Technology stocks have had a big win in 2024, posting top performances in the S&P 500 and the Dow Jones Industrial Average. The biggest winners in each were Palantir Technologies And Nvidia (NASDAQ: NVDA)respectively, thanks to the artificial intelligence (AI) boom. Investors are excited about the technology’s potential to make businesses more efficient and even produce breakthrough products.
And the good news is that AI’s growth may be far from over. According to analyst forecasts, the current $200 billion market could reach $1 trillion by the end of the decade. This means that AI stocks should continue to deliver growth going forward, making this a good time to buy. I generally prefer stocks that not only have a presence in AI, but also have a proven track record of growth that extends into other areas, so they aren’t dependent on just one sector or specialty.
If you have $50,000 to spread among several stocks, the four stocks I talk about below look like great buys right now. And if you don’t have $50,000, don’t worry. You can also pick up these shares with a much smaller amount. If you haven’t diversified your portfolio across different sectors, you’ll want to limit your technology investment to a portion of the $50,000 and use the rest to buy quality stocks in other sectors.
Diversification is important because it can reduce risk; if one sector or stock disappoints, others can compensate. Okay, it’s time to discover these top stocks to buy now.
Image source: Getty Images.
Metaplatforms(NASDAQ: META) is investing heavily in AI, making it the largest area of investment in 2024. But you probably know this company better for something else: social media apps.
As the owner of Facebook, Messenger, WhatsApp, and Instagram, Meta has generated billions of dollars in revenue and profits over time thanks to its dominance in the industry. This has been done through advertising, where advertisers have flocked to Meta to reach us, the target audience, because they know they will find us on these popular apps.
So Meta established itself as a social media giant before focusing on AI. Now, however, AI could offer the company the opportunity to boost growth. Meta aims to develop AI assistants that suit all its users, which could potentially encourage us to spend more time on the apps and advertisers to spend more time reaching us.
Today, Meta shares are particularly interesting because, based on just 27 times forward earnings estimates, they are quite reasonably priced for a company with a solid earnings track record and the potential to enter a big new era of growth thanks to AI.
Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) is comparable to Meta when it comes to the revenue model and today’s low valuation. The company, which owns search leader Google, gets the lion’s share of its revenue from advertising. Advertisers know we spend a lot of time on Google, so they try to reach us there. Alphabet uses AI to improve search results and help its advertisers create better targeted campaigns.
Alphabet also has another company that is showing strong growth: Google Cloud. This year, Google Cloud achieved milestones of $10 billion in quarterly revenue and over $1 billion in quarterly operating profit, thanks to its wide variety of AI products and services for cloud customers.
So for these solid companies, Alphabet looks like a bargain right now, trading at just 24 times forward earnings estimates. (It’s important to note that the company is going through an antitrust lawsuit, but I wouldn’t let that deter me from buying this market leader as it will clearly put up a strong fight to maintain its position.)
Amazon(NASDAQ: AMZN) is a user and seller of AI, something that could be a huge win over time. The company uses AI to improve efficiency in its e-commerce operations, from managing inventory and package delivery to providing shopping assistance to customers. Through its cloud computing business Amazon Web Services (AWS), it sells a wide range of AI products and services. Thanks to this focus on AI, AWS recently reached an annualized revenue ratio of $110 billion.
Before the AI boom, Amazon had already built leading businesses in e-commerce and cloud computing, helping the company generate billions of dollars in profit growth over time. In recent years, Amazon has revamped its cost structure, a move that, along with AI, could drive growth in the coming years.
Today, Amazon shares trade at 44 times forward earnings estimates. This isn’t dirt cheap, but it’s a reasonable price considering the company’s track record and bright future prospects.
Nvidia is often thought of as an AI company, but this chip designer actually relied on its sales to the video game market long before the AI boom. And it’s still a solid player in that market, with gaming revenue up 15% last quarter to over $3 billion.
That said, the $30 billion data center revenue in the quarter shows us that the AI customer is driving revenue at Nvidia today. Given Nvidia’s commitment to innovation to stay ahead and the general AI market forecast I mentioned above, I don’t mind that this particular company is so reliant on AI. Nvidia will likely continue to generate impressive growth for quite some time.
Right now, Nvidia is ramping up production of its new Blackwell architecture, a platform in high demand that could drive revenue growth next year as well as share performance. Nvidia is also very profitable in terms of revenue, with a gross margin of over 70%. This strength means that even if Nvidia trades at 46 times forward earnings estimates, it looks like a top AI stock to buy now.
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. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool holds positions in and recommends Alphabet, Amazon, Meta Platforms, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.
The Best Stocks to Invest $50,000 In Now was originally published by The Motley Fool
