Investors have ridden an incredible recovery from the April 2 “Liberation Day” tariff surprises. Since the April 8 low, the Nasdaq Composite(NASDAQINDEX: ^IXIC) has appreciated an incredible 40%. And of course, that recovery has taken place amid a decade-long bull market in technology growth stocks.
It’s easy to understand why. Society is becoming more digital and automated. The last 10 years have seen the emergence of cloud computing, streaming video, digital advertising, the pandemic-era boom in electronic devices and work-from-home, all topped off by the introduction of generative artificial intelligence (AI) marked by the unveiling of ChatGPT in late 2022.
However, after a long tech bull market, technology growth stocks have reached a worrying valuation level relative to other stocks, and today’s relative overvaluation mirrors an infamous period in stock market history.
In several ways, technology stock performance and valuations are currently mirroring the extremes of the dot-com boom of the late 1990s. Unfortunately, we all know how that period ended, with a terrible “bust” that sent the Nasdaq tumbling three years in a row, eventually culminating in a 78% drawdown from the March 10, 2000, peak.
Technology innovation can be very exciting; however, that excitement often finds itself in the form of high valuations. According to data published on Charlie Bilello’s State of the Markets blog, the technology sector’s recent outperformance has now exceeded that of the height of the dot-com bubble:
Graph showing tech sector performance relative to S&P 500 since 1990.
The relative outperformance isn’t the only mirror to the dot-com era. Back then, tech stocks also became very large, leading to an outperformance of large stocks relative to small stocks. Similarly, tech stocks are often growth stocks with high multiples, reflecting enthusiasm over their future prospects. This is in contrast to value stocks, which trade at low multiples, usually due to their more modest growth prospects.
As you can see below, the outperformance of large stocks to small stocks, as well as growth stocks to value stocks, is at highs last seen during the dot-com boom.
Given that higher-valued tech stocks now make up a larger portion of the index, the Schiller price-to-earnings (P/E) ratio, which adjusts for cyclicality in earnings over 10 years, while not quite at the levels of 1999, has crept up to the highest level since 1999, roughly matching the level from 2021:
As we all know, 2022 was also a terrible year for tech stocks. While it didn’t see a multiyear crash akin to the dot-com bust, 2022 saw the Nasdaq decline 33.1% on the year. Of course, at the end of 2022, ChatGPT came out, somewhat saving the tech sector as the AI revolution kicked off.
Thus, when compared to history, tech stocks are at worrying levels. Given the similarities to the 1999 dot-com bubble and the 2021 pandemic bubble, some may think it’s time to panic and sell; however, there are also a few counter-narratives to consider.
The first is that, unlike in 1999, today’s technology giants are mostly truly diversified, cash-rich behemoths that account for a greater and greater percentage of today’s gross domestic product (GDP). While the late 1990s certainly had its leaders — including Microsoft(NASDAQ: MSFT), the only market leader that is in the same position today as then — they weren’t really anything like today’s tech giants, with robust cloud businesses, global scale, diversified income streams, and tremendous amounts of cash.
While market concentration in the top three weightings tends to occur before market downturns, index weighting concentration appears to be somewhat of a long-term trend now, increasing beyond prior highs in 1999 and 2008 since 2019.
Image source: Charlie Bilello State of the Markets blog.
Thus, it seems a higher weighting of the “Magnificent Seven” stocks could be a feature of today’s economy, rather than an aberration.
While it’s true that some of today’s large companies are overvalued, given their underlying strength and resilience, it’s perhaps not abnormal for them to garner higher-than-normal valuation multiples.
It’s important to know that while taking note of market levels is important, it is extremely difficult to time market downturns. Famed investor Peter Lynch once said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”
So, one shouldn’t abandon one’s long-term investing plan just because overall market levels may be frothy. That being said, if you need a certain amount of cash in the next one to two years, it may be a good idea to keep that money in cash or Treasury bills until then, rather than the stock market.
Furthermore, if you have a regular, methodical investing plan, stick to it. But if you are consistently adding to your portfolio every month or quarter, you may want to look at small caps, non-tech sectors, and value stocks today, rather than adding to large technology companies.
Before you buy stock in NASDAQ Composite Index, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and NASDAQ Composite Index wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $649,657!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,090,993!*
Now, it’s worth noting Stock Advisor’s total average return is 1,057% — a market-crushing outperformance compared to 185% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.
Billy Duberstein has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Right now is a great time to invest in technology stocks — for two reasons. First, we’re at the beginning of the growth story for a promising new area, and that’s artificial intelligence (AI). JPMorgan Chase Chief Executive Officer Jamie Dimon has even said that AI could be as transformational for the world as the steam engine and the internet. And analysts predict that in just the time frame of today through 2030, the AI market could grow from $200 billion to more than $1 trillion.
Second, some of these players are trading at reasonable valuations right now considering their long-term prospects. That offers investors an opportunity to get in on this exciting growth story at a fair price.
So, if you have $50,000 to invest and are looking to buy growth stocks, it’s a great idea to pick up technology players that operate in the AI space, from designers of AI products to those who use them or sell AI services to others. I would spread this investment across several players and of course, make sure that this is in the context of a diversified portfolio; it’s always best to invest across a few sectors in case one falls on hard times.
To increase the safety of this bet, I favor companies that don’t rely uniquely on AI and prior to this boom, already built profitable businesses. Considering all of this, here are the best stocks to invest $50,000 in right now.
Image source: Getty Images.
Amazon
Amazon(NASDAQ: AMZN) may be the safest of all AI bets thanks to its diversification across high-growth industries. The company is a leader in e-commerce and in cloud computing through its Amazon Web Services (AWS) business. These two major areas have helped Amazon generate billions of dollars in revenue and profit in recent years. And today, Amazon’s investment in AI is adding to the gains.
This market giant is benefiting from AI in two ways. First, Amazon uses the technology to increase its own efficiency in e-commerce — for example, selecting the fastest delivery routes for packages. This should lower Amazon’s costs and in turn, boost profit. Second, AWS is going all in on AI, offering a wide range of products and services to fulfill just about every need of a customer launching an AI project. AWS recently reached a $105 billion annual-revenue run rate thanks to this focus on AI.
Today, Amazon shares trade for 39 times forward-earnings estimates. This isn’t dirt cheap but remains very reasonable considering the company’s solid market position.
Oracle
Oracle(NYSE: ORCL) is an up-and-coming AI powerhouse. Originally known for its database software, Oracle has shifted to prioritizing cloud infrastructure in recent times — and it’s been a worthwhile bet because the company has seen demand and revenue take off.
In the most-recent quarter, for example, cloud-infrastructure revenue soared 45% to $2.2 billion, and total remaining-performance obligations (RPO) — representing contract backlog — surged 53% to $99 billion. All of this offers investors a reason to be optimistic about growth ahead.
Another positive point is Oracle has signed multicloud agreements with market giants AWS, Microsoft, and Alphabet‘s Google Cloud. These allow customers to use Oracle’s database technology through any of these cloud providers. So Oracle has made itself easy to access and on top of this, gives customers additional types of flexibility, such as Oracle Alloy, which allows partners to customize their cloud experience.
Oracle shares trade for 26 times forward-earnings estimates right now, higher than in the past but a deal considering Oracle’s AI growth.
Meta Platforms
You may use a Meta Platforms(NASDAQ: META) service daily if you message a friend on WhatsApp or Messenger, or post something to Instagram or Facebook. Meta owns these top social media apps and thanks to advertisers on these platforms, the company has generated billions of dollars in earnings.
I expect this to continue since Meta has a solid moat, or competitive advantage. It’s very difficult for users to switch to other platforms, knowing that many of their contacts may not follow. After all, about 3.2 billion people worldwide use at least one of Meta’s apps daily.
But Meta isn’t stopping there. The company has made AI its biggest investment area this year and already has launched its first virtual assistant. In fact, the company aims to create AI tools for professional and leisure purposes to suit the needs of every Meta user. And that may be just the beginning, as Meta is exploring a wide array of AI products and services with the aim of being a leader in the space.
All of this makes the stock look particularly cheap at only 26 times forward-earnings estimates.
Nvidia
This article wouldn’t be complete without mentioning the star of the AI market right now, and that’s Nvidia(NASDAQ: NVDA). Some investors have worried about investing in this chip designer since earnings and share performance have soared so much in recent years. Profit has climbed in the triple digits into the billions of dollars quarter after quarter, and the stock has advanced more than 400% over the past three years.
So, the worry is Nvidia’s strongest wave of growth may have passed, and rivals may slip ahead. I wouldn’t expect Nvidia to register such earnings or share performance non-stop. But I think the growth opportunity is far from over, and a new wave of growth may be just ahead. It’s important to remember that Nvidia is the market leader, and its focus on innovation should keep it there.
The company now is planning for the launch of new architecture Blackwell, a platform that should supercharge growth and could lead to more share performance down the road.
And that’s why Nvidia’s valuation at 42 times forward-earnings estimates looks fair, and it’s worth picking up this winning stock at these levels.
Should you invest $1,000 in Amazon right now?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $752,838!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon and Oracle. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The stock market has delivered average annual returns of about 10% going back decades, which is enough to double your money every seven years. But it’s not that difficult to grow your money faster with well-chosen growth stocks.
To give you some ideas, three Motley Fool contributors believe On Holding(NYSE: ONON), MercadoLibre(NASDAQ: MELI), and Dutch Bros(NYSE: BROS) can help you achieve above-average returns. Here’s why.
Running past the competition
Jennifer Saibil (On Holding): On has distinguished itself as a top premium brand that is challenging names like Nike and Lululemon Athletica. It stands out for its soaring growth despite inflation, and it’s just getting started. It has a massive growth runway as it builds its brands and attracts loyal fans, and growth-minded investors should take a look.
First, the numbers. On reported phenomenal results in the 2024 second quarter, beginning with a 29% year-over-year sales increase (currency neutral). Profitability was outstanding, with gross margin expanding from 59.5% to 59.9% and net income up by 834%.
The results were so strong that Wall Street was willing to forgive its earnings miss — it was expecting $0.18 in earnings per share (EPS), while On’s EPS came in at $0.17. A penny might look insignificant, but Wall Street has crushed stocks for misses that were less than that.
Next, the opportunity. On still has a low brand presence pretty much everywhere, and it’s impressing shoppers as it develops its name through marketing efforts, new direct-to-consumer shops, and wholesale distribution deals. It has its finger on the pulse of current shopping trends, and sales are increasing about equally through direct-to-consumer and wholesale channels.
While it’s best known for its shoes, many of which feature a unique sole that’s become its imprint, its premium branding is earning a following and resulting in interest in its apparel and accessories. All of these categories are growing at a brisk pace, but apparel was a standout in the second quarter, increasing 66% year over year, and it’s an opportunity that On is leveraging. It recently launched a partnership with celebrity Zendaya, for example, as a lifestyle and fashion icon, as well as a branded tennis collection.
On is expecting full-year sales growth to ramp up to at least 30%, which is likely what led to the positive market reaction after the results were released, and it’s implementing new efficiency models in the second half of the year. Expect On stock to keep soaring this year and in the long term.
This stock has returned 1,600% and is still undervalued
John Ballard (MercadoLibre): Latin America is one of the fastest-growing e-commerce markets globally, and MercadoLibre has capitalized on that to deliver phenomenal returns to shareholders over the last several years.
There are several ways it generates revenue, which speaks to the opportunities it has to deliver growth. It operates a marketplace for buyers and sellers where it earns transaction fees. It also sells its own inventory to consumers from its own fulfillment system. But one of its fastest-growing services is in-store transactions with its fintech offering.
The marketplace continues to show incredible growth in gross merchandise volume (GMV). Brazil and Argentina — two of its largest markets — reported GMV increases of 36% and 252% year over year in the second quarter. This comes as the company introduces new shipping options and investments to expand its last-mile delivery capabilities.
MercadoLibre recently launched a fulfillment center in Texas, which will expand the selection of products to customers in Mexico. It’s an example of the potential MercadoLibre has to find ways to drive strong growth for shareholders.
The best part is that despite the stock’s 1,600% return over the last 10 years, it is trading at its cheapest price-to-sales (P/S) ratio in years. It’s currently trading at a P/S multiple of 5.6 — below its previous 10-year average of 10.
With the company’s revenue still growing at high rates — up 113% year over year last quarter (excluding currency changes) — the stock could deliver wealth-building returns to shareholders. All the stock needs to do is continuing trading at the current P/S multiple.
A coffee stock that’s just heating up
Jeremy Bowman (Dutch Bros): One of the more puzzling stock movements in recent weeks came in after Dutch Bros reported second-quarter earnings.
The fast-growing drive-thru coffee chain reported strong results with revenue jumping 30% to $325 million on same-store sales growth of 4.1%. Its margins also improved with generally accepted accounting principles (GAAP) net income more than doubling $22.2 million. It beat estimates on both the top and bottom lines.
However, in spite of the strong results and an increase in financial guidance, Dutch Bros stock plunged on the update, falling 20% on Aug. 8.
The reason for the sell-off seemed to be because the company said that new store openings for the year would now come in toward the lower end of its guidance range of 150 to 165. There wasn’t any particular reason for that update, and it’s nothing that would indicate long-term problems for the business. It’s probably just delays in construction or permitting or other vagaries of the real industry.
Punishing the stock for modestly slower expansion this year seems excessive and illogical, especially considering the company raised its full-year revenue guidance from $1.215 billion to $1.23 billion from $1.2 billion to $1.215 billion.
The stock is still trading at a premium after the discount, but it also shows the business is misunderstood as the company was able to accelerate revenue growth even with the setback on new stores, an achievement that should be rewarded.
Dutch Bros has less than 1,000 stores currently and a long growth runway ahead of it considering that established coffee chains like Dunkin’ and Starbucks have several thousand locations in the U.S.
Investors should take advantage of the sell-off and buy a piece of this fast-growing restaurant chain that’s firing on all cylinders.
Don’t miss this second chance at a potentially lucrative opportunity
Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried 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:
Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $20,001!*
Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,511!*
Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $357,669!*
Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.
Jennifer Saibil has positions in MercadoLibre. Jeremy Bowman has positions in MercadoLibre, Nike, and Starbucks. John Ballard has positions in Dutch Bros and MercadoLibre. The Motley Fool has positions in and recommends Lululemon Athletica, MercadoLibre, Nike, and Starbucks. The Motley Fool recommends Dutch Bros and On Holding and recommends the following options: long January 2025 $47.50 calls on Nike. The Motley Fool has a disclosure policy.
Growth stocks are your best choice for ensuring your investment portfolio not only beats inflation but also increases steadily in value to help you better prepare for your retirement. Many investors have been touting the strengths and benefits of the “Magnificent Seven” group of stocks and are familiar with their characteristics.
The problem with large growth stocks is that size itself is a limiting factor — it can be tough for a huge organization to grow quickly. For that reason, it pays to look at medium-sized growth companies. Their smaller size and customer base provide significant leeway for them to grow rapidly, underpinned by growing demand for their products or services. It helps if they have tailwinds that can propel their revenue and earnings higher, helping the share price to do the same.
Armed with these characteristics, such stocks could multiply your wealth more quickly than the larger growth stocks. Here are three stocks with the potential to increase your investment portfolio by fivefold or more by 2030.
Image source: Getty Images.
1. Fortinet
Fortinet(NASDAQ: FTNT) is a cybersecurity firm that has a portfolio of more than 50 enterprise-grade products. The company utilizes machine learning and artificial intelligence (AI) technologies to identify threats and keep organizations safe. With more businesses digitalizing and using cloud software, Fortinet should also enjoy increased demand for its products.
For 2023, the company’s revenue rose 20.2% year over year to $5.3 billion, while operating income jumped 28% to $1.2 billion. Net income came in at $1.1 billion for the year, up nearly 34%. The business also generated a positive free cash flow of $1.7 billion for 2023, which was nearly 20% higher than what was churned out in the previous year.
The momentum has carried over into the first quarter of 2024, as Fortinet reported a 7% year-over-year improvement in revenue to $1.35 billion. Of note, service revenue leaped 24% to $944 million for the quarter, and the cybersecurity specialist also generated a positive free cash flow of $609 million.
In early May, Fortinet announced the sector’s first-ever generative AI Internet of Things (IoT) security assistant to enhance the software’s operations and allow any individual to use natural language to utilize the software, thus eliminating the need to specifically train staff to handle the software.
Management has identified a total addressable market of $144 billion this year that could potentially grow to $222 billion by 2028, thus giving the business ample opportunity to grow its revenue and profits over time.
2. Braze
Braze(NASDAQ: BRZE) provides a customer engagement platform that allows marketers to collect and analyze data from any source. By doing so, these marketers can better engage their customers and tailor messages for them across different channels.
The company posted encouraging financial numbers for its fiscal 2024, which ended Jan. 31, 2024. Revenue climbed 32.7% year over year to $471.8 million, with gross profit surging by 35.3% year over year to $324.3 million. Operating cash flow turned positive for fiscal 2024, and Braze is close to generating positive free cash flow. The company is guiding for revenue of $572.5 million for fiscal 2025, representing a growth rate of 21.3%.
Braze is also seeing significant traction when it comes to garnering customers. Total customer count increased by 15% year over year to 2,044 for the fourth quarter of the fiscal year while customers with more than $500,000 of annual recurring revenue shot up 29% year over year to 202. Total remaining performance obligations surged by 40% year over year to $639.2 million, also for the fourth quarter.
The company is not limiting itself to specific sectors but is cutting across different industries such as media and entertainment, health and fitness, and travel and hospitality in search of more customers. Braze is also expanding internationally in countries such as Singapore, Indonesia, and Australia, and management is finding opportunities in different facets of many organizations.
With its unique value proposition and growing presence in 75 countries, Braze looks set to continue its breakneck growth.
3. Samsara
Samsara(NYSE: IOT) operates a platform that helps complex organizations improve their safety and efficiency. The company makes use of artificial intelligence (AI)-powered programs to protect employees, improve asset utilization, and lower maintenance costs.
Samsara reported a nearly 44% year-over-year jump in revenue to $937.4 million for its fiscal 2024, which ended Feb 3, 2024. Gross profit climbed almost 47% year over year to $690.4 million. The business saw a sharp improvement in operating cash flow, going from negative $103 million in the prior year to negative $11.8 million, and could be on its way to positive operating cash flow soon.
Samsara also witnessed good customer momentum as customers paid more for the company’s services. For the fourth quarter of fiscal 2024, Customers with $100,000 or more in annual recurring revenue (ARR) shot up 49% year over year to 1,848, while those paying $1 million or more in ARR leaped 61% year over year to 82. Customers with more than $100,000 in ARR now make up slightly more than half of Samsara’s total customer base, up from 45% two years ago.
The company’s strategy of “land and expand” showed that 53% of its net new annual contract value (ACV) was made up of expansion customers, while the remainder were new customers. What’s more, 16% of the latest quarter’s net new ACV came from international customers, a testament to Samsara’s ability to expand its network to more countries. Samsara expects fiscal 2025’s revenue will grow 27% to 28%, putting total sales at around $1.19 billion at the midpoint.
Should you invest $1,000 in Braze right now?
Before you buy stock in Braze, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Braze wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $677,040!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
Royston Yang has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Fortinet. The Motley Fool recommends Braze and Samsara. The Motley Fool has a disclosure policy.
Fool.com contributor Parkev Tatevosian highlights four growth stocks that are selling for less than $25 per share.
*Stock prices used were the afternoon prices of April 6, 2024. The video was published on April 8, 2024.
Should you invest $1,000 in SoFi Technologies right now?
Before you buy stock in SoFi Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoFi Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $539,230!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chewy, StoneCo, and UiPath. The Motley Fool has a disclosure policy.
Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
The Nasdaq Composite index has had a great year so far, and we’re only a few months into 2024. Technology stocks, which dominate the index, are roaring higher as investors favor growth and innovation such as artificial intelligence (AI) stocks, chip designers, and cloud computing players. This has pushed the index to a record high, confirming that it’s reached bull territory.
And if history is a guide, the Nasdaq’s winning streak may not be over. Over the past six periods of stock market gains dating back to 1990, the Nasdaq has climbed an average of 64% in the first two years of positive performance. The index advanced about 43% last year and so far has climbed 8% this year — so if it follows historical patterns, the Nasdaq could soar this year. Here are my top AI growth stocks to buy before it does…
Image source: Getty Images.
Amazon
Amazon (NASDAQ: AMZN) shares have advanced 20% so far this year, and this top stock could just be getting started. That’s because Amazon is an ideal AI stock to buy: The company is using the technology to improve its e-commerce operations, and it’s also selling AI products and services to cloud computing services customers through its Amazon Web Services (AWS) unit. So, it’s benefiting from AI in two ways.
For example, Amazon uses AI to help it streamline fulfillment center operations and select the shortest delivery routes. This is key because it could reduce the company’s cost to serve.
And AWS has made addressing every level of AI needs a priority, so it offers customers the basics like chips for their training and inference programs as well as a fully managed service that allows them to customize top large language models (LLMs) for their own use. Considering AWS is the world’s leading cloud services player, it already has an enormous audience present — and ready to launch AI projects.
So, it’s clear AI could have a significant impact on Amazon’s earnings growth over time through streamlining e-commerce processes and reducing costs there, and by boosting AWS revenue.
Today, Amazon shares trade for 43 times forward earnings estimates, which looks like a reasonable price for a growth stock — especially one with a solid profitability picture and a compelling AI strategy.
Intel
Intel(NASDAQ: INTC) has struggled to keep up in the AI race, but the tide recently may have turned. The chip company late last year introduced a portfolio of AI products that could up its game and drive a new era of growth. An example is the Intel Core Ultra mobile processor family, a key step to kick off the age of the AI personal computer — these are high-power computers that can carry out many AI tasks.
Intel also announced its latest Intel Xeon processor family with AI acceleration and its Gaudi 3 AI accelerator. I wouldn’t expect these innovations to threaten chip market giant Nvidia‘s leadership, but that’s OK. Considering the opportunity — with the AI market forecast to top $1 trillion by the end of the decade — there’s room for more than one company to carve out market share and benefit. Intel could be one of them thanks to its new and upcoming innovations.
On top of this, Intel’s move to open its manufacturing network up to others, with the goal to become the world’s second-biggest foundry by 2030, could supercharge growth. It’s a big bet, but one that could bring major rewards down the road. Intel already has won commitments from four customers for its 18A process and signed five advanced packaging deals.
Intel shares trade for 29 times forward earnings estimates, a bargain considering the company’s AI and foundry prospects as well as analyst estimates for double-digit annual growth over the next five years. So Intel could be ripe for a rebound, making now an ideal time to get in on this technology giant.
Should you invest $1,000 in Amazon right now?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
Tesla (NASDAQ: TSLA) has been one of the best-performing stocks on the market over the last decade as it proved that electric vehicles (EVs) can be a viable business, and even a highly profitable one. However, recently, Tesla stock has been looking surprisingly mortal. The stock trades down by roughly half from its peak in 2021, and its fourth-quarter earnings report shows why the stock has faded.
Tesla’s revenue growth continues to slow and profits are falling, and that pattern continued in Q4. Automotive revenue rose 1% year over year to $21.6 billion, and overall revenue was up just 3% to $25.2 billion. These metrics reflect the impact of lower prices as the company looks to stay competitive, gain market share, and overcome headwinds from higher interest rates.
As a result of lower prices, operating income fell 47% year over year to $2.06 billion, and adjusted earnings per share fell 40% to $0.71. Tesla missed estimates on the top and bottom lines, and it also forecast slower production growth in 2024.
Seemingly, Tesla is less of a millionaire-maker stock than it was two years ago. What’s an ambitious investor to do with this news? If you’re looking for growth stocks that can help make you a millionaire, keep reading.
Image source: Tesla.
Nvidia has powerful tailwinds pushing it higher
Tesla and every other artificial intelligence (AI) stock can’t make their technology without the help of one company, and that’s Nvidia (NASDAQ: NVDA).
Nvidia stock soared over the last year as its chips are in extraordinarily high demand from companies like OpenAI, Oracle, Meta Platforms, and Tesla, among others. Nvidia, which invented the graphics processing unit (GPU), has a significant head start over its rivals. AI systems like OpenAi’s ChatGPT and autonomous vehicle systems like Tesla’s full self-driving rely on massive training models that use the kind of chips and accelerators Nvidia makes.
That strong demand should help power Nvidia stock higher this year as it’s coming off a third quarter in which revenue tripled year over year and its generally accepted accounting principles (GAAP) profit rose by 12x.
As profits have soared, the company’s valuation has come down, and it appears to be set for another strong year in 2024 as cloud infrastructure companies and others are still rapidly building out their AI infrastructure. This should favor Nvidia.
General Motors is more profitable than Tesla
Tesla made its name in electric vehicles, but there are signs of slowing demand for EVs that could spell trouble for Tesla and its peers. It also creates an opening for traditional automakers like General Motors (NYSE: GM) whose stocks got hammered as investors chased EV stocks and abandoned legacy automakers.
As a result, GM stock now trades at a price-to-earnings ratio of just 5. GM may not offer the same growth potential that Tesla does, but the company has a growing EV and autonomous vehicle (AV) business in Cruise, whose rollout has taken a pause after San Francisco regulators suspended operations.
GM remains more profitable than Tesla and is reporting solid growth with a 14% increase in vehicles sold to 2.6 million. That’s a strong growth clip for a mature business and from a stock priced for no growth. Notably, that’s also significantly faster than Tesla’s Q4 revenue growth.
GM’s low valuation also gives the company a greater opportunity to return cash to shareholders. In fact, the company announced a $10 billion accelerated share repurchase program in November and raised its dividend by 33% to $0.12 a share.
Considering the growth in its legacy car business and its investments in electric vehicles and autonomy, GM should be able to bridge the gap with EVs and AVs when the time comes. If GM delivers another strong earnings report, the stock could soar.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Meta Platforms. The Motley Fool has positions in and recommends Meta Platforms, Nvidia, Oracle, and Tesla. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
Fool.com contributor Parkev Tatevosian discusses the Federal Reserve interest rate policy and three growth stocks that could benefit from the easing conditions.
*Stock prices used were the afternoon prices of Jan. 11, 2024. The video was published on Jan. 13, 2024.
Should you invest $1,000 in Palantir Technologies right now?
Before you buy stock in Palantir Technologies, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies, Pinterest, and Uber Technologies. The Motley Fool has a disclosure policy.
Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
Fool.com contributor Parkev Tatevosian presents one of his favorite growth stocks for long-term investors to buy in 2024.
*Stock prices used were the afternoon prices of Dec. 25, 2023. The video was published on Dec. 27, 2023.
Should you invest $1,000 in Sea Limited right now?
Before you buy stock in Sea Limited, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Sea Limited wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
Parkev Tatevosian, CFA has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Sea Limited. The Motley Fool has a disclosure policy.
Parkev Tatevosian is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.
Valuations for many stocks have been rising sharply this year. But investors should be careful not to assume that the current year’s trends will continue into 2024. Growth stocks, especially, are trading at elevated prices and could be due for a correction in the near future. Three stocks that may run out of steam next year include Riot Platforms (NASDAQ: RIOT), C3.ai(NYSE: AI) and Tesla (NASDAQ: TSLA).
1. Riot Platforms
There’s no mystery behind the impressive performance of Riot Blockchain this year. Crypto valuations have been soaring, with Bitcoin‘s price jumping by more than 150%. Riot has more than just gone along for the ride, however, as its share price is up a monstrous 417%.
Riot is a Bitcoin-mining and digital infrastructure company. As the price of Bitcoin goes up, its revenue does as well. In its most recent earnings report, for the third quarter ended on Sept. 30, the company’s revenue totaled $51.9 million and was up 12% year over year. Riot, however, still posted a net loss of $45.3 million this past quarter (versus a loss of $32.4 million in the prior-year period).
While the company is investing more into expanding its production capacity, the risk for investors is that this stock is still going to depend heavily on the value of Bitcoin, which has proven to be volatile over the years. Unless Bitcoin has another strong performance in 2024, Riot Platforms is a stock that may run out of steam in the near future. Unless you have a high risk tolerance, you’re better off avoiding the stock.
2. C3.ai
Artificial intelligence (AI) company C3.ai has benefited from the AI boom this year. Although it doesn’t have a chatbot, it provides AI solutions to companies. The only problem — the growth just hasn’t been all that impressive. While investors have seen Nvidia and other companies generate strong growth numbers this year thanks to AI, that hasn’t really been the case with C3.ai.
Over the past three quarters, its revenue has been within a range of $72 million to $73 million, and there hasn’t been a significant increase in quarter-over-quarter revenue. It has largely been flat. The troubling scenario is when C3.ai starts to lap this year’s numbers. Last quarter (which ended on Oct. 31), the company’s revenue totaled $73.2 million and was up 17% year over year. But if the year-over-year growth rate, which normally gets more attention than the quarter-over-quarter growth rate, gets down to single percentage points, the wheels could come off for the stock.
Year to date, shares of C3.ai are up more than 180%, but in recent months they have been declining. That trend could continue into 2024. C3.ai is a risky AI stock to own, and it may have already peaked.
3. Tesla
Electric vehicle (EV) maker Tesla is a favorite for long-term growth investors. The EV market is a hot one to be in, and Tesla is a leading company in that respect. Over the years, its financials have improved, the business is now profitable, and the stock is one of the top ones in the S&P 500.
This year, Tesla’s stock has doubled in value. But it too faces some challenges heading into next year. The company’s recently launched Cybertruck, for instance, won’t be profitable until at least 2025, according to CEO Elon Musk.
Meanwhile, the company’s margins have already been under pressure due to price cuts. Tesla’s gross margin last quarter (for the period ended Sept. 30) was just 17.9%, versus 25.1% in the same period a year earlier. In October, Musk also warned investors that “if the macroeconomic conditions are stormy, even the best ship is still going to have tough times.”
Tesla is the only one of the three stocks on this list that could make for a good long-term investment. But investors need to prepare for the possibility that the EV stock could slow down next year, or even fall in value due to potentially worsening profit numbers and economic headwinds.
Should you invest $1,000 in C3.ai right now?
Before you buy stock in C3.ai, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and C3.ai wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of the S&P 500 since 2002*.
David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Nvidia, and Tesla. The Motley Fool recommends C3.ai. The Motley Fool has a disclosure policy.
