AI Bubble Fears Spark a Sell-Off: 1 Stock to Buy, and 1 to Avoid

2 hours ago 2

Daniel Sparks, The Motley Fool

Sat, November 22, 2025 astatine 2:41 PM CST 5 min read

Palantir's lofty valuation means shares could autumn adjacent more.
Microsoft stands retired arsenic a much diversified and conservatively valued enactment for investing successful artificial quality (AI).
Palantir is simply a large business, but investors whitethorn beryllium overpaying.
10 stocks we similar amended than Microsoft ›

After a almighty tally earlier successful the year, the tech-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) has slipped from caller highs arsenic investors reassess however overmuch they are consenting to wage for artificial quality (AI) beneficiaries. Spooked, immoderate investors are seemingly rotating retired of immoderate of the astir assertive AI winners.

That nervousness is understandable. AI infrastructure spending has surged, and galore AI-linked stocks person multiplied successful value. Yet the existent sell-off is besides revealing a spread betwixt genuinely charismatic AI investments and those that whitethorn beryllium overhyped.

For investors trying to benignant accidental from risk, Microsoft (NASDAQ: MSFT) and Palantir Technologies (NASDAQ: PLTR) exemplify that range. Microsoft looks similar a credible mode to thin into semipermanent AI request during volatility, portion Palantir volition apt beryllium acold much exposed if AI spending oregon sentiment cools.

A unreality computing information halfway warehouse.

Microsoft arguably sits astatine the halfway of the AI buildout. Benefiting from AI (and powering it) is the bundle giant's Azure unreality computing platform. Of course, the institution is besides utilizing generative AI with its Copilot adjunct crossed its productivity tools successful Microsoft 365. Then there's its concern with OpenAI.

Importantly, AI is already positively impacting the bundle giant's fiscal results, too. In Microsoft's archetypal 4th of fiscal 2026, the institution generated gross of $77.7 billion, up 18% twelvemonth implicit year. Microsoft Cloud gross grew 26% twelvemonth implicit twelvemonth to $49.1 cardinal successful the aforesaid period.

Revenue from its intelligent unreality conception climbed 28% twelvemonth implicit twelvemonth to $30.9 billion, aided by 40% maturation successful "Azure and different unreality services revenue."

The banal does not look cheap, but it is not euphoric either. Microsoft banal has a price-to-earnings ratio of 34 -- a premium to the broader market, yet 1 supported by high-teens gross growth, rising net per share, and a equilibrium expanse stacked with cash.

In my opinion, Microsoft banal is worthy buying and holding for the agelong haul. It gives investors vulnerability to the AI roar without paying bubble-like prices.

Data analytics and bundle institution Palantir has go 1 of the market's loudest AI beneficiaries, with its banal up much than 100% this twelvemonth (even aft a large pullback successful caller weeks).