This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Investors are always on the lookout for the next big technology breakthrough. And in recent years, artificial intelligence (AI) emerged as this potential game changer. The idea is AI will make the world a more efficient place, and importantly, help companies save money and increase their ability to rapidly innovate.

Many companies in the space -- those developing or using AI -- already have seen their revenue soar, and investors have taken notice. They've piled into these stocks and often reaped the rewards as AI stocks have driven gains in the S&P 500. And, with the AI market forecast to reach into the trillions of dollars in just a few years, there may be a lot more to gain well into the future.

Of course, there are many AI stocks out there, so choosing just a few may seem overwhelming. It's important to consider each company's path so far, competition, and prospects down the road. And with all of this in mind, two in particular look like no-brainer AI stocks to buy hand over fist for 2026. Let's check them out. 

1. Nvidia

Nvidia (NASDAQ: NVDA) may be the most well-known AI stock on the planet thanks to its dominance in the AI chip market. The company makes the graphics processing units (GPUs) that fuel top AI tasks such as the training and inferencing of large language models (LLMs). The tech giant benefits from its early entrance into the AI market -- and its focus on innovation has kept it in the top spot.

All of this has led to enormous gains in earnings, with revenue and net income climbing in the double and triple digits in recent quarters -- and revenue has reached record levels. Nvidia has powered the early phases of the AI boom, but the company also is perfectly positioned to drive the next chapters, too. This is because Nvidia has tailored its chips to serve inferencing -- seen as the next big growth area for AI -- and expanded its offerings into a variety of products and services to suit customers' AI needs.

Nvidia also has made smart strategic moves -- for example, partnering with Nokia to develop AI for telecom, and just recently, acquiring the inferencing technology of start-up Groq.

So Nvidia is very likely to continue generating significant growth as the AI story unfolds, and that makes it a no-brainer buy for the coming year.

2. Amazon

Amazon (NASDAQ: AMZN) is both a user and seller of AI, and that's helped it become one of the early winners of the AI race. The company applies AI to its e-commerce business, helping it design more efficient delivery routes, for example, and offer shopping assistance to customers. By making shopping easier and delivery faster for customers, they're likely to keep coming back -- and efficiency also helps Amazon lower its cost to serve.

Though you may associate Amazon mainly with e-commerce, the company's biggest profit driver actually is another business: cloud computing. And through this unit, Amazon Web Services (AWS), the company is scoring a major AI victory.

AWS, the world's biggest cloud provider, offers customers a wide variety of AI products and services, from leading Nvidia chips and AWS' own chips targeting the cost-conscious customer to a fully managed AI service called Amazon Bedrock. And these are only a few examples. This along with AWS' full range of offerings beyond AI have helped the unit reach an annual revenue run rate of $132 billion.

Amazon is a no-brainer AI stock to own because the company has delivered growth over the years thanks to its e-commerce and cloud businesses -- so the company doesn't depend uniquely on AI for revenue. But AI offers Amazon the potential for explosive growth in the years to come, making a positive picture even brighter.

And today, trading for only 32x forward earnings estimates, it's a reasonably priced tech stock to add to any AI portfolio.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post 2 no-brainer AI stocks to buy hand over fist for 2026 appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has positions in Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon and Nvidia. The Motley Fool Australia has recommended Amazon and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Warren Buffett has many favorite stocks, ones that have played an important role in his portfolio for years and that have helped the billionaire deliver market-beating returns over time. Buffett, as chairman and chief executive officer, has led Berkshire Hathaway to a compounded annual increase of nearly 20% over 59 years. That's compared to the 10% compounded annual gain for the S&P 500 over that time period. 

Buffett chooses companies that he believes have solid competitive advantages and that can withstand the test of time. The investing giant aims to invest for the long term, so he looks for companies that may excel for years to come. And he aims to get in on them at a reasonable price.

I consider the following stock Buffett's favorite as it holds a special place in his portfolio: the top spot. Clearly, the company is a solid investment -- but could it double your money in five years? Let's find out. 

Taking a bet on technology

Buffett first bought shares of this player back in 2016, taking a bet on an industry he usually doesn't invest in -- technology. This stock is Apple (NASDAQ: AAPL), seller of the famous iPhone, Mac, and other leading devices. Buffett surely noticed Apple's fantastic moat, brand strength that keeps customers coming back.

Over time, this has driven revenue and profit growth and stock performance, too. Buffett is so grateful for these results that he thanked Apple CEO Tim Cook during the latest Berkshire Hathaway shareholders meeting back in May. Apple stock has advanced about 900% since Buffett initially bought the shares.

Buffett in recent quarters cut his position in Apple, and though he didn't spell out the reason, it's possible that the movement was simply to lock in gains after such a solid performance. Meanwhile, the fact that Apple remains his biggest holding shows he still believes in the company's prospects.

An $8 trillion market value

Now, let's consider whether this Buffett stock could double your money in five years. To do so, the stock price would rise to about $550, bringing the stock's market cap to $8.1 trillion. Let's do some math, involving the company's sales growth, to imagine the path to this level.

From Apple's actual 2023 sales of $383 billion through analysts' average estimates for $482 billion in annual sales next year, Apple has delivered a compound annual growth rate (CAGR) of 5.9%. And the stock trades for just under 10x sales.

A CAGR of 5.9% from 2023 through 2030 would imply annual revenue advancing to $610 billion by the end of that period. And revenue at that level would bring Apple to a price-to-sales ratio of 13, higher than it's ever traded in the past.

AAPL PS Ratio data by YCharts

Considering a market value of $8.1 trillion, to maintain a PS ratio of about 10, Apple would have to reach $800 billion in annual sales by 2030, suggesting a CAGR of 9.6% from 2023.

So, Apple's growth rate would have to accelerate quite a bit from current levels, and revenue itself would have to double from last year's level over the coming five years. This scenario is possible, but I don't think it's extremely likely. This doesn't mean Apple makes a bad investment, though.

Growth you can count on

Apple actually represents an excellent buy today as the stock, even if it doesn't double in a few years, could generate steady growth you can count on. The company has built out a massive presence of active devices around the world, and those are creating recurrent revenue that's reaching record levels -- this is as users sign up for Apple's services.

As mentioned earlier, Apple has brand strength that has equaled successful launches of iPhone updates, so we may expect growth with each innovation.

Finally, Apple got in on artificial intelligence (AI) later than rivals, with the rollout of AI features across its devices beginning about a year ago. This may have held Apple's performance back earlier in the AI boom, but the company today is well-positioned to benefit from its progress in AI.

All of these points make Apple a great wealth-building Buffett favorite to buy and hold -- even if it doesn't double your money in five years.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Could Warren Buffett's favorite stock double your money in 5 years? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple and Berkshire Hathaway. The Motley Fool Australia has recommended Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Considering all of this, could Nvidia become the first $10 trillion company? Let's find out. 

An amazing growth story

Before answering that question, let's take a quick look at this amazing growth story. Nvidia, for a number of years, focused on selling GPUs to video gaming companies. But, when talk of AI started to circulate about a decade ago, Nvidia knew it could play a significant role and jumped on the opportunity. The company designed GPUs for this powerful new technology, building its reputation as an expert and leader in the field.

All of this fueled massive growth in revenue, with sales climbing in the double and triple digits as the AI boom advanced. Customers rushed to Nvidia for chips and related tools to power their large language models, and Nvidia, seeing the potential ahead, pledged to innovate on an annual basis to satisfy the need for speed and efficiency. This commitment to innovation is what has kept -- and should continue to keep -- Nvidia ahead of the rest.

Now, let's take a look at our question: Could Nvidia become the first company to reach $10 trillion? To reach that level, Nvidia stock would have to climb 128% to about $411, which seems like a reasonable feat for this company over, say, a five-year period. (Nvidia soared 1,200% over the past five years.) But it's important to consider whether Nvidia's growth rate would support such a price.

Nvidia's price in relation to sales

We can gather clues by looking at Nvidia's price-to-sales ratio. Today, the company trades for 23x trailing 12-month sales, but over the past year, this ratio has most often been around 25 or even higher. Nvidia's sales reached $130 billion in the latest fiscal year, and analysts project levels of $213 billion for the current fiscal year and $316 for the next fiscal year (fiscal 2027). That suggests year-over-year growth of 63% in this fiscal year and 48% in the next fiscal year.

Now let's use the example of $400 billion in annual revenue by the end of the decade. This represents growth of only 27% from the fiscal 2027 projected figure -- a much lower growth rate than Nvidia has delivered in recent years. Nvidia could reach a $10 trillion market value in this example, because at this revenue level, the company's P/S ratio would be 25.

This means, mathematically, it's possible for Nvidia's market value to reach these levels. But does it have the business to fuel such revenue gains?

I'm optimistic, and here's why: Nvidia is the GPU market leader and is innovating to ensure its position. Meanwhile, we're now in a major stage of infrastructure ramp-up, meaning big cloud service providers are expanding data centers to accommodate soaring AI demand. And players like Meta Platforms, aiming to train models in-house and grow their own AI programs, also are turning directly to Nvidia for its products. In fact, Nvidia has predicted that AI infrastructure spending may reach as much as $4 trillion over the coming five years.

Nvidia, which already works closely with these deep-pocketed customers, may be one of the biggest winners of this movement. And all of this could shepherd this top AI company to yet another major milestone: $10 trillion in market value by 2030.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Could Nvidia become the first $10 trillion company? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Buffett is now approaching retirement, with plans to hand over his CEO role to Greg Abel, currently the company's vice-chairman of non-insurance operations, at the end of the year. But this expert investor has remained active in his final months and quarters of leadership. And that means we can take a look at what Buffett's latest portfolio moves say about the market...

Good news for Buffett fans

First, though, here's some good news for all of you Buffett-watchers: Buffett still will be around as chairman, will go into the Berkshire Hathaway office to share ideas with the team, and he's promised to continue communications through an annual Thanksgiving message. So we may hear about Buffett's thoughts on key subjects well into the future.

Now, let's consider Buffett's general investment strategy over time and the moves he's made in recent quarters. Buffett is known for choosing quality companies with solid competitive advantages, or moats, and investing in them for the long term. The billionaire won't jump into the latest trend even if everyone else is doing so -- and even if it's delivering big returns fast. Buffett prefers companies he can count on over time, and this strategy has been a successful one.

One extremely important point is that Buffett favors value stocks, meaning he aims to buy stocks trading for less than what they truly are worth. The idea is that the rest of the investment community eventually will recognize the strengths of these particular companies and buy the shares -- and these stocks then will rise.

So, what has Buffett been doing lately? The billionaire's moves have been very clear: Over the past 12 quarters, he's been a net seller of stocks, and he's built up Berkshire Hathaway's cash position to reach record levels.

BRK.B Cash and Short Term Investments (Quarterly) data by YCharts

Meanwhile, in his 2024 letter to shareholders, Buffett wrote that it's rare to be "knee-deep" in buying opportunities.

Buffett's moves suggest one thing...

This, along with Buffett's focus on value, says something very clear about the market today -- and a key market metric supports this. The S&P 500 Shiller CAPE ratio, a view of stock price in relation to earnings over 10 years, recently reached beyond 39, a level it's only surpassed once before.

S&P 500 Shiller CAPE Ratio data by YCharts

Buffett's actions, supported by this valuation metric, suggest the stock market is expensive and has been so for a while. But, before you make any abrupt investing decisions based on this, it's important to take a deeper look into Buffett's moves. The Oracle of Omaha, as he's often called, hasn't stopped investing. He's still found opportunities -- for example, he picked up shares of UnitedHealth Group in the second quarter and shares of Alphabet in the third quarter.

Both of these stocks were inexpensive at the time, and they continue to be reasonably priced. This shows us that, even if the overall stock market is pricey, investors still may find interesting opportunities.

UNH PE Ratio (Forward) data by YCharts

Now, looking specifically at the Alphabet purchase, we can draw an additional conclusion. Though technology and artificial intelligence (AI) stocks have climbed over the past few years, this doesn't mean that every AI player is expensive. It's important to consider each company individually -- if you don't, you might miss out on a deal today that may become a winner down the road.

So, Buffett's moves over the past several quarters -- from his selling activity to his accumulation of cash -- suggest that today's market is expensive. And the Shiller CAPE ratio confirms this. But Buffett doesn't recommend staying away. Instead, his investing principles ring true in any market environment, including today's: Look for value, and when you find it, buy and hold for the long term.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post What Warren Buffett's latest portfolio moves say about the market appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned.  The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Berkshire Hathaway. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended UnitedHealth Group. The Motley Fool Australia has recommended Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The Magnificent Seven technology stocks have powered the S&P 500 through this bull market so far -- that's because investors like their solid, well-established businesses and their promise in the high-potential artificial intelligence (AI) market. Some are bigger AI players than others, but they all are participating to some degree in this technology. Investors are enthusiastic about AI because it may supercharge earnings and stock performance over time.

And, as mentioned, the stock performance already has started, with the Magnificent Seven stocks each advancing in the double- or triple-digits over the past three years. This is great, but it's resulted in one thing that may be holding investors back from buying at least certain players right now: Stocks have become more expensive.

In fact, some analysts and investors have even worried about an AI bubble. Those concerns weighed on the S&P 500 in the early weeks of November, though tech companies' earnings reports and comments on demand haven't supported the idea of a bubble taking shape. Earnings have climbed, and companies have spoken of high demand for AI products and services.

Still, it's clear many AI stocks are expensive these days. But the good news is bargains also exist -- even among Magnificent Seven AI stocks. And two in particular may be offering investors a once-in-a-decade buying opportunity before the new year: They are the cheapest of the Magnificent Seven, but due to their potential in AI, this may not last for long. Let's check out these stocks to buy now. 

1. Meta Platforms

Meta Platforms (NASDAQ: META), trading for 26x forward earnings estimates, is the cheapest Magnificent Seven stock today. This is a fantastic deal considering the company's long history of earnings growth, which offers it the ability to invest in AI and reward shareholders with dividends.

You may know Meta mainly for its social media leadership -- the company owns a number of apps, including Facebook and Instagram -- and this platform has been its ticket to revenue growth. Advertisers come to Meta to reach us, and this has resulted in billion-dollar revenue and profit for the company.

Meta now aims to use AI to revolutionize advertising, automating ads across its platform and making them more successful. Meanwhile, the presence of AI on its apps may keep us on them longer. All of this may result in advertisers increasing their spending on ads here. And Meta's investments in AI also could lead to the development of new products and services that may drive revenue down the road.

All of this makes Meta look like a steal at today's valuation.

2. Alphabet

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is the second-cheapest of these seven tech titans, as it trades for 29x forward earnings estimates. Like Meta, Alphabet may not remain at this level for long as its AI investment powers revenue higher.

Alphabet uses AI across its Google Search business, and that should boost advertising revenue as it takes a route similar to Meta's -- improving the overall advertising experience and ad results. And Alphabet also is benefiting from AI through its Google Cloud business -- here, it offers a wide range of AI products and services to customers, and these have been fueling revenue growth.

In the latest quarter, for example, Google Cloud revenue climbed 34% to more than $15 billion, and for the first time ever, Alphabet reached total quarterly revenue of more than $100 billion. As a leading cloud player, Google Cloud should be well-positioned to attract AI customers looking for capacity -- demand already has been surging and hasn't shown signs of letting up. In the quarter, Alphabet said demand for AI infrastructure and generative AI systems drove cloud revenue.

So, Alphabet, like Meta, is on track for more growth as this AI boom marches on -- and that means getting in on these stocks at today's levels may be a once-in-a-decade opportunity.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Meta Platforms. The Motley Fool Australia has recommended Alphabet and Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), like other tech stocks, traveled through difficult times and better times this year. The stock slipped this spring amid concern about the impact of U.S. import tariffs on corporate earnings. But as President Donald Trump negotiated with other countries, this pressure eased.

The company also faced the challenge of an antitrust suit in the U.S., but a ruling in September averted the worst-case scenario -- and this decision offered Alphabet a significant boost. Since, the stock has gained nearly 50%, and just recently, Alphabet did something it hasn't done in seven years. Is it time to buy this top tech stock? Let's find out.

90% market share

First, though, let's catch up on the Alphabet story so far. This is the company behind something you may use and rely on every day: I'm talking about Google Search, the world's most popular search engine. It's steadily held onto about 90% share of the market. Google, through advertising across its platform, fuels Alphabet's revenue growth, but this isn't the only revenue driver.

Alphabet also is the owner of Google Cloud, one of the world's major cloud service providers, and that business is growing in the double digits.

On top of this, Alphabet's investment in artificial intelligence (AI) is helping the company improve its business -- for example, streamlining the advertising experience. Alphabet has developed its own large language model, Gemini, to apply to its own needs and offer to clients through Google Cloud. The cloud provider also offers many AI products and services, from chips to a fully managed service for the development of generative AI, and this has fueled growth in recent quarters.

In the latest quarter, for example, Alphabet said demand for AI infrastructure and generative AI powered a 34% gain in cloud revenue.

The elimination of a big risk

The major weight on all of this was the U.S. antitrust suit -- the risk was a potential breakup of revenue-driver Google. That risk was eliminated when a federal judge decided that Alphabet could maintain its ownership of its Google Chrome browser, and the company now faces lesser penalties.

All of this, along with a reasonable valuation, has helped boost Alphabet shares in recent months -- and help the company do something it hasn't done in seven years. On Nov. 21, Alphabet's market value soared past that of software giant Microsoft for the first time since 2018. Back then, both companies' market capitalizations were about $800 billion -- now, they've surpassed $3 trillion.

GOOG Market Cap data by YCharts

Alphabet has maintained its market cap gain, and now at $3.8 trillion, it's the biggest company after Nvidia and Apple.

Now, let's return to our question: Does this make Alphabet a stock to buy? It's key to keep in mind that a high market cap doesn't automatically translate into a buying opportunity. A company may have reached such a level but could now be overvalued or face new headwinds -- or it may not be the right fit for your portfolio.

Why a high market cap may be positive

Of course, recent gains in market cap might be positive -- they could be the result of good news that prompted investors to pile into the stock. And maintaining a high market cap over time shows sustained demand for the shares.

But, before investing, it's most important to consider a company's earnings track record, financial health, and future prospects -- and also take a look at valuation. In the case of Alphabet, there's reason to be optimistic about all of these points. The company has delivered growth in revenue and profit over time, the AI opportunity is in its early days so could spark significant growth in the quarters to come, and today, Alphabet still is reasonably priced -- it trades for 30x forward earnings estimates, which is lower than many of its AI peers.

All of this makes this stock that's roared past Microsoft a fantastic buy right now.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• Why ASX investors dumped IVV ETF last month

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Warren Buffett has become an investing legend, and that's thanks to his ability to generate market-beating returns over time. The billionaire, leading Berkshire Hathaway for nearly 60 years, has over that time delivered a compounded annual gain of almost 20% -- that's compared to the S&P 500's compounded annual increase of about 10% over the period.

Buffett has done this by investing in the same manner throughout all market environments: identifying quality companies with strong competitive advantages and getting in on these players for the right price. The famous investor doesn't follow market trends or get caught up in euphoria or despair; instead, he keeps his cool and searches for opportunity.

In recent years, though, opportunity hasn't been as readily available as he would have liked. "Often, nothing looks compelling; very infrequently, we find ourselves knee-deep in opportunities," he wrote in a recent letter to shareholders. And actions Buffett has taken in the quarters leading up to his retirement, set for the end of this year, may be seen as a warning for Wall Street. Let's take a closer look -- and see what history says may happen in 2026.

Buffett's transition

So, first, a quick note about Buffett's retirement. Don't worry: The top investor isn't completely disappearing from the investing scene. He will carry on as chairman of Berkshire Hathaway, but as of Jan. 1, he's turning his role of chief executive officer over to Greg Abel, currently the holding company's vice-chairman of non-insurance operations. Abel will then lead Berkshire Hathaway investment decisions.

In Buffett's final few years as CEO, it doesn't look like he's been "knee-deep" in opportunities because he's been a net seller of stocks for the past 12 consecutive quarters. This means that his stock sales surpassed his equity purchases during each three-month period.

And this brings me to the subject of Buffett's warning to Wall Street. As Buffett favored selling stocks over buying them in recent years, he's also built up a record cash position -- and this continued in the third quarter, with Berkshire Hathaway's cash level reaching $381 billion. So, Buffett has preferred setting aside cash for investing at a later time than allocating it to purchases today.

A trend that Buffett may not like

The investing giant hasn't offered us exact reasons for his decision, but since we do know that he favors buying stocks for a good price, it's fair to say that one key element may be holding him back. And this is valuation.

A look at the S&P 500 Shiller CAPE ratio shows us that stocks are at one of their most expensive levels ever. The metric, a measure of stock price in relation to earnings over a 10-year period, recently climbed to 40, a level it's only reached once before since the S&P 500's formation as a 500-company benchmark.

S&P 500 Shiller CAPE Ratio data by YCharts

Now, let's consider what history has to say about what may happen in 2026. At times when Berkshire Hathaway's cash levels have been on the rise and reached a peak, the S&P 500 then has taken a dip, as you can see in the chart below, particularly in early 2016 and then toward 2017. The S&P 500 Shiller CAPE ratio also has been on the rise prior to these stock market dips, suggesting valuation may play a role in this trend.

BRK.B Cash and Short Term Investments (Quarterly) data by YCharts

The most important point

This historical pattern suggests we may see a dip in stocks in 2026 -- but this doesn't necessarily mean that the year will finish in the negative. Stock market declines that have followed Buffett's increases in cash levels generally have been short-lived, and most important of all, the S&P 500's declines always have resulted in recovery and gains in the years to follow.

So, what does all of this mean for investors? Buffett's actions imply opportunities aren't overly abundant right now -- and that could start weighing on demand for stocks. This "warning" means investors should pay close attention to valuations and avoid buying stocks that are overpriced or have questionable long-term prospects.

Fortunately, though, if stocks do slip in 2026, history shows us these periods aren't long lasting -- and that's why investing for a number of years has been a winning strategy for Warren Buffett and could be a winning strategy for you too. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Warren Buffett, weeks before his retirement, has a warning for Wall Street. History says this may happen in 2026. appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) has helped investors take serious steps along the path to wealth -- and with a gain of more than 21,000% over the past decade, it's clearly made some early investors multimillionaires. This is because the company emerged as the world's dominant designer of chips powering the high-growth industry of artificial intelligence (AI).

From today's higher levels, I wouldn't expect Nvidia stock to deliver a repeat performance over the next few years, but the stock still has what it takes to climb significantly -- and even help investors grow their portfolios into the millions of dollars over the long run. Here's why this stock still is a multimillionaire-maker. 

Nvidia's daring move

First, a quick look at how Nvidia became a millionaire-maker in recent years. The company made a daring move, tailoring its graphics processing units (GPUs) to suit the needs of the promising field of AI -- and it did this early on, putting itself on track for leadership. Nvidia won this bet, and the company's ongoing innovation has kept it in the top spot.

All of this has translated into enormous growth, with double- and triple-digit revenue gains over the past few years. Profitability on sales also has been strong, as gross margin shows us -- Nvidia generally has maintained a level greater than 70%.

NVDA Gross Profit Margin (Quarterly) data by YCharts

That said, investors have worried that Nvidia's best days are in the past and growth will slow in the later stages of the AI boom.

AI across industries

Now let's consider why Nvidia, even at this phase of the AI story, remains a stock that may significantly increase your wealth. And this is because Nvidia is positioned to serve every phase of AI and will be a key player as the use of AI expands across industries. Nvidia's GPUs are the top product used for the training of AI models -- but, importantly, these GPUs also are needed to power the models through their tasks.

The AI giant already has designed specific tools to facilitate the use of AI in various industries like healthcare and automotive, with a particular focus on autonomous vehicles. And just recently, Nvidia announced an investment in telecom giant Nokia as part of an effort to transform telecom networks -- AI will drive this new connectivity, and Nvidia will be at the heart of this.

So, Nvidia is taking AI into a broad range of industries and revolutionizing the way things are done -- this should result in strong revenue growth for many years to come. Nvidia's growth won't be tied uniquely to providing GPUs to data centers; instead, the use of AI across many areas should significantly contribute to the company's growth.

This could supercharge stock performance over the long term -- and as part of a diversified portfolio of quality assets, Nvidia could continue to be a multimillionaire-maker for investors.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Here's why Nvidia still is a multimillionaire-maker appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Meta Platforms (NASDAQ: META) is a company many of us have close contact with daily. That's because it's the owner of some of the world's most commonly used apps: Facebook, Messenger, Instagram, and WhatsApp. About 3.5 billion people around the globe use at least one of these daily. 

The tech giant doesn't consider itself just a social media company, though. In recent years, it's made major steps in the world of artificial intelligence (AI) -- for example, it's developed its own large language model, and this tool powers certain Meta products, like the company's AI assistant.

So, owning Meta stock offers you access to a social media titan as well as a potential winner in the exciting field of AI. But should you wait to get in on this player? No -- Here's one compelling reason to buy Meta shares hand over fist right now.

A solid earnings track record

It's important to note that Meta's well-established social media business has helped it produce a long history of earnings growth. Advertisement across Meta's apps drives revenue, as many sorts of businesses sign up for ads to reach us where they know they'll find us -- on these social media platforms. In the recent quarter, advertising revenue climbed about 25% to $50 billion.

In fact, Meta's financial picture is so strong that the company is able to expand and invest in AI as well as pay shareholders a dividend.

While AI represents a considerable investment for Meta today, this effort could deliver big down the road. Meta is using AI to improve the overall advertising experience and boost the capabilities of its apps to keep users on them longer -- all of this should encourage advertisers to keep coming back to Meta and even increase their ad spending. Finally, the investment in AI could lead to additional products and services that may expand revenue streams in the coming years.

Why buy now?

All of this makes Meta a fantastic stock to own well into the future. But why buy now? Right now, Meta is the cheapest of the Magnificent Seven tech stocks that have driven the S&P 500 to record highs in recent years.

Meta trades for 24x forward earnings estimates, which looks cheap relative to peers and also seems very reasonable considering the complete Meta package.

META PE Ratio (Forward) data by YCharts

This is particularly noteworthy today as investors worry about the formation of an AI bubble, as valuations of many AI stocks have exploded higher. Meta, trading at these levels, looks much less vulnerable than players that are trading at lofty valuations.

This, along with Meta's strengths in social media and AI ambitions, makes it a stock to buy hand over fist right now.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has positions in Amazon and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Nvidia (NASDAQ: NVDA) stock has roared higher over the past several years as artificial intelligence (AI) emerged as a game-changing technology. The company designs the most powerful AI chips around -- they're known as graphics processing units (GPUs) and are key to the development and use of AI. So, the idea is, if you invest in Nvidia, you'll benefit as this technology revolution marches on.

The company has demonstrated this as AI, for the past few years, already has been supercharging its revenue growth. Nvidia has reported double- and triple-digit gains quarter after quarter, and the stock price has taken off too, advancing 1,200% over the past five years.

But, as this has unfolded, valuations of Nvidia and other AI players have climbed too, prompting investors to worry about the potential formation of an AI bubble. And this concern has weighed on the S&P 500 and Nvidia in recent weeks -- they declined more than 2% and 7%, respectively, from the start of November through the Nov. 19 market close.

Are Nvidia and other AI stocks in a bubble? Here's what Nvidia chief Jensen Huang says.

The message from other tech giants

Before we zoom in on Huang's comments, though, let's take a quick look at the current AI picture. Though some investors have worried about an AI bubble, we haven't seen evidence of a slowdown in demand for AI products and services. Tech giants from Amazon to Alphabet and Broadcom all have reported earnings over the past several weeks -- and each one has spoken of high demand for AI products and services.

Cloud service providers are building out infrastructure to keep up with this soaring demand -- and this has been driving their revenue growth as well as growth at chip companies such as Nvidia, Broadcom, and Advanced Micro Devices. All of this supports Huang's prediction, delivered a few months ago, for as much as $4 trillion in AI infrastructure spending by the end of the decade.

As mentioned, though, as investors piled into AI stocks, valuations climbed. The S&P 500, as seen through the S&P 500 Shiller CAPE ratio, has been trading at one of its most expensive levels ever. And this has prompted some investors to start thinking about the possibility of an AI bubble taking shape.

Why Huang's view is key

Now, let's consider what Nvidia's Huang has to say about the matter. He, as the leader of a company with great visibility on what's happening next in the AI market, is well-positioned to address this subject. After all, Nvidia is in close contact with its customers as they plan future orders, so the chip giant sees if momentum is slowing or set to continue.

Huang, during Nvidia's earnings call on Wednesday, said the following:

"There's been a lot of talk about an AI bubble. From our vantage point, we see something very different."

The idea is that, though a company such as Nvidia has seen tremendous growth in recent years, we are still in the early days of the AI boom. Huang sees three major shifts in progress: the transition from central processing unit (CPU) computing to GPUs, the broad use of generative AI, and the growing use of agentic AI systems. And these, all requiring AI products and services, should keep powering earnings higher at Nvidia.

"Our singular architecture enables all three transitions," Huang added.

Nvidia's revenue climbs 62%

Nvidia's fiscal 2026 third-quarter earnings reinforce all of this. The company reported a 62% increase in revenue to a record level of $57 billion and maintained high profitability on sales, with gross margin of more than 73%. And the demand picture looks bright too, with Nvidia saying its installed base of GPUs is in use at 100% and "the clouds are sold out."

Considering all of this, Nvidia, trading for around 40x forward earnings estimates, looks reasonably priced.

So, today, in the wake of Nvidia's earnings report, investors may breathe a sigh of relief as Huang offers evidence that the top AI stock isn't in a bubble -- and instead could continue to deliver growth well into the future as the AI boom evolves.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Is Nvidia in an AI bubble? Here's what Jensen Huang says. appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has positions in Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom. The Motley Fool Australia has recommended Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Palantir Technologies (NASDAQ: PLTR) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) both have been benefiting from the artificial intelligence (AI) boom in recent quarters. Palantir sells AI-driven software that helps customers make better use of their data. And Alphabet uses AI to improve its Google Search platform and sells AI products and services to customers of its Google Cloud business.

All of this has resulted in earnings growth and stock performance for both companies over the past few years. But now, even as the AI boom marches on, Wall Street expects only one of these stocks to climb in the coming 12 months and has an overwhelming number of buy recommendations on this player. Meanwhile, Wall Street predicts the other stock will fall. Let's take a closer look at each of these AI powerhouses and find out which one Wall Street favors right now. 

Palantir Technologies

Palantir may seem like an overnight success, as the stock has soared more than 2,000% in just three years, but this company actually has been around for more than 20 years. In its early days, Palantir depended on government contracts for growth, but the release of its AI-driven software system -- known as Artificial Intelligence Platform (AIP) -- a couple of years ago supercharged the growth of another customer. The commercial one.

Today, businesses and organizations are flocking to Palantir for AIP, and as a result, total commercial revenue has surpassed U.S. government revenue for four straight quarters. But this doesn't mean government business is slipping – instead, Palantir now is generating double-digit growth from both commercial and government businesses, and demand has prompted the company to lift annual forecasts across the board, from revenue to adjusted income from operations. Finally, Palantir has expertly balanced growth and profitability, suggesting we may expect a healthy earnings picture as this story progresses.

Amid this growth, however, Wall Street doesn't advise buying Palantir stock right now -- most analysts have a "hold" recommendation on the shares. And the average price forecast calls for a decline of a little more than 4% over the coming 12 months.

Alphabet

Alphabet is most known for its ownership of Google Search, the world's most popular search engine -- it holds more than 90% of this market, and that's helped advertising across the Google platform power Alphabet's earnings over time. Advertising makes up most of the company's revenue, but in recent quarters, AI has helped the Google Cloud business take off.

Customers have flocked to Google Cloud for AI infrastructure and tools, and the unit's revenue has soared. In the latest quarter, Google Cloud revenue climbed 34% to more than $15 billion. And this along with strong performance across the search business has pushed the company's overall revenue to a new milestone, surpassing $100 billion in a quarter for the first time. This is on top of a long-established track record of revenue and profit growth.

Analysts are overwhelmingly optimistic about Alphabet's potential over the coming 12 months, as we can see through their forecasts. Wall Street's average price estimate calls for an increase of about 6% for the stock, and most analysts have a "buy" or "strong buy" recommendation on the shares.

What does this mean for investors?

So, Wall Street clearly is cautious about Palantir -- and much of this has to do with the company's valuation. A look at it compared to that of Alphabet points to Alphabet as the better bargain today.

PLTR PE Ratio (Forward) data by YCharts

This doesn't necessarily mean that you should rush out and sell your Palantir shares or avoid the stock entirely, though. The company still has the earnings strength and market position to advance over the long term, but this high valuation may weigh on appetite for the stock in the near term. So Palantir is best left to aggressive growth investors right now, while Alphabet makes a solid buy for anyone seeking a potential AI winner.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Palantir stock vs. Alphabet stock: Wall Street says to buy only one appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Palantir Technologies. The Motley Fool Australia has recommended Alphabet. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Warren Buffett is stepping down as chief executive officer of Berkshire Hathaway at the end of the year, but he's expertly prepared the terrain for his successor, Greg Abel. At the helm for nearly 60 years, the billionaire has scored market-beating returns -- and he's done this through buying quality stocks and holding on for the long term. 

Though Buffett isn't known for investing in technology stocks, he has made exceptions from time to time. This has resulted in the purchase of two technology powerhouses that, together, now make up 23% of his $257 billion portfolio. These players have well-established positions in their markets, delivered earnings growth over time, and seen their share prices climb -- and the good news is that these companies could continue to score a win for investors in the years to come.

Let's take a closer look at these top tech players that have been successful enough to make a nontech but brilliant investor like Buffett sit up and take notice. 

1. Apple (22% of Buffett's portfolio)

Buffett has significantly trimmed his stake in Apple (NASDAQ: AAPL) over the past year, but even after doing this, it remains the biggest position in the Berkshire Hathaway portfolio. On top of this, in the May shareholder meeting, Buffett thanked Apple chief Tim Cook for the company's performance -- and even joked that Cook has made Berkshire Hathaway more money than he did over the years.

All this suggests that Buffett remains optimistic about Apple's ongoing growth story. It's important to remember that Apple, maker of the world-famous iPhone, has something Buffett greatly appreciates in a company, and that's a solid moat, or competitive advantage. And this is Apple's brand strength -- we can see this as iPhone users eagerly wait for the next version to hit the shelves and choose it over rivals even if the price is higher.

The company recently reported a record year, with revenue for fiscal 2025 reaching $416 billion, and Apple also announced a record September quarter -- revenue rose 8% to reach more than $102 billion.

And one element in particular -- the installed base of active Apple devices hitting an all-time high -- represents the key to future growth. Users of these devices may sign up for a wide range of services from digital entertainment to cloud storage, and this creates recurrent revenue for Apple. So, when a device is sold, the revenue opportunity may be just beginning. Record services revenue quarter after quarter shows that this is indeed happening.

So, this tech giant can offer investors a certain degree of safety thanks to its well-established business and solid moat as well as the ticket to growth over time.

2. Amazon (0.8% of Buffett's portfolio)

Back in 2018, Buffett expressed regret about not getting in on Amazon (NASDAQ: AMZN) in its earlier days -- then, one of his investment managers in 2019 decided to take the leap. And Buffett hasn't turned back as he continues to hold on to Amazon shares.

Amazon, like Apple, has an impressive moat, and in this case it's the company's extensive fulfillment network, as well as its Prime subscription program. It would be very difficult, and likely impossible, for another player to develop a similar offering and unseat this market giant. Since Amazon improved its cost structure in recent years, it's been able to boost earnings -- and this should continue as a better cost structure supports higher profitability.

The company, thanks to its broad range of sellers and product sourcing options, also hasn't experienced major headwinds from import tariffs. So, the e-commerce structure Amazon has built over the years is showing its strength, and should continue to do so.

Amazon also has become a major player in the world of technology thanks to its cloud computing unit, Amazon Web Services (AWS). In fact, AWS actually drives overall profit at the company, so it is a key part of the business. This is important moving forward: AWS has established itself as a leader in the high-growth artificial intelligence (AI) market, offering AI products and services to its customers. The position has already helped AWS reach a $132 billion annualized revenue run rate, and considering demand for AI, momentum may continue.

So, though Buffett didn't buy Amazon during its earliest days, he's still scoring a win from his later purchase -- and investors who get in on Amazon today may do the same a few years down the road. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has positions in Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, and Berkshire Hathaway. The Motley Fool Australia has recommended Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Michael Burry has proven his ability to identify a bubble. Back in the early 2000s, the hedge fund manager considered trends in the U.S. housing market unsustainable -- and decided to short this market, betting on a decline.

Amid the subprime mortgage crisis that unfolded, he collected more than $700 million for his clients thanks to that move. And Burry gained additional fame when Hollywood told the story in The Big Short a few years later.

Since that time, investors have closely watched Burry's moves, as they recognize his strength in spotting clues that may not be noticed by everyone. And as illustrated by his bet against the housing market, Burry isn't afraid to go against the crowd.

All this means that Burry's latest move -- concerning one of today's fastest-growing markets -- is likely to attract investors' attention. I'm talking about artificial intelligence (AI), a market forecast to grow from the billions now to more than $2 trillion by the end of the decade. Burry recently bet against two companies driving the AI boom. Does he know something Wall Street doesn't? 

Michael Burry's 13F

So, let's jump right in and consider this top investor's latest moves, shown in his 13F filing with the U.S. Securities and Exchange Commission. These are filings managers of more than $100 million in equities must submit on a quarterly basis -- and this is great for the rest of us investors, as it offers us a glimpse into the strategy of some of the world's most successful money managers.

In the third quarter, Burry bought $186 million in put options on Nvidia (NASDAQ: NVDA) and $912 million in put options on Palantir Technologies (NASDAQ: PLTR) for his Scion Asset Management portfolio, totaling a more than $1 billion bet against these AI giants. A put option, allowing the holder to sell a particular stock at a specific price at a future date, is a bet that the stock price will fall.

This move is striking because Nvidia and Palantir both have generated tremendous earnings growth in recent quarters, thanks to demand for their AI products and services, and are known as key companies in this AI revolution. Nvidia, selling the world's top-performing AI chip, dominates that market, while Palantir offers software systems that allow customers to easily apply AI to their needs.

Palantir's explosive growth

In the third quarter, Palantir delivered double-digit gains in revenue and strong profitability and increased forecasts across the board for the full year. Nvidia is expected to release quarterly earnings later this month, but it's reported record revenue and high profitability on sales recently. Palantir's and Nvidia's stock performance has reflected this success, with the shares climbing 2,200% and 1,200%, respectively, over the past three years.

In spite of these bright earnings reports, though, Burry's third-quarter moves suggest he expects both Palantir and Nvidia stock prices to decline. So, we might wonder: Does Burry know something Wall Street doesn't?

Is an AI bubble forming?

In recent weeks, investors have debated whether a bubble is forming or has formed in the AI market, and that's even weighed on stock performance during certain trading sessions. But tech companies' earnings so far have been strong, and forecasts for growth ahead are encouraging -- so, even if we see some declines in the near term, the long-term picture remains bright. And this means investors could win by holding onto quality companies, such as Nvidia and Palantir, for the long haul.

As for Burry's bet, it's important to keep a couple of things in mind. He made this move in the third quarter, and we don't know if he's maintained it in recent weeks -- we also don't know if this bet is a short-term or long-term one.

And Burry -- like any investor -- isn't always right. Back in 2023, he posted "sell" on X, then a couple of months later said that he had been wrong.

So, what does this mean for investors? Burry's move doesn't mean you should sell or avoid all AI stocks. Instead, at this time as valuations overall have climbed, it's a great idea to maintain positions in stocks -- in AI or other industries -- with solid long-term stories, ones that could withstand potential near-term turbulence and still generate growth in the years to come. And at the same time, ensure that your portfolio is well diversified.

Whether Burry is right or not, these moves should help you manage any short-term headwinds -- and win over the long run. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Does Michael Burry of "The Big Short" fame know something Wall Street doesn't? He just made a billion-dollar bet against 2 companies driving the AI boom. appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia and Palantir Technologies. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

You may think of Amazon (NASDAQ: AMZN) primarily as an e-commerce giant -- and it is -- but the company also has become a major player in artificial intelligence (AI) in recent years. And just this week, it scored a new win that reinforces its position in this high-growth market.

OpenAI, the owner of chatbot ChatGPT, inked a $38 billion deal with Amazon's cloud business for access to high-powered compute. This is significant because it's the first direct contract between OpenAI and Amazon -- and OpenAI is considered one of the leaders in the development of AI.

Investors clearly liked this news as Amazon's shares rose in Monday's trading session and closed at a record high. Now the question is: Should you buy Amazon after its deal with the top AI research lab? Let's find out. 

Amazon's cloud business

We'll get started by taking a look at Amazon's cloud business and its focus on AI. Amazon Web Services (AWS) is the world's No. 1 cloud services provider and offers its customers a broad variety of AI products and services -- from its own in-house developed Trainium AI chip to top chips from Nvidia and a fully managed AI service called Amazon Bedrock. Basically, customers of any type -- small start-ups and market giants alike -- may find anything they need for their AI projects at AWS.

All of this has helped drive growth in recent quarters, and in the latest one -- the third quarter -- AWS reported a 20% increase in revenue, and its annual revenue run rate climbed to $132 billion thanks to the company's focus on AI. The company has spent billions of dollars -- more than $89 billion so far this year -- to expand its data centers in response to demand from AI customers, and Amazon said it expects AI to be "a massive opportunity with the potential for strong return on invested capital (ROIC) over the long term."

Amazon has a solid track record when it comes to ROIC, with periods of investment resulting in progressive gains over time.

AMZN Return on Invested Capital (Annual) data by YCharts

The biggest profit driver

It's also important to note that, though Amazon is well known for its e-commerce business, AWS actually drives the company's profit. In the recent quarter, AWS operating income totaled more than $11 billion -- that's about 64% of the company's total operating income.

Now, let's consider the OpenAI deal. The agreement offers the research lab access to AWS' fleet of Nvidia graphics processing units (GPUs), the world's highest-performance AI chip. Right now, OpenAI will use AWS' current infrastructure, but as part of the plan, AWS eventually will build additional infrastructure for this AI customer.

Originally, OpenAI had an exclusive cloud deal with a major AWS cloud competitor, Microsoft, but that exclusivity ended earlier this year. And in recent times, the research lab has made a variety of AI deals, from one for cloud capacity with Oracle to direct agreements with chip designers including Nvidia and Broadcom.

A key customer for AWS

OpenAI, as a major user of compute for the training and inferencing of models today and as the AI boom progresses, represents a key customer for chip designers and cloud providers -- so this deal clearly is positive for AWS and secures its position as a significant player in the market. Right now, the deal involves access to Nvidia chips, but it's possible that in the future it could broaden to include AWS' own Trainium chips -- that could represent another big win for AWS as margins on its own low-cost chips should be higher than those on chips from other providers.

Now, let's return to our question: Should you buy Amazon now, after the OpenAI deal? As mentioned, Amazon already has been winning in the AI market -- now this deal broadens its revenue growth opportunity and reinforces its position as a key AI player. Today, the stock looks reasonably priced, trading at 36x forward earnings estimates -- that's not a high price to pay for a highly profitable e-commerce and cloud leader that also is excelling in AI.

So, the bottom line is Amazon already was a smart buy before the OpenAI deal -- but this news is the cherry on the cake.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Should you buy Amazon after its deal with OpenAI? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has positions in Amazon and Oracle. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Microsoft, Nvidia, and Oracle. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

About a year ago, Nvidia (NASDAQ: NVDA) was facing one of its biggest moments ever. The artificial intelligence (AI) chip giant was launching its new Blackwell architecture, a system that was being met with "insane" demand as CEO Jensen Huang told CNBC at the time. The company announced Blackwell in March 2024 and the fourth quarter of the year was the first to include Blackwell revenue.

Blackwell was to be the first release of a new routine for Nvidia: launching chip or entire platform updates on an annual basis. Since that time, this new architecture has helped Nvidia's earnings roar higher, with Blackwell data center revenue climbing 17% in the most recent quarter from the previous one. In the report, Huang said, "The AI race is on, and Blackwell is the platform at its center." Meanwhile, Nvidia stock has reflected all of this, advancing 40% so far this year.

Now, it's logical to wonder where Nvidia will be as this story progresses, for example, 24 months after the Blackwell launch. Here's what history says. 

Nvidia's path in AI

First, though, let's consider Nvidia's path in the AI market so far. The company has always been a graphics processing unit (GPU) powerhouse, but in its earlier days, it mainly sold these high-performance chips to the gaming market. As it became clear that their uses could be much broader, Nvidia developed the CUDA parallel computing platform to make that happen -- and then, as the potential of AI emerged, Nvidia didn't hesitate to put its focus on this exciting market.

That proved to be a fantastic move as it helped Nvidia secure the top spot in the AI chip market -- and the quality and speed of its GPUs has kept it there. All of this has resulted in several quarters of double- and triple-digit revenue growth as well as high profitability on sales -- gross margin has generally surpassed 70% in recent times.

To keep this leadership going, Nvidia committed to ongoing innovation, with the promise of updating its chips once a year. The company kicked this off with the launch of Blackwell about a year ago, then released update Blackwell Ultra a few months ago. Next up on the agenda is the Vera Rubin system, set for release late next year.

From platform to platform

All of these platforms operate together seamlessly, so customers don't have to wait for a specific one and instead can get in on Nvidia's current system and easily move forward with the latest innovations when needed. Still, as mentioned earlier, demand from big tech customers for the latest systems has been great -- they want to win in the AI race and to do so aim to get their hands on the best tools as soon as possible.

So, where will Nvidia be 24 months after the Blackwell launch? The clues so far suggest revenue will continue to climb in the double-digits -- and Wall Street's average estimates call for a 33% increase in revenue next year from this year's levels. And as Rubin is released, demand is likely to increase for that system as customers' interest in gaining access to the latest AI technology continues.

But what about Nvidia's stock price? History offers some clues. Prior to this time, Nvidia's major recent releases happened every two years. We can look back to the launch of the Ampere platform on May 14, 2020, and the release of Hopper on Sept. 20, 2022. And each time, over the next 24 months, Nvidia stock soared in the triple digits. It climbed 120% in the two years following the Ampere release and more than 700% following the release of Hopper.

NVDA data by YCharts

What history says

History shows Nvidia stock is on track for a triple-digit gain two years after the Blackwell launch. If we use the starting point as the first quarter of Blackwell revenue -- this quarter ended on Jan. 26, 2025 -- we can see the stock has climbed about 30% so far. But Nvidia still has plenty of time to post more Blackwell sales and potentially see its shares advance in the triple-digits from their level earlier this year through the first month of the 2027 calendar year.

To illustrate, a 100% gain from early 2025 levels would bring the stock price to $284, and that would result in $6.9 trillion in market cap by the start of 2027. This fits into a scenario I wrote about recently, predicting Nvidia will reach $10 trillion in market value by the end of the decade.

Of course, it's impossible to guarantee this outcome -- any negative geopolitical or economic news, or even an unexpected problem like a decline in tech spending could hurt Nvidia's revenue and stock performance. But, if these potential risks don't materialize, history could be right -- and Nvidia stock may find itself significantly higher 24 months after the Blackwell launch. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Where will Nvidia be 24 months after the Blackwell launch? Here's what history says. appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• How to invest in the AI Build-Out: Expert
• 3 fantastic ASX ETFs to buy this month
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• Why now could be the time to buy these popular ASX ETFs

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

You might not automatically think of the words "bargain" or "dirt cheap" when considering "Magnificent Seven" stocks. That's because these are the seven tech giants that have soared in recent years, leading the S&P 500 higher in this bull market. So, you wouldn't necessarily expect these players to be inexpensive.

But two of these stocks, well-established technology giants delivering billions of dollars in earnings annually, actually are pretty cheap right now -- and they also offer bright prospects in the high-growth space of artificial intelligence (AI) today and in the years to come. I'm talking about Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Meta Platforms (NASDAQ: META), companies well positioned to win in the AI race.

If you only could buy one of these bargain Magnificent Seven stocks right now, though, which one should you choose? 

The case for Alphabet

Alphabet is best known for its ownership of the Google platform, with advertising across it bringing in the lion's share of the company's revenue. This is because Google is and has been for years the dominant internet search engine, holding about 90% share of the worldwide market.

But Alphabet also has become a major player in the AI space, using its AI tools -- such as its own large language model (LLM), Gemini -- to improve its search performance and to make advertising easier and more fruitful for advertisers. This is key as it may keep these customers spending more and more on ads here and driving Alphabet's revenue higher.

Meanwhile, Alphabet is winning big in AI thanks to its Google Cloud unit, which offers a wide variety of AI products and services to customers -- and this has resulted in double-digit revenue growth for the business quarter after quarter.

Finally, one of Alphabet's biggest risks has faded, as a federal judge in a U.S. antitrust case against the company recently ruled out the worst-case scenario, a breakup of Google, offering investors one more reason to be optimistic about this tech giant.

The case for Meta Platforms

Meta Platforms, like Alphabet, probably isn't a company that automatically brings AI to mind. Instead, when you think of Meta, you may think of social media as the company owns the world's most popular apps -- from Facebook to Instagram.

And, like Alphabet, Meta generates most of its revenue through advertising -- in Meta's case, companies place ads across its social media apps to catch us where they know they'll find us. In the recent quarter, that resulted in $46 billion in revenue for Meta, so this is a big business.

But Meta isn't just a social media giant. This company has a major ambition, and that's to become an AI leader. It may be well on the way as it's invested billions of dollars in the technology, has developed its own LLM, called Llama, and aims to use AI as a tool to supercharge revenue over time.

Meta already is using AI to keep people on its apps longer through features like its AI assistant and at the same time, Meta's AI tools are improving the ad experience for advertisers. If ads are more efficient, advertisers may go all-in on advertising across Meta's apps. Finally, Meta's investment in AI research also may lead to other products and services in the future.

Better buy: Alphabet or Meta?

Both of these companies look like strong AI winners, so to make the choice a bit easier, let's look at valuation. Here, too, each player is reasonably priced -- we even can use the word "cheap" to describe these stocks. And their valuations, using forward P/E ratios, are almost identical.

GOOG PE Ratio (Forward) data by YCharts

So, which stock makes the better bargain Magnificent Seven buy if you only could scoop up one today? Though they both are fantastic buys, I would go for Alphabet for the following reason. Right now, one of the greatest needs of AI customers is capacity for workloads, and they are finding this at Google Cloud. I expect this unit to continue to see strong growth in the coming years as customers rush to cloud providers for various AI tasks -- from training and inferencing to the development of AI agents.

All of this means right now is a great time to get in on Alphabet, at this bargain price, and benefit from this key phase of the AI story. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Best bargain "Magnificent Seven" buy: Alphabet vs. Meta Platforms appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Meta Platforms. The Motley Fool Australia has recommended Alphabet and Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Artificial intelligence (AI) stocks have helped the S&P 500 roar higher over the past two years -- and the benchmark is extending that gain this year too, heading for a 13% annual increase. But this AI boom may not be a trend that lasts just a few years, and could instead be a theme that offers momentum for quite some time.  

Why? The earlier stages of the AI boom, and we're still at this point right now, involve building up capacity and training AI models to do their jobs of solving complex tasks. Future stages of growth involve putting this AI to work in various ways, such as through AI agents or robotics, across industries.

All of this means companies that play key roles in the AI market could see their share prices continue to climb over the long haul. And one in particular looks very well positioned to do so. Are you ready to buy the stock that could dominate the market for decades to come? Let's check out a player who could offer investors significant long-term growth. 

The world's biggest company

This AI giant has already seen its stock advance 1,200% over the past five years, and it's become the world's largest company with a market value of more than $4 trillion. But don't worry, this market leader still has plenty of room to run thanks to the strength of its products and innovations, and forecasts for the growth of the AI market. Analysts predict the AI market, today worth billions of dollars, will reach the trillions in just a few years.

And Nvidia (NASDAQ: NVDA) is the stock that's likely to dominate the stock market for decades to come. You may know of Nvidia as the world's leading AI chip designer, and it is, but importantly, Nvidia has used this strength to expand. The company now offers a variety of related products and services, making it the one customers turn to when developing an AI platform. This is one positive point, but there are a few more that make me confident about Nvidia's future.

One of these is Nvidia's focus on innovation, with a commitment to update its graphics processing units (GPUs), or AI chips, on an annual basis. The company is already steps ahead of rivals, and this pledge should keep it in the lead year after year.

Building an AI community

Another important element of Nvidia's strength is its partnerships and  AI community, allowing each player to work together and benefit.

For example, Nvidia recently announced a $5 billion investment in chipmaker Intel. As part of the deal, Intel -- an expert in central processing units (CPUs) -- is incorporating Nvidia's GPU technology into its personal computer (PC) systems. And Nvidia is adding Intel CPUs to AI platforms for data centers. This offers Nvidia access to top CPUs and also broadens Nvidia's reach in the PC market.

Another major move is Nvidia's planned $100 billion investment in OpenAI, allowing the AI lab to fund infrastructure expansion -- and buy more Nvidia chips.

Finally, Nvidia has demonstrated its ability to complete a complex product launch and maintain high profitability on sales. Late last year, it released its Blackwell architecture and chip and delivered double-digit revenue growth in the following quarters, along with gross margin levels above 70%. (This excludes the impact of a charge in the first quarter for orders the company wasn't able to ship to China due to export restrictions.)

Potential risks

Of course, Nvidia stock could slip on a slowdown in AI spending or potential delays in its plan for product launches. These are risks that exist now and into the future. But I also believe that Nvidia has the strength to handle these challenges. For example, when initial restrictions were launched a few years ago, Nvidia created a GPU specifically to meet requirements for export to China.

Now, let's get back to our question: Are you ready to buy this stock that could dominate the market for decades? Though Nvidia has soared in recent years, the stock isn't ridiculously priced. Trading for 41x forward earnings estimates, it still has room to run -- and it's important to remember that these earnings estimates are for the coming year, so they don't include growth that may come a bit farther down the road.

So, today, you can get in on this player for a decent price, and all of the elements I mentioned above offer reasons to be excited about the company's future -- and believe that it could dominate the market in the years to come.  

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Are you ready to buy the stock that will dominate the market for decades to come? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Intel and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: short November 2025 $21 puts on Intel. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Nvidia already returned more than $24 billion to shareholders through repurchases and dividends in the first half.
• In general, share repurchases could be seen as a sign of confidence or a poor use of cash.

Investors have rushed to buy Nvidia (NASDAQ: NVDA) stock during the artificial intelligence (AI) boom, driving the stock up a mind-boggling 1,200% over the past five years. Why are investors so excited about this one particular company? Because it's become the leading designer of AI chips and the general go-to destination for any customer with AI aspirations. Nvidia sells not only the world's top-performing chip but also a full range of AI offerings.

All of this has generated double- and triple-digit revenue growth, along with strong profitability on sales. And considering the projections for AI investment in the years to come and Nvidia's commitment to innovation, the company may continue to deliver significant earnings gains for quite some time. This has clearly given investors reason to be bullish about the company.

But investors aren't the only ones buying shares of Nvidia. The company itself has repurchased shares this year and has just announced an authorization to buy back $60 billion in stock at any point in the future. This is in addition to the more than $14 billion that remains on its share purchase authorization. Now, you may be wondering what Nvidia's interest in buying its own shares means for investors -- is this good or bad news? Let's find out.

Returning $24 billion to investors

As mentioned, buybacks aren't a new thing for Nvidia. The company returned more than $24 billion to shareholders in the form of repurchases and dividends in the first half of the year. Over the years, Nvidia has increased its investments in its own shares, as you can see in the chart below.

NVDA Stock Buyback (Annual) data by YCharts.

And with Nvidia's latest move, it joined a wave of activity launched by a number of major tech and financial companies. Apple, Alphabet, and JPMorgan Chase have each announced billions of dollars in share repurchases this year, helping overall share repurchases for the year reach $1 trillion by August -- the fastest rate ever.

Buybacks should generally be viewed as positive, as they suggest management is confident in the company and how it's likely to perform in the economic environment. The move also removes some shares from circulation, boosting the value of the shares that remain on the market and compensating for dilution that may be caused by stock options granted to employees.

All of that is positive. But there is a negative side to the story, too. By lowering the number of outstanding shares, share repurchases boost a company's earnings per share. While this isn't necessarily bad, some investors may view buybacks as an attempt to make earnings look better than they actually are.

On top of this, some investors may prefer that a company invest more in research and development (R&D) or the expansion of its business rather than repurchasing shares. In these cases, a big stock repurchase plan could be bad news for shareholders.

AI infrastructure spending

Now, let's consider the case of Nvidia. Though the AI powerhouse's growth has slowed from triple digits to double digits in recent quarters, growth remains quite strong, and the long-term earnings outlook is solid. Nvidia predicts as much as $4 trillion in AI data center infrastructure spending this decade. And as a leading provider of chips and related products, Nvidia is likely to benefit from those investments from big tech companies and others. All of this means that Nvidia doesn't need to buy back shares to make its earnings per share look good.

As for R&D, Nvidia has been increasing its investment over time, and today it's on track to update its chips on an annual basis as promised. The company launched its Blackwell architecture late last year, recently made the chip update Blackwell Ultra available, and the next-generation Rubin architecture is planned for release at some point next year. At the same time, free cash flow has been on the rise.

NVDA Free Cash Flow (Quarterly) data by YCharts.

All of this shows that Nvidia generates a great deal of cash and has been using it wisely to boost growth. The move to repurchase shares is unlikely to harm the company's ability to innovate and grow.

So, Nvidia's plan to repurchase as much as $60 billion in shares is far from negative for shareholders. Instead, it's a sign of confidence from the tech giant in its future and its ability to advance in today's economic environment and the ones to come. And that means that as Nvidia readies to buy some of its own shares, other investors should consider getting in on this top AI stock, too -- and, importantly, holding on for the long term. 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia's $60 billion buyback plan: Good or bad news for investors? appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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• Why now could be the time to buy these popular ASX ETFs

JPMorgan Chase is an advertising partner of Motley Fool Money. Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, JPMorgan Chase, and Nvidia. The Motley Fool Australia has recommended Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Key Points

• Nvidia beat analysts' earnings expectations, but revenue is growing more slowly than it did earlier in the AI boom.
• It's important to dig into the details and consider the company's long-term prospects.

Nvidia (NASDAQ: NVDA) is known for beating analysts' expectations quarter after quarter -- and the artificial intelligence (AI) chip giant continued along the path just this week when it announced soaring second-quarter revenue and profit. Still, that wasn't enough for investors as the stock slipped in after-hours trading following the report.

Though Nvidia continues to deliver explosive growth, its 56% increase in revenue is the slowest since the start of the AI boom. In the previous quarter, revenue climbed 69%, and the company has even delivered triple-digit quarterly and annual sales gains in recent years. On top of this, Nvidia's data center sales -- this includes the company's AI business, which is the biggest overall contributor to revenue -- came in just under analysts' estimates in the recent quarter. Nvidia reported $41.1 billion, lower than the $41.3 billion estimate, according to Bloomberg data.

All of this weighed on appetite for Nvidia shares, at least in the hours following the report. But, in investing, it's important to take a look at the full picture and focus on the long term before making any decisions. And considering this, here are two crucial things about Nvidia that some investors may be ignoring right now.

Nvidia's growth throughout the AI boom

Before considering the following points, though, it's key to put Nvidia's growth into perspective. Yes, the company is delivering slower growth than it was in the earlier days of the AI revolution, and this is for one good reason: Then, Nvidia's comparison periods were much easier. The company started with lower AI demand and sales, and therefore, as need for AI computing power strengthened, revenue exploded higher. For example, in the second quarter of fiscal 2023, data center revenue totaled only $3.8 billion, then soared in the triple digits to more than $10 billion in the second quarter of the next year.

Today, demand and sales still are going strong -- but the percentage increases are lower because we're comparing them to recent quarters of very high revenue levels.

1. The AI opportunity ahead

So, now, it's critical to focus on the long-term AI opportunity, and here, there's reason to be very optimistic. Nvidia forecasts $3 trillion to $4 trillion in AI infrastructure spending by the end of the decade -- and this leading provider of the world's top-performing AI chips as well as a whole ecosystem of related products is perfectly positioned to benefit.

Nvidia chief Jensen Huang says the major cloud service providers have doubled capital spending in two years. And comments from these players, such as Alphabet, suggest the momentum will continue. Importantly, this is only part of the growth story as Nvidia also may gain as companies throughout industries and governments expand their presence in AI. Nvidia's leadership and wide range of AI offerings have made it the go-to place for AI, and its promise to update its chips annually should help it maintain this position.

All of this signals investors who hold onto Nvidia stock for years to come could score more wins ahead as the full AI story plays out.

2. Nvidia's profitability on sales

Sales growth is great, but it's also important to turn those sales into profitability, and here, Nvidia has been hitting it out of the park quarter after quarter. We can see this through the company's gross margin, which has consistently remained above 70% -- even during periods of greater investment and expense such as the launch of the Blackwell architecture during the fourth quarter of the last fiscal year and in the early months of this fiscal year.

In fact, even as Nvidia took a billion-dollar charge earlier this year on chips it couldn't sell to China due to government restrictions, gross margin still exceeded 60%. (Excluding the charge, gross margin topped 71%.) In the recent quarter, Nvidia's gross margin topped 72%, and the company says it aims to finish the year with levels in the mid-70s on a non-GAAP (adjusted) basis.

All of this shows that Nvidia has what it takes to balance growth and profitability, a key strength that may ensure success for the company -- and its investors -- over the long term.  

 

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Nvidia stock slips after earnings. 2 crucial things investors may be ignoring. appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

More reading

• 5 ASX ETFs that could supercharge your portfolio
• How to invest in the AI Build-Out: Expert
• 3 fantastic ASX ETFs to buy this month
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• Why now could be the time to buy these popular ASX ETFs

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet and Nvidia. The Motley Fool Australia has recommended Alphabet and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Over the past two years, investors put their money into an industry set to become the next big thing in technology: artificial intelligence (AI). This billion-dollar market is set to reach into the trillions in a few years as it potentially changes the way business is done and how our daily lives are organized. All of this is great news for companies that get in early and play a key role, and investors, recognizing this, drove these stocks higher.

But, earlier in the first half, many of these players lost their momentum. Investors worried that President Trump's import tariffs would hurt economic growth -- and that made any high-growth industry, such as AI, vulnerable. AI stocks and other growth players led declines in April on these concerns. In recent weeks, though, signs have emerged that headwinds may not be as strong as expected -- the U.S. has been negotiating tariffs with other countries, for example -- and this has helped optimism return to the stock market. The S&P 500 even reached record highs in recent days.

Now, my prediction is the following two AI stocks -- one that stagnated and another that fell in the double-digits in the first half -- will rebound in the second half of the year.

1. Amazon

Amazon (NASDAQ: AMZN) stock, after rising early in the year and dropping on import tariff concerns in April, then began to rebound -- and finished the first half unchanged. Today, there's reason to believe the positive momentum will continue and this stock will climb in the second half.

It's important to remember that Amazon is a well-established leader in both e-commerce and cloud computing and has delivered earnings growth over many years. So, investors who may have been a bit skittish about investing a few months ago may feel more comfortable with Amazon than with a newer player that hasn't yet proven itself. The company also revamped its cost structure a few years ago, a move that helped it through the challenge of higher inflation and that should help it face other cost challenges in the future -- such as import tariffs.

Amazon also is well positioned to benefit as the AI boom continues as the company is a user and a provider of AI. In e-commerce, Amazon uses AI across its fulfillment network to gain in efficiency, lowering its cost to serve. And Amazon Web Services (AWS), the cloud business, offers customers a wide range of AI products and services -- from chips to a fully managed service that gives users access to AI models they can tailor to their needs. All of this has helped AWS reach a $117 billion annual revenue run rate.

Right now, Amazon trades for 36 times forward earnings estimates, a reasonable price that could attract investors in the second half -- and help this top AI stock to rebound.

2. Apple

Apple (NASDAQ: AAPL) has faced two problems in recent times. The company has been slower than other tech giants to adopt AI, and it also is viewed as a player that may suffer the most from import tariffs due to its reliance on production abroad -- most iPhones have generally been manufactured in China.

All of this has weighed on Apple stock, and in the first half, the shares fell 18%. Though the headwinds haven't disappeared, the situation is improving. Apple is in the early days of its Apple Intelligence growth story, meaning this array of AI features could offer a catalyst for growth in the quarters to come. And, as mentioned above, trade negotiations are happening -- it's also important to note that the U.S. is unlikely to make decisions that would destroy the earnings potential of one of its biggest companies. Apple is the third-largest in market value after Nvidia and Microsoft.

And, like Amazon, Apple is a company that's proved itself over time, delivering many years of earnings growth into the billions of dollars. It also has a solid brand moat, with customers flocking to the iPhone -- the world's No. 1 smartphone -- regardless of the price or wait time for the latest release. Investors looking for a growth pick that doesn't come with a great deal of risk may notice these points.

Finally, this established leader also has a newish growth driver, and that's services revenue. Now that it has more than 2.2 billion devices active worldwide, these devices, are bringing in recurrent revenue through services subscriptions -- from cloud storage to digital content.

All of this could prompt investors to set aside near-term challenges and get into Apple today at a bargain 29 times forward earnings estimates -- and that could power shares of this solid long-term stock higher in the second half.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Prediction: These 2 AI stocks will rebound in the 2nd half appeared first on The Motley Fool Australia.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

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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 Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon, Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.