Nasdaq Correction: Why I Took Advantage of a 20% Sell-Off to Buy More of This Magnificent 7 Stock.

The Nasdaq has hit some turbulence this year. It's currently down more than 10% from its recent peak, which puts it in correction territory. Some stocks have sold off even more.

I actually like it when the market takes a breather because it allows me to buy some high-quality stocks at much better prices. I recently did just that, buying more shares of technology titan Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL). Here's why I couldn't resist the opportunity to buy more shares of this "Magnificent Seven" stock, which has tumbled 20% from its recent peak.

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The most magnificent of the seven

Alphabet is one of seven leading tech companies dubbed the Magnificent Seven due to their strong growth prospects and stock price performance in recent years. Even with the recent decline, Alphabet shares are up more than 150% over the past five years, easily outperforming the S&P 500 (more than 90% gain).

One of the biggest factors driving my decision to add to my Alphabet position is its valuation:

GOOG PE Ratio (Forward) data by YCharts.

As that chart shows, it has the lowest forward price-to-earnings (P/E) ratio among the Magnificent Seven. Its forward P/E ratio of a little more than 18 times is also cheaper than the broader market. The Nasdaq-100 trades at over 25 times forward earnings even after its correction, while the S&P 500 sells for more than 21 times its forward P/E.

That's a bargain for such a high-quality growth stock. Its revenue rose 15% last year to $350 billion, while its net income surged more than 35% to $100 billion. That's a robust growth rate for a company as big as Alphabet.

The AI-powered growth accelerator

Artificial intelligence (AI) has been a big factor driving the surging valuations of Magnificent Seven stocks in recent years. Alphabet is capitalizing on that same growth catalyst. CEO Sundar Pichai commented on its AI-driven growth catalysts in the company's fourth-quarter earnings press release:

Q4 was a strong quarter driven by our leadership in AI and momentum across the business. We are building, testing, and launching products and models faster than ever, and making significant progress in compute and driving efficiencies. In Search, advances like AI Overviews and Circle to Search are increasing user engagement. Our AI-powered Google Cloud portfolio is seeing stronger customer demand, and YouTube continues to be the leader in streaming watchtime and podcasts.

Its AI investments are clearly having an impact. Google Cloud revenues surged 30% in that quarter to $12 billion, led by growth in AI infrastructure and generative AI solutions.

Like many of its rivals, Alphabet is investing heavily to accelerate its growth and capitalize on the AI opportunity. It plans to invest $75 billion into capital expenditures this year, up from $52.5 billion last year. That additional money will enable it to buy more servers and build additional data centers, among other things. The company is also increasing spending to add talent related to AI.

Those investments set Alphabet up for continued growth. It's becoming a leader in AI infrastructure, which should continue to drive growth in its cloud platform. Meanwhile, it's developing ever-improving AI models based on its Gemini platform. It's also driving research breakthroughs in quantum computing. Finally, the company is integrating AI into its products and platforms, making them even more user-friendly. These drivers should enable Alphabet to continue growing its revenue and earnings at healthy rates in the coming years.

A magnificent growth stock on sale

Alphabet's sell-off is a great buying opportunity. With its share price slumping 20%, the technology titan trades at the lowest valuation among the Magnificent Seven stocks (and at a discount to the broader market). Meanwhile, it's growing briskly, which should continue. That growth for such a reasonable price is an opportunity I couldn't resist, which is why I recently added to my position and will buy even more shares if the price continues to decline.

Don’t miss this second chance at a potentially lucrative opportunity

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Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

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*Stock Advisor returns as of March 10, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Matt DiLallo has positions in Alphabet, Amazon, Apple, Meta Platforms, and Tesla and has the following options: short May 2025 $275 calls on Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.