HomeBusinessHere are my top 3 “Magnificent Seven” stocks to buy in April

Here are my top 3 “Magnificent Seven” stocks to buy in April

There’s no hotter topic in technology these days than artificial intelligence (AI). Breakthroughs from ChatGPT and competing platforms have captivated technology enthusiasts and investors alike. But with so many companies trying to make waves in AI, investors may find themselves exhausted trying to identify the most attractive opportunities.

The “Magnificent Seven” Stocks — Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), Metaplatforms (NASDAQ: META), Alphabet, Apple, TeslaAnd Nvidia — are the usual suspects in the AI ​​spotlight. Below, I’ll break down the three mega-cap tech giants that I think are the strongest buys right now.

1.Microsoft

Microsoft kicked off the AI ​​revolution in early 2023 with its multibillion-dollar investment in OpenAI. OpenAI is the start-up behind the hugely successful AI application ChatGPT.

Over the past year, Microsoft has rapidly integrated ChatGPT throughout its Windows operating system. The technology has helped grow the company’s Azure cloud computing platform, as well as Microsoft’s developer product GitHub.

The investment in OpenAI seems to be paying off. It’s no wonder that top technology analyst Dan Ives of Wedbush Securities has proclaimed that Microsoft’s “iPhone moment” has arrived.

ChatGPT’s integration into Microsoft’s ecosystem represents something bigger than just new revenue opportunities. Microsoft has transformed from a personal computing empire to a leader in cloud computing and is now evolving into a full-fledged AI powerhouse.

With a price-to-earnings (P/E) ratio of around 36, Microsoft shares aren’t exactly cheap. The forward price-earnings ratio of the S&P500 is just under 21. However, the company’s robust cash flow machine and diversified business model are hard to ignore – especially when it comes to the Magnificent Seven.

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Microsoft is an excellent investment opportunity as the AI ​​story continues to evolve. This is a good time to start using dollar-cost averaging to expand an existing position or initiate a new one. Prepare to commit for the long haul.

AI rendering on a chipboard.

Image source: Getty Images.

2. Amazon

While Microsoft’s partnership with OpenAI was the talk of the town for a while, e-commerce and cloud computing specialist Amazon made a splash of its own by investing $4 billion in a competing platform called Anthropic. Under the terms of the deal, Anthropic will use Amazon as its primary cloud provider.

Additionally, the AI ​​startup will also use Amazon’s internal Trainium and Inferentia chips to train future generative AI models. The relationship with Anthropic should serve as a benchmark to accelerate growth, especially in cloud computing.

With Amazon’s $36.8 billion in free cash flow over the trailing twelve months and $86 billion in cash on its balance sheet, it’s no wonder both Cathie Wood and Warren Buffett own the stock. The company has tremendous financial flexibility and is uniquely positioned to invest in many areas of the AI ​​world.

With a price-to-sales ratio (P/S) of just 3.4, Amazon shares look attractive compared to historical valuation levels. Furthermore, it is the lowest valued stock in the Magnificent Seven based on this measure. Currently, there is an incredible opportunity to acquire shares in Amazon as AI breakthroughs continue to unfold.

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AMZN PS Ratio ChartAMZN PS Ratio Chart

AMZN PS Ratio Chart

3. Metaplatforms

The final Magnificent Seven company I’ll explore is social media giant Meta Platforms, which dominates the social media world through its ownership of Facebook, Instagram and WhatsApp. Additionally, the company is also making strides in gaming through its popular virtual reality (VR) company Meta Quest.

2023 was a key year for Meta. The company spent much of it on a series of layoffs to straighten out its cost profile and shift its focus to accelerating profit margins. While Meta grew its turnover by 16% last year, operating profit increased by 62%. The renewed margin expansion flowed directly to the bottom line as net profit rose 69% year over year.

With $43 billion in free cash flow, Meta has found no shortage of ways to reinvest in the company. The company increased its stock buyback program by $50 billion and announced a quarterly dividend.

Additionally, Meta is making impressive strides in the AI ​​space. The company is building its own chips to compete with industry titan Nvidia. Furthermore, by combining these chips with the existing data library of the various social media platforms, Meta is uniquely positioned to unleash a new phase of growth for its core advertising business.

While the price-to-earnings (P/E) ratio of 34.3 is a bit pricey compared to peers, I think the premium is justified. Meta is a cash machine and has found ways to reward shareholders while aggressively pursuing AI, the next frontier in technology in general.

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There is currently a lucrative opportunity to pick up shares in Meta and take advantage of the passive income opportunity of the dividend, while also keeping a close eye on the company’s further progress in AI.

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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. Adam Spatacco has positions in Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool holds positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.

Here are my top 3 ‘Magnificent Seven’ stocks to buy in April, originally published by The Motley Fool

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