3 “Magnificent Seven” Stocks That Will Crush the Market

A couple of years ago, the chief investment strategist at Bank of America Global Research — a fellow by the name of Michael Hartnett — borrowed the title of a classic film to identify a hot new group of tech stocks that had been lifting the entire U.S. market on their shoulders throughout the early 2020s: the “Magnificent Seven.” That group includes:

  1. Nvidia (NVDA 1.28%)
  2. Microsoft (MSFT 1.58%)
  3. Apple (AAPL 0.53%)
  4. Amazon (AMZN 1.62%)
  5. Alphabet (GOOG 0.51%) (GOOGL 0.54%)
  6. Meta Platforms (META 0.73%)
  7. Tesla (TSLA 0.04%)

Moving forward, I expect some of these stocks will be less dominant than they were when Hartnett labeled them, but I still think a few could easily outperform the market: Nvidia, Alphabet, and Meta Platforms. While there will likely be some other strong performers in the “Magnificent Seven,” these three are my top picks.

Person looking at a chart with data.

Image source: Getty Images.

Nvidia

At this time, Nvidia is the world’s largest company by market cap, and it rose to that position thanks to the incredible growth of its graphics processing unit (GPU) business. GPUs are designed to handle specific types of computationally intense processing tasks that can be easily broken down into a slew of smaller ones that can be solved simultaneously, rather than in sequence.

As it happens, AI model training and inference are heavy on just those types of tasks, so the growing use of AI has driven a surge in demand for GPUs. And as Nvidia makes some of the most powerful ones — and certainly the most popular ones — its revenue increased rapidly over the past few years.

NVDA Revenue (TTM) Chart

NVDA Revenue (TTM) data by YCharts.

That growth is far from over. In Q1, Nvidia delivered an impressive 69% year-over-year growth rate and gave guidance for 50% growth in Q2. There has never been a company of Nvidia’s size delivering such rapid growth, and it has pretty much defied all investment notions about large companies not being able to grow rapidly.

There are no signs of the AI infrastructure build-out slowing, which means more and more Nvidia GPUs will be used. This is an incredibly bullish time for Nvidia, and I believe it will continue to outperform the market.

Alphabet

Alphabet is on the opposite side of the AI business from Nvidia. Many investors expect that generative AI systems will replace Google’s search engines, but that hasn’t happened.

In Q1, Google Search revenue rose 10% year over year, which isn’t indicative of a segment that’s failing. Furthermore, Alphabet has already deployed its AI search overview tool in a bid to supplement its results, and that will likely be sufficient for many average users’ needs.

Due to the market’s current aversion to Alphabet’s stock, it trades at a significant discount to many of its major tech peers.

GOOGL PE Ratio (Forward) Chart

GOOGL PE Ratio (Forward) data by YCharts.

At 18.6 times forward earnings, Alphabet stock is far cheaper than most of its big tech peers, which trade around 30 times forward earnings. Furthermore, the broader market, as measured by the S&P 500 (^GSPC 0.83%), trades at 23.2 times forward earnings.

I believe Alphabet’s stock will gain more respect from the market as it continues to deliver solid results quarter after quarter.  This should cause the valuation to rise, delivering shareholders market-crushing returns.

Meta Platforms

Meta Platforms is probably better known by the social media platforms under its umbrella: Facebook, Instagram, WhatsApp, Threads, and Messenger. These platforms generate revenue by selling advertising space, and Meta is investing significant resources to ensure that its ad tools are best in class.

With its top-notch tools and popular platforms, Meta provides some of the best returns on investment in the advertising space, making nearly every business on Earth a potential customer. Moreover, Meta is working on an AI tool that will take information from a business about its offerings and its target audience, and create an ad campaign for it. It’s also utilizing AI to enhance content and streamline business operations.

It has been no secret that Meta Platforms is offering substantial signing bonuses to the top AI engineering talent available, and I believe this is an excellent strategy for Meta to utilize its vast resources in assembling a dream team. This could pay off significantly in the next few years as AI tools become more widespread and Meta is recognized as a leader in its space.

I believe that the value Meta will deliver to shareholders over the next few years, due to its significant AI investments, will be substantial and lead to a market-crushing stock.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, 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. 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. Keithen Drury has positions in Alphabet, Amazon, Meta Platforms, Nvidia, and Tesla. The Motley Fool has 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 on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Source link

Visited 1 times, 1 visit(s) today

Related Article

Fireworks were synchronized to patriotic music at the 2023 July 4th Family Picnic and Fireworks Show.

8-year-old girl fatally struck by fireworks on July Fourth

A young girl was fatally hit by fireworks. (Julie Gallant) An 8-year-old girl was fatally struck by illegal fireworks on July Fourth, according to the Buena Park Police Department. Officers patrolling the 8000 block of Cornflower Circle on Friday night saw several people frantically carry the child into a residence after multiple fireworks had detonated

Federal forecast concerns surface in Texas’ deadly flooding debate

Federal forecast concerns surface in Texas’ deadly flooding debate

AUSTIN (KXAN) — State and local officials are calling out federal forecasters amid deadly flooding in the Texas Hill Country over the extended Fourth of July weekend. The criticism comes, as funding cuts and staff shortages plague the National Weather Service and other emergency management agencies nationwide. Texas Department of Emergency Management Chief Nim Kidd

VIG Chart

2 Dividend ETFs to Buy With $500 and Hold Forever

If you have $500 to invest and love dividends, you have plenty of stocks to choose from. But $500 won’t necessarily get you a diversified portfolio of individual stocks. For that sum, you may be better off buying an exchange-traded fund (ETF) that prioritizes dividend income. Two of the best options for buy-and-hold investors today

A drone view shows the Zubair Oil Field in Basra, Iraq, January 16, 2025. (credit: REUTERS/Mohammed Aty)

The Iran-backed Popular Mobilization Forces is behind the drone attacks on Iraq

Iran has that Iranian dissident groups are present in the Kurdistan region. TheKurdistan Regional Government’s (KRG) interior ministry on Friday pointed the finger at Iranian-backed militias in Iraq as culprits behind recent drone attacks. The attacks began on June 24 when the ceasefire came into force after 12 days of Iran-Israel conflict. The US had

Chantal is forecast to hit the Carolinas on Sunday as a tropical storm. Image by National Hurricane Center

Tropical Storm Chantal forms, forecast to reach Carolinas by Sunday

July 5 (UPI) — Tropical Storm Chantal formed in the Atlantic on Saturday morning and is projected to reach South Carolina’s coast on Sunday, the National Hurricane Center said. South and North Carolina are already encountering dangerous rip and surf conditions during the Fourth of July holiday weekend Chantal, the third named storm of the

0
Would love your thoughts, please comment.x
()
x