Earlier this year the S&P500 cemented its presence in a bull market as it soared to records, and a handful of stocks led the gains. I’m talking about a group known as ‘The Magnificent Seven’, a reference to the 1960 western. However, in this case, these stars are not on the silver screen, but are companies that specialize in one thing or another form of technology. They are Amazon (NASDAQ: AMZN), Apple, Alphabet, Metaplatforms, Microsoft, Nvidia (NASDAQ: NVDA)And Tesla.
These companies are also big names in artificial intelligence (AI), one of the biggest growth areas today, and that helped their shares rise last year. Each of these players still makes a solid long-term buy – even a stock like Tesla that has recently fallen in value.
But two Magnificent Seven stocks – both major players in the world of AI – stand out as stocks to buy right now.
1. Nvidia
Nvidia dominates the AI ​​chip market and has an 80% share because it sells the most powerful graphics processing units (GPUs). These powerful chips power the crucial AI tasks of training and inferring large language models (LLMs) so that the LLMs can solve complex problems and more. Nvidia also sells a wide range of products and services to help companies run and maintain their AI projects – and customers can easily find all these offerings on any public cloud.
All of this has translated into triple-digit earnings growth for this tech giant in recent quarters. Why am I optimistic that this will continue? Because of two reasons.
First, the overall AI growth story is currently still in its early stages, with enterprise AI needs at an early stage. Analysts predict that the AI ​​market will exceed $1 trillion by 2030. This suggests that demand for Nvidia’s products and services could continue at its current pace or even increase significantly over time.
Secondly, Nvidia is taking the necessary steps to stay ahead of the competition, focusing on innovation. The company has promised to increase the power of its GPUs annually. Since Nvidia is already in the lead, it will likely maintain its dominance if it can deliver on this promise.
All of this makes the stock look like a reasonable buy today at a forward earnings estimate of 44x.
2. Amazon
Amazon benefits from AI in two ways. The e-commerce giant is using AI to improve efficiency across its business. For example, it uses the technology to streamline the fulfillment process and choose the best delivery routes, ultimately saving the company time and money. Amazon also uses AI to help you, the customer, find what you’re looking for – something that may keep you coming back.
But the area where Amazon could have the biggest AI victory is cloud computing. Amazon Web Services (AWS) is the world’s largest cloud provider and also drives Amazon’s overall profits. So success here is critical for the company.
AWS has gone all-in on AI and offers services that suit almost any AI customer. It sells premium chips, such as those from Nvidia, along with its own cheaper chips for the price-conscious customer. It also offers a fully managed service that gives clients access to a range of LLMs. AWS also builds applications such as a coding assistant for developers.
These efforts are already showing results, with AWS announcing annual revenues of $100 billion this year. Amazon is not only investing in AI, but more importantly, it is monetizing it.
These days, Amazon, with a forward earnings estimate of 41x, is far from the cheapest Magnificent Seven stock, but that’s OK. The company’s solid earnings numbers, leadership in the e-commerce and cloud computing growth businesses, and approach to AI make it well worth the price.
Should You Invest $1,000 in Nvidia Now?
Consider the following before buying shares in Nvidia:
The Motley Fool stock advisor The analyst team has just identified what they think is the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The ten stocks that survived the cut could deliver monster returns in the coming years.
Think about when Nvidia created this list on April 15, 2005… if you had $1,000 invested at the time of our recommendation, you would have $740,886!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including portfolio building guidance, regular analyst updates, and two new stock picks per month. The Stock Advisor is on duty more than quadrupled the return of the S&P 500 since 2002*.
View the 10 stocks »
*Stock Advisor returns June 10, 2024
Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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 and Tesla. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool has a disclosure policy.
Here are my top 2 great seven stocks to buy Hand Over Fist was originally published by The Motley Fool
