The smartest growth stock to buy now with $1,000

It’s becoming increasingly difficult to find undervalued growth ideas, especially with so many investors rushing to get into the hottest AI growth deals. With January’s turmoil weighing heavily on the broad basket of stocks, it may be time to think about picking up some of the former growth darlings on the way down.

Of course, there are still plenty of still somewhat expensive but reasonably valued company shares that could make sense to buy for $1,000, especially if you have some extra money left in your Tax Free Savings Account (TFSA) which only contains cash and is likely to earn a limited amount of interest.

So, what’s a good bet at this point?

Constellation software (TSX:CSU) shares used to be very popular. But these days it seems to be one of the most hated names on the market, with shares plunging 15% in the past few weeks alone. The software giant is now down almost 45% from its all-time high. Undoubtedly, the name has not only been corrected, but also crashed, and in a cruel way, mainly thanks to AI fears. Could AI technology really erode the moats of the big software companies or the industry consolidators? Possibly. Either way, the depth seems exaggerated.

However, I wouldn’t dare call for a bottom as the negative momentum seems to be pushing things to the next level. The latest collapse of the past year could easily push expensive stocks back to or even below the $2,000 per share level. If you’re a shareholder, I wouldn’t panic if you’re in it for the long haul and aren’t panicking amid the latest software stock implosion.

The recent crash has more to do with the state of AI and its ability to code software quickly. When you have AI models like Anthropic’s Claude Code putting together a respectable piece of software in a matter of weeks, investors should be fully aware of the disruptive impact. Given the high demand for AI chips and the stunning coding capabilities of something like Claude Code, I think investors are right to question the price they’re paying for some of the more traditional software stocks out there.

The disruption of AI is real, but the reaction may be overblown

There’s no doubt that a disruption could happen, but should the latest freefall prompt investors to sell now and ask questions later? It’s hard to say. The Claude Code technology is real. But the right price to pay for a former market leader like Constellation is a big question mark.

You can still believe in agentic AI and its coding capabilities, while also being bullish on the software companies, especially those that are effectively deploying AI to automate workflows and the like.

For now, I’m not even sure what could turn the tide. But I do think Constellation will find a way to change and become an AI winner. In an age where software is at risk of being disrupted, it is either embrace AI or fall behind. Constellation stock is priced like it’s about to lag, but I wouldn’t bet against the company as it looks like it will get back on its feet. But until then, we won’t rush to buy CSU stock at a price more than 63.2 times its price-to-earnings ratio. Perhaps just a small bite is warranted.