The Nasdaq Just Hit Correction Territory: The 2 Smartest Stocks to Buy and Hold Forever

Core Viewpoint - The recent correction in the Nasdaq Composite presents a buying opportunity for quality stocks, specifically Alphabet and Microsoft, which are now more attractively priced than earlier in the year [1]. Group 1: Alphabet - Alphabet's shares are down approximately 20% from their all-time highs in early February, resulting in a forward price-to-earnings (P/E) ratio of 18.5, indicating an attractive valuation [2]. - The company is a leader in digital advertising, with Google being the largest platform globally and YouTube ranking fourth [3]. - Alphabet is heavily investing in artificial intelligence (AI) to enhance search results and create new ad formats, which could significantly increase monetization opportunities [4]. - The Gemini 2.0 model is improving Alphabet's capabilities in multimodal search, and its Veo 2 text-to-image video generator is outperforming competitors [5]. - Google Cloud, Alphabet's cloud computing division, reported a 30% revenue growth and a 142% increase in segment income last quarter, indicating a profitability inflection point [6]. - Alphabet is also advancing in quantum computing and autonomous driving, with its Waymo unit being the only provider of paid robotaxi rides in the U.S. [7]. Group 2: Microsoft - Microsoft, known for its Office 365 productivity tools, also owns the second-largest cloud computing business and operates various platforms including LinkedIn and GitHub [8]. - The company has successfully transitioned to a subscription model for its software, driving growth and embracing AI through significant investments in OpenAI [9]. - Azure, Microsoft's cloud computing unit, experienced a 31% revenue growth last quarter, with Azure AI revenue soaring 157% year over year [10]. - Microsoft 365 AI copilots are a significant growth opportunity, offering AI assistance to users for various tasks, which could lead to high adoption rates if proven effective [11][12]. - Following the market pullback, Microsoft's stock trades at a forward P/E of 25 based on fiscal year 2026 estimates, presenting a reasonable valuation for a leading tech company [13].