Earlier this year, the S&P500 confirmed its presence in a bull market by hitting record highs, and a handful of stocks led the gains. I’m talking about a group known as “The Magnificent Seven”, a reference to the 1960s western. In this case, however, these stars are not on the big screen but rather are companies specializing in a certain form of technology. They are Amazon (NASDAQ:AMZN), Apple, Alphabet, Metaplatforms, Microsoft, Nvidia (NASDAQ:NVDA)And You’re here.
These companies are also big names in artificial intelligence (AI), one of today’s fastest growing areas, and that has helped their stocks rise last year. Each of these players is still a solid long-term buy – even a stock like Tesla that has recently fallen.
But two Magnificent Seven stocks – two key players in the world of AI – stand out as ones to buy right now, hand in hand.
1.Nvidia
Nvidia dominates the AI ​​chip market, holding an 80% share, as it sells the most powerful graphics processing units (GPUs) on the market. These high-performance chips power crucial AI tasks of training and inference large language models (LLMs) so that LLMs can continue to solve complex problems and more. Nvidia also sells a wide variety of products and services to help businesses run and maintain their AI projects – and customers can easily find all of these offerings on any public cloud.
All of this has translated into triple-digit profit growth over the past few quarters for this tech giant. Why am I optimistic that this will continue? For two reasons.
First, the general growth of AI is still in its infancy, with business needs for AI still in its infancy. Analysts predict that the AI ​​market will reach more than $1 trillion by 2030. This suggests that demand for Nvidia’s products and services could continue at current rates, or even increase significantly over time. time.
Second, Nvidia is taking the necessary steps to stay ahead of its competitors, with a focus on innovation. The company is committed to increasing the power of its GPUs on an annual basis. Since Nvidia is already in the lead, it is likely to maintain its dominance if it can keep this promise.
All of this makes the stock look like a reasonable buy today at 44x. forward profit estimates.
2. Amazon
Amazon benefits from AI in two ways. The e-commerce giant is using AI to improve the efficiency of its business. For example, it uses technology to streamline the fulfillment process and choose the best delivery routes, saving the company time and money. Amazon also uses AI to help you, the customer, find what you’re looking for – something that might keep you coming back.
But the area where Amazon could score the biggest AI victory is in cloud computing. Amazon Web Services (AWS) is the world’s largest cloud provider and also generates Amazon’s overall profit. Success here is therefore essential for the company.
AWS has gone all-in on AI, offering services that suit almost any AI customer. It sells high-end chips, like those from Nvidia, as well as its own cheaper chips for cost-conscious customers. It also offers a fully managed service which allows clients to access a range of LLMs. AWS also creates applications such as a coding assistant for developers.
These efforts are already paying off, with AWS reporting annual revenue of $100 billion this year. Amazon isn’t just investing in AI: more importantly, it’s monetizing it.
Today, with forward earnings estimates of 41 times, Amazon is far from the cheapest Magnificent Seven stock, but that’s OK. The company’s strong earnings track record, leadership in the growing e-commerce and cloud computing sectors, and approach to AI are well worth the price.
Should you invest $1,000 in Nvidia right now?
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Suzanne Frey, an executive 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 spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon and Tesla. The Motley Fool holds positions and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla. The Mad Motley has a disclosure policy.
Here are my top 2 of seven magnificent stocks to buy Hand Over Fist was originally published by The Motley Fool
