The stock market could start getting pretty volatile later this year. In particular, it’s US growth stocks that seem to have investors on edge. With artificial intelligence (AI) corporate spending going wild, Nvidia shares have helped elevate the S&P 500 to record highs. But with returns on AI spending taking their time to materialise, investors are starting to get impatient.
We’ve already seen the semiconductor stock take a hit on the back of its latest results despite delivering triple-digit growth. It seems expectations are getting out of hand. And once the AI cycle naturally starts to dip, expectations could come crashing back down to earth. And with it, the Nvidia share price, along with the S&P 500, potentially triggering a market crash in the process.
Don’t forget investors are already on edge about a potentially looming US recession, and this may be the final straw that tips things over the edge.
To be clear, this is a worst-case scenario and is by no means guaranteed to happen. But a stock market crash will eventually happen again. And when it does, I’ll be busy buying these five stocks while the rest of the world’s selling.
The shares I’d buy
Finding the best shares to buy can be a daunting task. After all, there are thousands of companies to choose from, yet only a small number will actually deliver market-beating returns. However, in my experience, the stocks to buy are often ones that are already in my portfolio.
Even if the stock market crashes from the bursting of an AI tech bubble, there’s a good chance unrelated stocks are going to get sold off as panic takes hold. So, if and when that happens, I’ll use it to increase my stake in my highest conviction long-term stocks. Right now, those are Shopify, Alpha Group International, Arista Networks, Intuitive Surgical, and Mercadolibre (NASDAQ:MELI).
One of the biggest growth opportunities
Let’s zoom in on Mercadolibre. It’s an e-commerce platform operating across 18 Latin American countries. However, rather than just being another online marketplace, Mercadolibre’s developed a whole suite of solutions for buyers and vendors. This includes its own digital payment system, a delivery logistics service, online advertising channels, and custom merchant storefronts.
E-commerce in Latin America’s still in its infancy. But the growth’s staggering, thanks to the technological developers Mercadolibre’s introduced to the region. There are currently 74.8 million users on the platform, with an average of 45 purchases every second. But with more than 625 million people living across its target markets and a combined GDP of $5trn, the firm has barely scratched the surface of its long-term potential.
So it’s no surprise that it’s recently joined the IBD 50 – an index that tracks the 50 largest growth stock opportunities.
Waiting for a stock market crash
As much as I admire this business, there’s no denying that Mercadolibre shares currently trade at a pretty lofty valuation. At a price-to-earnings ratio of 72, a lot of investor expectations have been baked in. And just like Nvidia, that makes it highly susceptible to volatility. To top things off, by operating in countries with relatively unstable economies, the firm is constantly battling against high inflation.
It’s a similar volatility story for the rest of my shopping list. And that’s why I’m waiting for a better price. After all, even the world’s greatest business can still be a terrible investment if the wrong price is paid.
