I've Been Buying Artificial Intelligence (AI) Stocks for 10 Years. Here's the 1 Lesson This Correction Taught Me.

I get that this has been a challenging time for a lot of investors who have put money into tech stocks -- particularly those that are involved in artificial intelligence (AI). The sector has been down in recent weeks, which makes investors nervous.

The crux of the problem involves how expensive it is for these companies to build out the AI infrastructure to power the AI revolution. Hundreds of billions of dollars are being spent this year on graphics processing units (GPUs) and central processing units (CPUs) that may be obsolete in a relatively short time. And that doesn't include the spending required for servers, land, construction, cooling equipment, and other costs associated with AI.

I'm an unabashed tech stock bull, as many of my friends who like to talk about stocks know. And even they are starting to give me the side eye while asking if I'm continuing to hold on to some of my favorite AI stocks, such as Nvidia and Palantir Technologies (NASDAQ: PLTR). Several of them are already looking for what they consider to be safer options.

But I'm in this for the long haul, and that didn't change even when the tech-heavy Nasdaq Composite and the Nasdaq-100 both hit correction territory in March, dropping more than 10% from highs reached in January. My appreciation of tech stocks goes back a decade, and some of my earliest investments were with companies that even today sit squarely at the intersection of AI.

The biggest thing this correction reinforced in my thinking? It's that the market often overreacts. And that's a great opportunity to make money from the stock market.

Image source: Getty Images.

Examples of the market overreaction

There are plenty of big names that have taken a beating so far this year. And honestly, not all of them are warranted.

For instance, at the time of this writing, Microsoft (NASDAQ: MSFT) stock is down 12% year to date and down nearly 22% from its all-time high. Microsoft stock is getting hammered for the company's heavy capex spending, which totaled $37.5 billion in the most recent quarter. But that completely ignores the fact that Microsoft has an amazing core business in offering productivity software, and its Microsoft 365 suite of products -- which includes Word, Outlook, Teams, and PowerPoint, among others -- has nearly 345 million paid subscribers. Microsoft's revenue jumped 17% in the second quarter of fiscal 2026 (ending Dec. 31, 2025).

Then there's Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), whose stock dropped by nearly 10% in March when the company announced plans to spend $185 billion on cloud infrastructure this year. The market overreacted as Alphabet announced it raised $32 billion in a bond sale to help pay for the build-out, and analysts projected that the Google parent would see negative cash flow this year.

But I think those concerns discount the fact that Alphabet's core business is intact, with its advertising revenue bringing in $82.2 billion in the fourth quarter alone -- roughly 72% of Alphabet's total revenue. Alphabet stock is just starting to bounce back.

Finally, let's look at Palantir, which is down 20% in 2026, despite revenue jumping 70% from a year ago to $1.4 billion. Palantir closed $4.26 billion in total contract value in the quarter, including 80 individual deals worth more than $1 million. Palantir's stock fell even though it doesn't have the same concerns as Microsoft and Alphabet -- it's not a hyperscaler looking to outfit data centers. Despite its extreme price-to-earnings ratio of 107, I see no realistic reason why Palantir stock should be falling.

PLTR data by YCharts

All three of these companies are great businesses that I think are being unfairly treated by the market right now.

Why I'm holding my positions

I have a long-term investment horizon, so I don't mind dips in my stock prices every now and then. It happens in the market to nearly every stock, but the best names recover and move even higher.

Pulling money out of my favorite stocks now means that I won't be able to enjoy and profit from that recovery. Sure, I could jump into energy stocks, or even real estate, but such efforts to time the market rarely work out.

That's why I'm not panicking even when AI stocks take a momentary tumble -- and I don't think you should, either.

Patrick Sanders has positions in Nvidia and Palantir Technologies. The Motley Fool has positions in and recommends Alphabet, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.