Even if an investor starts from a relatively large base, reaching a net worth of $1 million in the stock market is a challenge. If you notice that a stock is on track for huge gains in a shorter period of time, such as a year, predicting such growth and sustaining it over a long period of time is an entirely different matter.
Fortunately, the market offers innovative stocks that can benefit from such trends. Granted, the market offers no guarantees, but given the pace of innovation and growth that is expected to follow, there is a reasonable chance that these three stocks will achieve such returns.
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Tesla(NASDAQ: TSLA) has impressed investors with tremendous growth as the introduction of Model 3 and Model Y showed that a mass-market electric vehicle could not only become popular among consumers but also help Tesla achieve significant growth and profitability.
Fortunately for investors, Tesla isn’t done innovating yet, and its artificial intelligence (AI)-powered self-driving technology could spark the next wave of stock price growth. The company just released its Cybercab, its upcoming self-driving vehicle, and estimates it can grow production to 2 million units annually by 2026.
Additionally, Tesla expects to offer this technology as a kind of self-driving platform-as-a-service offering. Cathie Wood’s Ark Invest believes this could take its stock to $2,600 per share, a roughly eightfold gain in five years, as self-driving technology will ultimately drive most of Tesla’s sales growth.
Currently, Tesla shares are on the road to recovery, having more than tripled from a multi-year low of just over $100 per share in early 2023. The recent price-to-earnings ratio of 88 may seem high. However, if Ark Invest is right in saying that self-driving technology will become the company’s main source of revenue, that premium may be a small price to pay for Tesla’s growth potential.
When it comes to the AI chip market, a semiconductor stock looks like Qualcomm (NASDAQ: QCOM) may seem like an afterthought. After all, the company’s revenue had been declining in recent quarters, and with the 5G upgrade cycle coming to an end, it seemed poised for a downturn.
However, AI has given consumers a new reason to buy a smartphone, and Qualcomm is ready to deliver AI capabilities with its Snapdragon 8 Gen 3 and Elite Mobile Platform. Moreover, it continues to beat the competition, as companies like it Apple trying to develop a superior product, only to sign back on with the company.
Moreover, Qualcomm is preparing for the day when smartphones become less critical. To this end, the company has expanded into PCs, industrial/IoT applications and automotive, with the automotive segment growing particularly rapidly.
Furthermore, investors should remember that Grand View Research predicts that the global AI chip market will grow at a compound annual growth rate of 29% through 2030. Even if the AI market share is not as large as Nvidia’s, the technology could significantly expand the market. the growth of the company.
Finally, its price-to-earnings ratio of just 19 may indicate that investors have ignored this company until now. As the AI capabilities of smartphones and other applications become more apparent, the low valuation could be the catalyst Qualcomm needs to move up from here.
Those who don’t believe an exchange-traded fund (ETF) can deliver outsized returns should take a closer look at the VanEck Semiconductor ETF (NASDAQ: SMH). The fund has mastered the art of owning numerous stocks for diversification while consistently beating the competition S&P500(SNPINDEX: ^GSPC).
The VanEck fund consists of 26 semiconductor stocks and its investments are well known among technology investors. Nvidia amounts to approximately 23% of the fund, followed by an allocation of 13% Taiwanese semiconductor and 8% indoors Broadcom.
Each of the other positions represents less than 5% of the fund. However, other holding companies also include AMD, Texas instrumentsAnd ASML.
Amid that relative lack of diversification, the fund has averaged 27% annual returns over the past decade. That includes boom years like 2024, where the fund is up 49% year to date and down 34% during the 2022 bear market.
Finally, portfolio management and returns cost shareholders an ETF expense ratio of just 0.35%. For comparison: Morning star The average expense ratio was estimated at 0.48%, meaning investors can benefit from this fund at a low cost.
Given these low management fees and the ETF’s returns, investors may have good reasons to buy the VanEck Semiconductor ETF instead of putting their faith in an individual stock.
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*Stock Advisor returns November 11, 2024
Will Healy has positions in Advanced Micro Devices and Qualcomm. The Motley Fool holds positions in and recommends ASML, Advanced Micro Devices, Apple, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, Tesla, and Texas Instruments. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.
Do you want $1 million in retirement? Invest $100,000 in These 3 Stocks and Wait a Decade was originally published by The Motley Fool
