The stock market doesn't always get it right. Periodically, investors can find inefficiencies that can yield higher returns than the S&P 500 average. Sometimes the market notices underpriced assets right away, while in other cases it can take several months or even years. Investors who are looking for buy-the-dip opportunities in the tech sector may want to consider these three picks.
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1. Adobe
Adobe (ADBE +0.00%) is one of the many software stocks that took a beating when Claude's artificial intelligence features fueled the plunge in the software as a service (SaaS) sector. Investors feared AI would replace many software businesses or stunt future growth, but that hasn't been the case for many companies, including Adobe.
NASDAQ: ADBE
Key Data Points
A 13% year-over-year revenue growth in Adobe's fiscal 2026 second quarter (ended May 29) helped set the record straight. Furthermore, Adobe's AI-first annual recurring revenue tripled year over year, exceeding $500 million. That part of the business is still relatively small, but it demonstrates that artificial intelligence is helping Adobe gain market share.
That's an important distinction, since the majority of Adobe's bearish sentiment has centered on the possibility that AI could hurt the business. The 37% year-to-date drop (as of July 8) now looks like a compelling buying opportunity, and some investors are already accumulating shares at this level.
The valuation isn't even a problem anymore thanks to the dip. It trades at a forward price-to-earnings (P/E) ratio of 9. Last year, Adobe's forward P/E ratio hovered in the high teens and low 20s.
2. Duolingo
Duolingo (DUOL +2.40%) has lost almost 30% of its value this year, for much the same reasons as Adobe. Investors worried that consumers would use AI models to learn new languages instead of sticking with their Duolingo subscription plans.
NASDAQ: DUOL
Key Data Points
Just like Adobe, Duolingo posted solid results that suggest AI is helping, not hurting, the business. Bearish investors wrongly interpreted a tailwind as a headwind, and that's part of the reason shares are up by more than 40% from their 2026 lows in April.
Duolingo trades at a forward P/E of less than 19, so it's not as cheap as Adobe. However, the edtech company commanded a forward P/E ratio of more than 100 less than a year ago, so it is a meaningful improvement.
The company is also growing faster than Adobe. First-quarter revenue rose 27% year-over-year was a solid result that assuaged AI concerns. Duolingo even highlighted how AI has helped the company strengthen its educational courses and provide more lessons.
This capability will become more valuable as Duolingo continues to expand into other subjects, rather than relying exclusively on people who want to learn new languages.
3. Broadcom
Broadcom (AVGO 1.64%) is the leading provider of ASIC (application-specific integrated circuit) chips. This technology lets customers tailor AI chips to their specific needs, instead of relying exclusively on Nvidia's (NVDA 2.20%) all-purpose graphics processing units (GPUs).
NASDAQ: AVGO
Key Data Points
While Broadcom isn't going to dethrone Nvidia anytime soon, a more than 21% drop from its all-time high is the type of pullback the stock needed to become more compelling. Fundamentals remain strong, based on 48% year-over-year revenue growth in Broadcom's fiscal 2026 second quarter. AI-related revenue surged 143% year over year, accounting for almost half of total revenue.
As AI semiconductors make up a larger share of Broadcom's total revenue, overall sales growth should continue to accelerate. Broadcom Chief Executive Officer Hock Tan told investors to expect AI semiconductor revenue to more than triple year over year when it reports earnings for its fiscal 2026 third quarter ending Aug. 2.
The recent news of Apple (AAPL 0.87%) expanding its partnership with Broadcom supports Tan's optimism about future results. This multi-year deal is valued at more than $30 billion and offers meaningful revenue gains for the years ahead. Broadcom's recent price movement suggests growth is cooling off, but that couldn't be any further from the truth. This mismatch presents a buying opportunity for savvy investors.
