The recent surge in the S&P 500 and Nasdaq indices, breaking records and affirming a robust bull market, has spotlighted a select cohort of tech stocks affectionately dubbed the “Magnificent Seven” – evoking echoes of the legendary 1960 Western. These stars of the technological arena include powerhouses such as Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla.
Investor fascination with the Magnificent Seven stems from their impressive earnings histories, promising future outlooks, and strategic positioning to capitalize on the zeitgeist fascination with artificial intelligence (AI).
Despite delivering triple and even quadruple-digit gains over the past five years (Nvidia notably in the latter category), one might expect these stocks to have skyrocketed in price. Yet, contrary to intuition, two members of this illustrious septet stand out as surprising bargains, presenting an opportune moment for savvy investors. Let’s delve into these hidden gems.
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Alphabet: The Search Engine Sovereign
Alphabet, acclaimed as the progenitor of Google Search, commands an unwavering grip on over 90% of the global search market – a dominance poised to persist fueled by Alphabet’s relentless AI focus.
Alphabet strategically harnesses AI to bolster its primary revenue stream – advertising. Recent quarterly reports revealed a 10% surge in Google advertising revenue to $65 billion, constituting 75% of total revenue.
Deploying AI innovations intricately, Alphabet has reduced search latency by 40% for U.S. English queries, revamping search dynamics to furnish more comprehensive results replete with summaries and diverse links. This enhancement not only augments user satisfaction but also empowers advertisers with AI-driven tools like streamlined ad creation interfaces.
At present, Alphabet shares trade at a modest valuation of merely 19 times forward earnings estimates, a figure seemingly incongruent with its colossal search market share and the AI potential poised to fortify its preeminence.
Meta Platforms: Pioneering AI Frontiers
Meta Platforms, synonymous with a suite of premier social media apps including Facebook, Messenger, Instagram, and WhatsApp, derives its revenue from ad placements across its digital ecosystem, signaling a propitious revenue trajectory exemplified by a recent 25% upsurge to over $40 billion.
Embracing AI as a fundamental developmental cornerstone, Meta galvanizes its operations to serve as a fulcrum for future product innovations. Noteworthy advancements include the Llama large language model (LLM) and ambitious GPU investments to power AI models – with 600,000 GPUs slated for acquisition, many from industry titan Nvidia.
Meta’s visionary CEO, Mark Zuckerberg, envisions a future where users wield personalized AI assistants across the Meta gamut, amplifying operational efficiencies for developers, content creators, and businesses. The ongoing investment endeavors position Meta to ascend as an AI trailblazer.
Trading at a modest 24 times forward earnings estimates, Meta’s shares proffer an enticing proposition for investors eyeing a company poised to stake a prominent claim in the AI landscape while capitalizing on its prevailing revenue growth.
Should you invest $1,000 in Alphabet right now?
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