $2.8 billion market cap is more susceptible. C3.ai, specialized in AI software for companies, saw its 19% growth in revenue to $82 million in the third quarter of 2024 due to energy and manufacturing customers like Shell driving sales. Subscription-based revenue, 85% of its total, brings stability, and deals with AWS and Microsoft assist with growth. Barclays is forecasting a move to $35 in nine months as AI usage grows 30% annually, estimates IDC. The discount in question offers a low entry to a stock tied to a high-growth market.
AI stocks are resilient in downturns because of secular trends. Worldwide spending on AI hit $150 billion in 2024 and is projected at $300 billion by 2027, according to Statista. Nvidia's hardware leadership, Palantir's government business, and C3.ai's enterprise orientation ride different growth drivers, less exposed to near-term market fluctuations. The Nasdaq's tech-heavy composition—50% of its value from innovation areas—implies that such stocks will lead the rebound, as in 2023's rally when AI names performed 15% better than the index.
Volatility persists. Interest rate hikes could extend into the late stages of 2025, Fed minutes say, compressing valuations. Nvidia is exposed to supply chains because of tensions in Taiwan, and Palantir's forward price-to-earnings ratio of 80 reflects premium pricing. C3.ai's smaller scale exposes it to behemoths like IBM. But earlier troughs, like the 2020 crash, had AI stocks appreciating 40% in a year, S&P data shows, balancing risk with reward.
The Nasdaq's 8% drop up to March 31, 2025, is a strategic moment. Nvidia, Palantir, and C3.ai, all on the unstoppable wave of AI, are at attractive levels. Cycles of history predict a 10–15% Nasdaq rebound by Q3 2025, JPMorgan estimates, and AI stocks to probably beat that. Long-term growth seekers find these three stocks intriguing amidst the churn.