Key Points
Microsoft has rarely traded at this valuation over the past decade.
Micron is cheaply valued, but has a multiyear growth cycle ahead of it.
Only one year of growth is priced into Nvidia's stock.
- 10 stocks we like better than Microsoft ›
Finding bargains in the stock market is the goal of every investor, regardless of whether you classify yourself as a growth or value investor. Value investors may be looking at "true" bargains, where a stock is underpriced compared to its underlying business. However, growth investors are doing the same thing, as they believe the stocks are bargains now and will grow their way into becoming much larger companies.
Right now, the market is giving investors a handful of bargains that should be at the top of every investor's shopping list. These components are all set up to excel for an extended time period, and investors should consider taking advantage of them now.
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1. Microsoft
Microsoft (NASDAQ: MSFT) is one of the biggest bargains in the stock market right now. Although it has rallied from recent lows alongside the rest of the stock market, it's still nowhere near an all-time high. Additionally, it's priced well below historical levels. My preferred metric to evaluate Microsoft's valuation is the operating price-to-earnings ratio, as it cuts out some of the noise that occurs from one-time charges and investment gains. From this standpoint, Microsoft's stock has seldom been this cheap over the past decade.
MSFT Operating PE Ratio data by YCharts
The last time Microsoft was this cheap was in 2023, when the market was convinced we were headed for a recession. The current situation isn't nearly as dire, and Microsoft is well-suited to take advantage of the massive AI build-out. Microsoft has positioned itself as a strong neutral party in the AI buildout with its cloud computing platform, Azure. Azure acts as the computing muscle behind several leading AI models, including OpenAI's ChatGPT. Microsoft has a massive $625 billion backlog in this division, showcasing that there is still plenty of room for Microsoft to rapidly grow and take advantage of the AI buildout.
I see really no good reason for Microsoft to be trading this cheaply, so investors should take advantage of this bargain while it's still active.
2. Micron
Micron Technology (NASDAQ: MU) is a bit different from most stocks. Micron makes memory chips, which are known to be a cyclical industry. There isn't a ton to separate one memory chip from another, so this product is pretty much a commodity. However, as supply falls and demand rises, commodity prices can skyrocket, and that's exactly what has happened with memory chips. Micron's management informed investors that it only has enough capacity to meet half to two-thirds of the memory demand over the medium term. Additionally, Micron projects that the total addressable market for high-bandwidth memory (HBM, the type used for AI) will increase from $35 billion in 2025 to $100 billion by 2028.
So, Micron cannot meet demand now, and demand is expected to triple by 2028. That's a catalyst for soaring commodity prices, and Micron will benefit all along the way as it increases its production capacity. The stock has been an incredible performer recently, but it trades for a mere 8.4 times forward earnings due to the stigma of being a cyclical business. With memory demand being massive over the next few years, plus Micron being unable to meet demand now, I still think it's a solid long-term bargain that will pay off for years to come.
3. Nvidia
Nvidia (NASDAQ: NVDA) may seem like an odd inclusion. It's already the world's largest company; how can it be a bargain? Well, the market is only pricing in success for 2026, then nothing after that. However, informed investors know that AI spending is expected to skyrocket through 2030, and companies like Nvidia will be huge beneficiaries. We know that Nvidia is well positioned to take advantage, as CEO Jensen Huang stated that cumulative orders for Rubin and Blackwell GPUs have reached $1 trillion through 2027. Over the past 12 months, Nvidia has generated $216 billion, so there's huge growth in store.
NVDA Revenue (TTM) data by YCharts
Despite that, Nvidia trades for 24.3 times forward earnings, not much more expensive than the S&P 500, which trades at 21.6. This essentially informs investors that the market believes Nvidia will return to near market-average pricing by the end of the year (as long as the stock price stays flat). However, we know that there is massive growth in store during 2027 and beyond, and with Nvidia trading for an affordable valuation, that growth should directly translate into stock performance. This could make Nvidia the bargain hiding in plain sight, and I think it's a screaming buy at these levels.
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Keithen Drury has positions in Microsoft and Nvidia. The Motley Fool has positions in and recommends Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
