It hasn't been a great year for many ASX tech stocks.
Some of the market's highest-quality names have been sold off heavily, with investors worried about valuations, interest rates, and the impact of artificial intelligence (AI) disruption.
But when I see great businesses down 40% to 60%, I start paying attention.
Three that stand out to me as smart buys for investors with $2,000 are below.
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Pro Medicus Ltd (ASX: PME)
Pro Medicus has fallen roughly 60% from its highs, which is a big move for a company that's rarely looked cheap.
What I find interesting is that the core story hasn't really changed.
This is still a global leader in medical imaging software, with long-term contracts, high margins, and a growing presence in the US healthcare system.
Furthermore, management has spoken at length about why it believes AI will benefit its business, not disrupt it.
In my view, businesses like this don't often go on sale. And when they do, it's usually because of broader market sentiment rather than something fundamentally broken.
It still won't be the cheapest stock on traditional metrics. But I think quality rarely is.
Xero Ltd (ASX: XRO)
Xero is also down around 60% from its peak, which feels significant for a business of its scale.
What I like here is the combination of growth and stickiness. Once small businesses adopt accounting software, they tend to stay. That creates recurring revenue and strong customer retention.
On top of that, Xero still has a long runway for growth globally. Management estimates that its total addressable market is $100 billion globally across accounting, payments, and payroll.
To me, the key question isn't whether Xero can grow. It's how fast, and at what margins.
If management continues to improve profitability while expanding internationally, I think the current share price weakness could look like an incredible opportunity in hindsight.
TechnologyOne Ltd (ASX: TNE)
TechnologyOne hasn't fallen as much as the others, down around 40%, but it's still a meaningful pullback.
This is probably the most predictable of the three ASX tech stocks. It provides enterprise software to government and education sectors, with long-term contracts and high recurring revenue.
What stands out to me is its consistency. Revenue growth, margins, and returns have been steadily improving over time.
It's not trying to dominate the world like some tech companies. It's executing well in its niche.
And sometimes, that's exactly what you want.
Foolish takeaway
Pro Medicus, Xero, and TechnologyOne aren't risk-free investments.
But after significant share price declines, I think the risk-reward profile has improved significantly.
For me, this is the kind of setup I like. Strong businesses, long-term growth potential, and a market that's giving you a second chance to buy them at a lower price.
They may not be the only ASX tech stocks to consider, but right now, they could be some of the smartest.
