Adam Spatacco, The Motley Fool

Sat, May 24, 2025, 10:00 AM5 min read

• While the Nasdaq Composite has recovered from its 20% decline, some technology stocks are still trading for unusually low valuations.

• Artificial intelligence (AI) infrastructure spend on data centers and GPU chipsets is a good area to look at right now.

• 10 stocks we like better than Nvidia ›

As of the closing bell on May 20, the three major stock market indexes -- S&P 500, Nasdaq Composite, and Dow Jones Industrial Average -- are all essentially at break-even returns on the year. Under normal circumstances, mundane returns like these might have investors worried.

But 2025 has been anything but normal. Over the last several months, financial news has been packed with storylines featuring the potential for a recession, mixed economic indicators, ongoing geopolitical tensions in Europe and the Middle East, and (of course!) tariffs.

At one point, each of the major indexes had dropped by double digit percentage points. The Nasdaq fared worst of all, declining by 21% at its low point. While the Nasdaq has bounced back considerably in recent weeks, some technology stocks are still trading for lower-than-usual valuations.

Let's explore some of the biggest movers and shakers in the Nasdaq this year. From there, I'll take a look at valuation trends to help suggest if now is a good opportunity to buy the dip in tech stocks.

The chart below illustrates price returns for a number of different technology-themed investments, particularly in the artificial intelligence (AI) sector.

Shares of the Invesco QQQ ETF have gained roughly 2% on the year. This index fund tracks the Nasdaq-100 -- providing investors with exposure to a number of different AI stocks. Given this diversification, it's not surprising to see the Invesco QQQ outperform a number of individual volatile growth stocks this year.

This leads me to the "Magnificent Seven." For much of the last two years, it was pretty hard to lose money investing in Microsoft, Nvidia (NASDAQ: NVDA), Amazon, Alphabet, Meta Platforms, Apple, or Tesla. While timing mattered to some extent, these companies have largely become the de facto buys for AI investors. Yet this year, their respective performances have been far less predictable.

Lastly, there's Palantir Technologies. Despite a brief dip back in February, shares of Palantir have soared to new highs -- making it one of the biggest outliers among popular AI stocks.

An important thing to understand is that just because a stock might be outperforming its peers or the broader industry doesn't make it a smart buy. While I am bullish on Palantir, the company's valuation is stretched right now. In addition, even though shares of Tesla may appear deflated, the stock has been experiencing a lot of momentum as of late -- despite the company's financial picture looking pretty questionable.