The economy and the stock market have ups and downs over time. As a long-term investor, you can see the forest for the trees and base your investments on general trends that can determine which stocks perform best over time.
Over the past decade, cloud computing, e-commerce and digital advertising have been prominent growth stories. While these still offer more benefits, emerging industries such as artificial intelligence (AI) are already paving the way to the future.
The brilliant companies leading these sectors have already enriched shareholders and have the fundamentals and growth prospects to continue winning for the foreseeable future. Consider buying these three top growth stocks today and holding them for the long term.
AI chip company Nvidia(NASDAQ: NVDA) is the textbook example of the AI craze that has been sweeping the market since early 2023. The company built its business on graphics processing units (GPUs), and their strong computing power and task-specific functionality made them so suitable for training AI models in data centers that Nvidia essentially took over virtually the entire market. Cloud computing companies have spent billions of dollars on Nvidia’s H100 chips to amass the computing power needed to run AI applications over the cloud.
That put Nvidia into hyper-growth mode, and its next-generation chips are poised to be just as successful. The reality is that AI requires enormous computing resources, and the need is growing as models become more sophisticated and more companies look to deploy AI applications. You can see that Nvidia’s business remains on an upward trajectory, with analysts estimating that it will generate nearly $200 billion in revenue next fiscal year:
Analysts estimate that Nvidia will grow earnings by an average of 20% per year over the next three to five years. The stock trades at a price-to-earnings (P/E) ratio of 47, a reasonable valuation for perhaps the most important company in the nascent AI industry. Nvidia should continue to win, so consider buying today and adding opportunistically.
Google is one of the world’s best-known brands and is so dominant in Internet searches that regulators declared it a monopoly earlier this year. That alone ensures that the parent company Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL)on this list. But Alphabet is much more than a search engine; it owns the world’s most visited video platform (YouTube), the world’s third largest cloud (Google Cloud) and a host of interests in other technologies such as autonomous driving, quantum computing and smartphone software.
Alphabet competes fiercely for AI leadership with other technology rivals. It could have an edge because it has the primary ingredients to develop and deploy AI, including a cloud company (Google Cloud), an AI model (Gemini), and a wealth of first-party data on which to train its AI . Alphabet had $93 billion in cash and generated $55 billion in free cash flow over the past four quarters. The company is a financial juggernaut that can outpace (or at least keep pace with) any competitor:
GOOGL Free Cash Flow Data by YCharts
Given its existing business and AI benefits, it’s hard not to like Alphabet’s investment prospects. Analysts estimate the company will grow earnings at an average annual rate of nearly 18% over the next three to five years. That growth rate makes the stock an attractive value, trading at just 24 times earnings.
E-commerce giant Amazon(NASDAQ: AMZN) went from selling books online to selling just about anything. Its rise to controlling approximately 40% of all e-commerce in the United States makes it one of the most important corporate success stories ever.
Equally impressive is the company’s ability to start and expand new businesses that have risen to the top of their respective markets. Amazon’s Prime subscription gives the company direct access to more than 200 million customers, allowing it to create additional opportunities in video streaming, grocery shopping and healthcare.
Amazon also operates the world’s largest cloud computing platform, which has become the company’s main source of profit. Customers can deploy AI applications through Amazon’s cloud platform, making it an important cog in AI as long as it maintains its market share. Amazon’s ability to enter different markets makes it a clear growth stock.
AMZN revenue estimates for current fiscal year data by YCharts
The future looks bright, in part because Amazon’s core business still has plenty of life. Consider that e-commerce (Amazon’s oldest business) accounts for less than a fifth of retail spending in America! Amazon recently launched online vehicle sales, proving it can and will target virtually any consumer market.
Analysts estimate that Amazon will grow earnings by an average of 28% over the next three to five years, making the stock a solid buy with a forward price-to-earnings ratio of 44.
Have you ever felt like you missed the boat on buying the most successful stocks? Then you would like to hear this.
On rare occasions, our expert team of analysts provides a “Double Down” Stocks recommendation for companies they think are about to pop. If you’re worried that you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
Nvidia:If you had invested $1,000 when we doubled in 2009,you would have $348,112!*
Apple: If you had invested $1,000 when we doubled in 2008, you would have $46,992!*
Netflix: If you had invested $1,000 when we doubled in 2004, you would have $495,539!*
We’re currently issuing ‘Double Down’ warnings for three incredible companies, and another opportunity like this may not happen anytime soon.
See 3 “Double Down” Stocks »
*Stock Advisor returns December 9, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Justin Pope has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Alphabet, Amazon and Nvidia. The Motley Fool has a disclosure policy.
3 Brilliant Growth Stocks to Buy Now and Hold for the Long Term was originally published by The Motley Fool
