September Effect: 3 AI Stocks to Buy on a Potential Market Pullback
Key Points
Palantir has become an important AI operating system which is leading to huge growth.
Marvell is a leader in optical connectivity and custom chip technology.
Snowflake's platform is become an integral foundation for agentic AI.
September is generally a poor month for stocks, with the S&P 500 Index down an average of 1.1% since 1928.
It tends to get even worse during midterm election years, with Cantor Fitzgerald noting that the index has dropped by 5% during the September-October period 15 times since 1930. The market this year faces additional pressure from a war in Iran and a struggling consumer.
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However, market pullbacks can be good buying opportunities. Let's look at three AI stocks to buy if there is a pullback.
1. Palantir
The biggest knock on Palantir Technologies (NASDAQ: PLTR) is its valuation, which would make the stock intriguing if there is a big market pullback.
The company has established itself as a prime beneficiary of AI, as its platform essentially serves as an AI operating system that helps make AI more useful in real-world situations. The secret to its success is the company's data-gathering capabilities, which enable it to capture information from a variety of sources and organize it into an ontology that it then links to physical objects, processes, and concepts. This helps ground AI into the real world and helps reduce costly AI hallucinations.
Palantir's AIP solution has been a huge success with customers. This is not only seen in its huge revenue growth, but also in its extraordinary net revenue retention figures. Last quarter, the company grew its revenue by 93% year over year, while its net dollar retention was an impressive 157%. Any number over 100% indicates growth from existing clients of over a year, and that type of number is rarely seen.
With AIP being used across industries to solve all different types of problems, Palantir has the technology to one day grow into one of the most important companies in the world, making it a buy on a pullback.
Artist rendering of AI in brain.
2. Marvell
Another stock that has been riding some powerful waves but which has looked a little pricey is Marvell Technology (NASDAQ: MRVL). The company is at the forefront of optical connectivity with a strong portfolio of optical DSPs, switching, and broadband analog components. This business is benefiting from the shift in AI data centers away from copper wires and toward fiber optics.
In addition, Marvell is also a major player in providing intellectual property (IP) to help companies design custom chips. It currently counts Amazon and Microsoft among its large ASIC (application-specific integrated circuit) customers, and it recently signed a multi-year deal with Alphabet for products that integrate with its tensor processing unit (TPU) ecosystem, such as inference accelerators and storage and network interface controllers. Piper Sandler analyst David O'Connor believes this could be an $18 billion annual revenue deal once the program is fully ramped up.
With Marvell expecting to see 50% revenue growth in fiscal 2028 and the Alphabet deal kicking in fiscal 2029, this is a growth stock to buy if the stock dips.
3. Snowflake
Snowflake (NYSE: SNOW) is another stock that has a great growth runway in front of it but whose stock is looking a little frothy at the moment. The company is the leader in cloud-based data warehousing and analytics, where its solution splits storage from compute to let customers store data and then process it across multiple cloud computing providers. This has turned it into one of the most integral systems of record for agentic AI.
The company has been seeing strong revenue growth, led by its AI solutions. Last quarter, its revenue rose by 35%, while it saw impressive net revenue retention of 126%. It is seeing rapid adoption of its new AI coding agent, CoCo, and ready-to-use agentic app, CoWork. Meanwhile, revenue growth is projected to accelerate next quarter to between 37% and 38%.
Snowflake has positioned itself as a model-agnostic platform at the center of enterprise AI deployment, giving it a long runway of growth in this emerging field. This makes it a stock to own on any meaningful pullback.
Geoffrey Seiler has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Marvell Technology, Microsoft, Palantir Technologies, and Snowflake. The Motley Fool has a disclosure policy.