Every stock market correction raises the same uncomfortable question: is the market offering you a discount on exceptional companies, or sending you a warning you haven’t yet understood?
Right now, several of the largest U.S. stocks are pulling back. Among them are names most Canadian investors know well: Amazon, Broadcom, Visa and Mastercard. Others are less familiar, but just as strategic in the artificial intelligence economy: Cadence Design Systems, Applied Materials and Vertiv.
According to a TradingView screen run for this article, these seven companies have three things in common: a market capitalization above US$50 billion, a share price below their 50-day moving average (SMA 50), and a “Strong Buy” rating from analysts.
A word of caution from the outset. Trading below the SMA 50 does not mean a stock is cheap. It only indicates that the price has weakened recently relative to its trend over the past few weeks. It’s a starting point for analysis, not a conclusion. Likewise, a “Strong Buy” rating reflects the opinion of analysts, who are regularly wrong, especially when optimism is widespread.
So the real question is this: is the market simply offering a better entry point into high-quality businesses, or do some of these declines reflect genuine risks?
Note on the data: the prices, price-to-earnings (P/E) ratios, growth rates and moving averages cited come from the TradingView screen (data in U.S. dollars, at the time of capture). Background information on the companies’ businesses reflects our own analysis and does not come from the screen.
Amazon (AMZN): AWS and Advertising at the Heart of the Thesis
Key Figures and Technicals (as of September 23, source: TradingView)
| Metric | Data | Analysis |
|---|---|---|
| Price | US$254.98 | Moderate pullback from recent highs |
| SMA 50 | US$256.26 (-0.5%) | Immediate test of short-term support |
| SMA 200 | US$240.53 (+6.0%) | Long-term uptrend intact |
| P/E | 20.51 | Attractive multiple compared with historical averages |
| Revenue Growth | +15.77% | Solid momentum driven by B2B and services |
| EPS Growth | +89.73% | Strong operating leverage following cost rationalization |
| FCF Margin | -1.50% | Temporary pressure from heavy investment spending |
Why Amazon Remains Attractive Over the Long Term
Amazon’s investment thesis no longer rests solely on e-commerce growth. Over the years, the company has built several businesses that reinforce one another: its retail platform generates an immense volume of transactions and data, advertising allows it to better monetize that audience, and AWS provides the technology infrastructure used by businesses around the world.
AWS is probably the most important piece of the long-term thesis. The rise of artificial intelligence is dramatically increasing demand for computing power, storage and cloud infrastructure. Amazon is therefore investing heavily in its data centres, servers and in-house chips. This spending is currently weighing on free cash flow, but it is aimed at positioning AWS for demand that could keep growing for several years.
Advertising is a second, particularly interesting growth engine. Amazon has a different advantage from social media platforms: shoppers who visit its site often already intend to buy. This proximity to the transaction makes its ad inventory especially valuable to brands and allows Amazon to generate more revenue from infrastructure it already owns.
E-commerce also remains important. Its growth may be less spectacular than it once was, but the scale of Amazon’s logistics network is an asset that is difficult and expensive to replicate. For investors, the question is no longer just how much Amazon can sell online, but how much profit the company can gradually extract from the ecosystem it has built.
The Real Risk: Return on Investment
This is where the thesis becomes more nuanced. Amazon is devoting an enormous amount of capital to AI and data centres. Rapid AWS growth alone is therefore not enough: these investments will eventually need to generate a high enough return to justify the sums committed.
If AI demand disappoints, if the capacity being built exceeds actual needs, or if Microsoft, Google and other competitors put more pressure on pricing, the payoff from these investments could take longer to materialize.
For long-term investors, this is probably the most important thing to watch: not Amazon dipping a few dollars below its 50-day moving average, but the ability of AWS, advertising and improving e-commerce margins to turn today’s investments into sustainable cash flow growth.
Broadcom (AVGO): Enormous AI Potential… Already Priced In?
Key Figures and Technicals (as of September 23, source: TradingView)
| Metric | Data | Analysis |
|---|---|---|
| Price | US$364.54 | Recent pullback after a strong run-up |
| SMA 50 | US$378.62 (-3.7%) | Stock below its short-term trend |
| SMA 200 | US$368.92 (-1.2%) | Price slightly below its long-term trend |
| P/E | 46.54 | Valuation reflects high growth expectations |
| Revenue Growth | +48.69% | Very rapid revenue expansion |
| EPS Growth | +100.12% | Strong improvement in profitability |
| Operating Margin | 48.57% | Very high operating profitability |
| FCF Margin | 44.22% | Excellent conversion of revenue into cash flow |
Why Broadcom Holds a Strategic Position in AI
When it comes to artificial intelligence, Nvidia naturally draws much of the attention. Yet building an AI data centre takes far more than GPUs. Thousands of processors must communicate with one another at very high speeds, and this is precisely the infrastructure where Broadcom holds a particularly attractive position.
The company supplies networking technologies that are essential to data centres. The larger and more complex AI computing clusters become, the more important the speed at which data moves between chips. Broadcom therefore benefits from the expansion of AI without depending solely on sales of a single type of processor.
The other growth engine to watch is custom accelerators, often referred to as ASICs. Some large data centre operators want to develop chips tailored to their own workloads rather than relying exclusively on general-purpose processors. Broadcom has the expertise to help these customers design such custom solutions.
This business could become especially important if tech giants continue to diversify their AI infrastructure. That would put Broadcom in an attractive position: it could benefit both from the growing number of specialized chips and from the infrastructure needed to connect them.
VMware Adds a Second Growth Engine
Broadcom, however, is no longer purely a semiconductor company. The acquisition of VMware added a significant infrastructure software business.
This diversification is gradually changing the company’s profile. Semiconductors give it exposure to massive investment in AI and data centres, while software can add a more recurring component to revenue.
This is an important element of the long-term thesis: Broadcom now aims to combine high-value semiconductors, AI infrastructure and enterprise software. If this combination works, the company could have several growth engines rather than depending entirely on a single technology cycle.
The Real Risk: Expectations Are Already Very High
The issue is not necessarily Broadcom’s quality. It’s the price the market is willing to pay for that quality and growth.
At roughly 46 times earnings, based on the TradingView data used here, a great deal of optimism is already built into the share price. In particular, the market expects AI spending to remain high and Broadcom to keep capturing a significant share of it.
This creates an unusual situation: Broadcom could continue to post excellent results without necessarily satisfying investors, if those results fall short of the expectations already embedded in the price.
Concentration among very large customers is another factor to watch. Orders from a handful of major cloud players can have a significant impact on growth. Add to that the cyclical nature of semiconductors and the challenges of integrating and monetizing VMware.
For investors with a multi-year horizon, the most important indicators will therefore be less the moves around the SMA 50 and SMA 200 than the growth of AI-related businesses, the progress of custom ASICs, Broadcom’s ability to maintain its margins, and VMware’s contribution to cash flow.
That is what will determine whether the company’s growth ultimately justifies the particularly high expectations reflected in its current valuation.
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Visa (V) and Mastercard (MA): The Toll Booths of the Digital Economy
Key Figures and Technicals (as of September 23, source: TradingView)
| Metric | Visa (V) | Mastercard (MA) |
|---|---|---|
| Price | US$362.04 | US$555.89 |
| SMA 50 | US$367.59 (-1.5%) | US$567.45 (-2.0%) |
| SMA 200 | US$336.30 (+7.7%) | US$531.82 (+4.5%) |
| P/E | 31.07 | 30.58 |
| Revenue Growth | +14.39% | +16.15% |
| EPS Growth | +15.03% | +22.62% |
Why These Two Companies Remain Attractive Over the Long Term
Visa and Mastercard operate two of the largest payment networks in the world. Their competitive advantage rests mainly on the network effect: billions of consumers use their cards because they are widely accepted, and merchants accept them because so many consumers use them.
Their growth also benefits from a simple structural trend: the gradual replacement of cash by digital payments. Cross-border transactions and value-added services are additional growth drivers.
The model is highly profitable because Visa and Mastercard don’t require physical investments comparable to those of a semiconductor manufacturer or a data centre operator. This structure allows them to generate high margins and strong cash flow.
Mastercard is currently showing faster growth according to the TradingView data, but the two companies share very similar characteristics. Over several years, trends in payment volumes and cross-border transactions will likely matter more than the growth gap observed over a single period.
The Main Risk: Quality Comes at a Price
The risks stem mainly from fee regulation, litigation and changes in how people pay. Real-time payments and digital wallets could gradually reshape the ecosystem, even though many of these solutions still run on Visa or Mastercard behind the scenes.
And unlike some of the other stocks in this selection, the pullback remains modest. Visa and Mastercard are below their SMA 50 but still above their SMA 200. With P/E ratios around 30, the market continues to assign a significant premium to their quality.
For long-term investors, the question is simple: will future growth in payments and earnings be enough to justify this high valuation?
Cadence Design Systems (CDNS): The Software Behind Every Chip
Key Figures and Technicals (as of September 23, source: TradingView)
| Metric | Data |
|---|---|
| Price | US$302.95 |
| SMA 50 | US$321.49 (-5.8%) |
| SMA 200 | US$325.80 (-7.0%) |
| 3-Month Performance | -19.36% |
| 1-Year Performance | -18.12% |
| P/E | 60.27 |
| Revenue Growth | +14.70% |
| EPS Growth | +36.00% |
| Gross Margin | 84.56% |
Why Cadence Remains Attractive Over the Long Term
Cadence holds a strategic position in the semiconductor industry without manufacturing any chips itself. Its electronic design automation (EDA) software allows engineers to design and test increasingly complex processors.
The rise of AI reinforces this trend: the more transistors and sophisticated architectures chips contain, the more essential design tools become. Cadence also enjoys a significant competitive advantage: the EDA market is highly concentrated, and switching platforms can be costly and complex for engineering teams.
Its gross margin of 84.56% also illustrates the appeal of its software model. Unlike chipmakers, Cadence can benefit from the industry’s growth without bearing the enormous costs of building semiconductor fabs.
The Main Risk: A Still-Demanding Valuation
The pullback is much steeper than for Visa or Mastercard: CDNS has lost nearly 20% over three months and is trading below both its SMA 50 and SMA 200. Yet its P/E remains above 60.
That’s the Cadence paradox: the company can be excellent without its stock necessarily being cheap. At this valuation, the market is still pricing in substantial growth.
For long-term investors, the key will be to watch whether growth in revenue, EPS and demand for chip design tools remains strong enough to justify this premium.
Applied Materials (AMAT): Selling Shovels During the Gold Rush
Key Figures and Technicals (as of September 23, source: TradingView)
| Metric | Data |
|---|---|
| Price | US$472.46 |
| SMA 50 | US$496.29 (-4.8%) |
| SMA 200 | US$418.28 (+13.0%) |
| 3-Month Performance | -19.27% |
| YTD Performance | +76.90% |
| 1-Year Performance | +144.56% |
| P/E | 40.74 |
| Revenue Growth | +7.77% |
| EPS Growth | +38.27% |
Why Applied Materials Remains Attractive Over the Long Term
Applied Materials offers a different way to benefit from semiconductor growth. Rather than designing chips, the company supplies the equipment essential to manufacturing them: material deposition, etching, processing and other critical production steps.
This is the “picks and shovels” logic: no matter which company wins the AI race, ever more advanced chips will need to be manufactured. And the more complex those chips become, the more chipmakers need specialized equipment.
This position allows Applied Materials to benefit not only from AI, but also from broader trends such as rising semiconductor content and the construction of new manufacturing capacity.
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The Main Risk: Cyclicality
The semiconductor equipment sector remains highly cyclical. When chipmakers cut back on capital spending, orders can slow quickly.
Valuation also deserves attention. Despite a decline of nearly 20% over three months, AMAT is still up a spectacular 144.56% over one year and trades at a P/E above 40.
The challenge for investors is therefore to determine whether the industry’s future growth justifies a still-elevated valuation for a company exposed to semiconductor cycles. U.S. restrictions on sales of advanced technology to China are another risk to monitor.
Vertiv (VRT): Powering and Cooling AI
Key Figures and Technicals (as of September 23, source: TradingView)
| Metric | Data |
|---|---|
| Price | US$253.46 |
| SMA 50 | US$269.04 (-5.8%) |
| SMA 200 | US$261.81 (-3.2%) |
| 3-Month Performance | -21.71% |
| 1-Year Performance | +77.18% |
| P/E | 57.35 |
| Revenue Growth | +26.23% |
| EPS Growth | +111.13% |
| FCF Margin | 25.52% |
Why Vertiv Remains Attractive Over the Long Term
Vertiv benefits from a less-discussed side of artificial intelligence: data centres need enormous amounts of electricity and cooling.
The company supplies the power, thermal management and liquid cooling systems needed to run IT infrastructure. The increasing power of AI servers makes these systems even more important, since more computing power also means more heat to dissipate.
Vertiv is therefore an indirect way to participate in the expansion of AI: rather than betting on which chipmaker will win, the company provides part of the infrastructure needed to keep those chips running.
The Main Risk: Very High Expectations
The numbers also explain the risk: revenue up 26.23%, EPS up 111.13%, and the stock still up 77% over one year despite its recent decline.
At 57 times earnings, a great deal of future growth is already priced in. A slowdown in data centre investment could therefore trigger a sharp reaction in the stock, even if Vertiv keeps growing.
For long-term investors, the key things to watch will be order growth, margins and, above all, continued investment in AI infrastructure.
Comparison Table: 7 Stocks to Watch
| Stock | Price (US) | Main Long-Term Driver | Main Risk |
|---|---|---|---|
| Amazon (AMZN) | $254.98 | AWS and advertising | Return on capital spending |
| Broadcom (AVGO) | $364.54 | Networking and custom AI chips | High expectations, concentrated customers |
| Visa (V) | $362.04 | Global digital payments | Regulation |
| Mastercard (MA) | $555.89 | Digital payments and services | Regulation, competition |
| Cadence (CDNS) | $302.95 | Chip complexity | Very high valuation |
| Applied Materials (AMAT) | $472.46 | Advanced chip manufacturing | Cyclicality, China |
| Vertiv (VRT) | $253.46 | Data centre power | Dependence on AI, expectations |
Source: TradingView screen, data at the time of capture.
Business Quality vs. Price Paid
An excellent company is not automatically an excellent investment. The return on an investment depends on two things: future earnings growth and the price paid today for those earnings.
Sometimes the real risk isn’t the company, but the price paid for it. A business can keep growing, gaining market share and posting enviable margins while still delivering disappointing returns to investors. This happens when the purchase price already assumes several years of exceptional growth: if that growth simply materializes as expected, the market has no reason to reward the stock further. And if growth turns out to be merely good rather than exceptional, the multiple can contract even as the business moves forward.
The seven stocks analyzed here illustrate this gap well. Visa and Mastercard trade at around 30 times earnings. That’s a high price, but it’s backed by decades of consistent results and more predictable growth. Broadcom trades at around 46 times, Vertiv around 57 times and Cadence around 60 times. At these levels, the price already reflects expectations of sustained growth over several years, largely tied to artificial intelligence.
This doesn’t mean the most expensive stocks are bad investments, or that the cheapest are better deals. Genuinely superior growth can justify a higher multiple. But the level of expectations built into the price varies enormously from one stock to another, and the higher those expectations, the thinner the margin for error. A single disappointment can then lead to a sharp decline, even if the company remains excellent.
Amazon and Applied Materials fall somewhere in between, each with its own issues: the weight of capital spending for Amazon, and cyclicality for Applied Materials.
For long-term investors, then, the goal is not to pick the stock with the greatest potential, but to strike a balance between quality, growth, price paid, and the volatility you can tolerate without selling at the wrong time.
Should You Buy Now or Wait?
No one can identify the bottom with certainty. A stock trading below its SMA 50 could rebound next week or keep sliding for months. Cadence and Vertiv are even trading below their SMA 200, which signals more pronounced technical weakness than for several of the other stocks in this selection. That said, no moving average can predict a stock’s future direction.
If you believe in a company’s fundamentals but are concerned about its valuation or the possibility of further declines, dollar-cost averaging offers a calmer approach. Rather than investing your entire amount at once, you split it into several purchases over a few months. If the stock falls, your subsequent purchases are made at a better price. If it rises, you already have a position.
For Canadian investors, two practical considerations come into play: currency conversion costs and the choice of account. For U.S. stocks held directly in an RRSP, dividends are generally exempt from the 15% U.S. withholding tax, unlike in a TFSA. However, the treatment may differ depending on the type of investment and its structure. Since these seven stocks pay little or no dividend, this issue is secondary here.
Finally, these companies already make up a significant portion of the U.S. or global equity ETFs that many investors hold. Before adding individual stocks, it’s worth checking your actual exposure to avoid excessive concentration in technology.
Conclusion: A Decline Alone Doesn’t Create an Opportunity
A falling stock is not an opportunity in itself. The most attractive situations arise when the price weakens while the company’s competitive advantages, growth and long-term earning power remain intact.
That’s the question every investor has to answer, stock by stock: has the share price simply declined while the business remains as strong as before, or are the fundamentals genuinely starting to deteriorate?
Based on the data reviewed, the indicators for these seven companies remain solid: revenue growth, high margins and strategic positions in their markets. But their situations are not the same. Visa and Mastercard are down slightly while remaining above their SMA 200. Cadence and Vertiv have seen steeper declines while maintaining demanding valuations. Applied Materials has pulled back sharply after a spectacular 12-month rally.
The coming quarters should make it easier to distinguish temporary stock market weakness from a real deterioration in the business. Until then, your role as an investor is not to guess which stock will rebound fastest, but to determine whether the current price compensates you enough for the risks you are taking on, and whether each stock has a place in your portfolio given your investor profile.
FAQ
Is a stock trading below its 50-day moving average undervalued?
No. The SMA 50 only measures the recent price trend. A stock can trade below this average while remaining very expensive relative to its earnings.
What does a “Strong Buy” rating on TradingView mean?
It aggregates analyst recommendations. It’s an opinion, not a guarantee, and it doesn’t always take into account the price you’re paying today.
Is it better to hold these stocks in a TFSA or an RRSP?
For U.S. stocks held directly in an RRSP, dividends are generally exempt from the 15% U.S. withholding tax, unlike in a TFSA. The treatment may differ depending on the type of investment. For low-dividend stocks like these, the difference remains limited.
Can I invest in these companies without buying the individual stocks?
Yes. Most of them are included in ETFs that track the S&P 500 or the Nasdaq-100, which offer broader diversification.
Disclaimer: This article is provided for informational and educational purposes only. It does not constitute personalized financial, tax or investment advice. The data comes from TradingView at the time of capture and may have changed. Consult a qualified professional before making any investment decision.