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

The stock market hasn't been the same since OpenAI unleashed ChatGPT to the public three years ago. As of Dec. 4, the S&P 500 (SNPINDEX: ^GSPC) market index has posted a 75% total return since then. The tech-heavy Nasdaq-100 index gained a dividend-adjusted 118% over the same period.

But the kings of artificial intelligence (AI) are soaring far above these not-so-pedestrian returns. AI chip champion Nvidia (NASDAQ: NVDA) is up more than tenfold and AI platform master Palantir Technologies (NASDAQ: PLTR) more than doubled Nvidia's stellar gains:

PLTR Total Return Level data by YCharts

But past performance is never a guarantee of future results. What matters to today's investors is a fundamentally different question -- which AI stock is the better investment for new money today?

When AI valuations go orbital

Let's address the elephant in the room, or the rocket ship in the stratosphere directly above Wall Street. Palantir's stock has gone absolutely parabolic in 2025, trading at roughly 109 times trailing revenue. That triple-digit figure is not a typo. For context, even during the dot-com bubble's wildest moments, most high-flyers topped out around 50 times sales.

Nvidia, meanwhile, has seen its valuation actually compress even as its business keeps breaking records. At about 24 times revenue, it's still priced for perfection. However, compared to Palantir, Nvidia's stock price looks almost reasonable.

Mind you, Nvidia is already absolutely massive and it should be harder to keep the hypergrowth going from an annual revenue base of $187 billion. Palantir's trailing-12-month sales look minuscule in comparison, stopping at $3.9 billion. The law of large numbers says that Nvidia's sales growth must slow down at some point. Meanwhile, Palantir's long-term value is limited by its focus on the smaller market of government contracts. The company is pushing into commercial contracts too, but how many businesses need military-style data analytics?

The political cycle wild card

Palantir's recent surge coincides suspiciously with a favorable shift in the federal spending environment. The company's government revenue, while growing at a respectable 40% year over year, suddenly seems poised for acceleration as Washington embraces AI-powered defense and intelligence applications.

But here's the risk nobody's talking about: government contracts follow political cycles. What happens if spending priorities shift after the 2026 midterms? What if the regulatory environment becomes less friendly to aggressive data analytics? Palantir's commercial business is growing faster at 54%, but government contracts still represent nearly half of revenue. That's a lot of exposure to political winds that can change direction every two years (with sharper shifts around the four-year presidential election cycle).

Nvidia faces its own unique challenge -- its biggest customers are becoming its biggest competitors. Amazon, Alphabet, and Microsoft are all developing custom AI chips while still buying billions worth of Nvidia's GPUs. It's like selling weapons to armies that are simultaneously building their own armories. Nvidia can maintain this delicate balance, but it requires constant innovation and careful relationship management.

"Less overvalued" wins by default

I can't believe I'm writing this, but at current prices, Nvidia is the better buy -- and that's despite my concerns about customer competition and a still-rich valuation. Here's why:

• Valuation sanity: OK, "sanity" is a stretch but at 24x sales vs. 109x, Nvidia's premium is at least loosely grounded in financial reality.
• Proven moat: CUDA's ecosystem lock-in is real and tested, while Palantir's competitive advantages remain harder to quantify.
• Diversification: Nvidia sells to everyone in AI; Palantir's concentration in government and large enterprises limits its addressable target market.
• Profit machine: Nvidia's 57% net margin vs. Palantir's 20% shows who's actually printing money today.

But here's the real takeaway: Both stocks are priced for a perfect AI future that may not materialize as smoothly as bulls expect. Palantir needs flawless execution and continued government AI spending to justify its valuation. Nvidia needs to fend off increasingly capable competitors while maintaining its innovation edge. Both might actually succeed in the long run, but it won't be easy. 

For investors seeking AI exposure today, the smartest move might be looking elsewhere in the ecosystem -- perhaps at the hyperscalers building AI services, semiconductor equipment makers enabling the whole industry, or even "boring" companies successfully implementing AI to improve their operations. Sometimes the best investment isn't choosing between two expensive options -- but finding a completely different third path.

So, if forced to pick between these two AI titans, I'd reluctantly choose Nvidia. But I reduced my Nvidia exposure in 2025, converting some of my AI-boom paper gains into cash profits.

My highest-conviction call in this duel is simple: Neither stock really offers a compelling risk/reward balance for new money at December 2025 prices. The AI revolution is real, but that doesn't mean every AI stock is a buy at any price.

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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• 3 fantastic ASX ETFs to buy this month
• Is this the best Vanguard ETF money can buy right now?
• Why now could be the time to buy these popular ASX ETFs

Anders Bylund has positions in Alphabet, Amazon, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Microsoft, Nvidia, and Palantir Technologies. 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, 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.

Amazon (NASDAQ: AMZN) didn't exactly knock it out of the park in 2025. As I write this on Dec. 2, the e-commerce giant's stock has gained just 6.8% since the last round of fireworks and "Auld Lang Syne." Meanwhile, the S&P 500 (SNPINDEX: ^GSPC) index gained 16.1%, and the Nasdaq-100 portfolio raced ahead with a 21.6% jump. 

Can Amazon turn it around next year, or will 2026 be another disappointing period for its investors?

The good, the bad, and the pricey

First, let's check out the market footprint. By the end of 2024, Amazon carried a $2.32 trillion market cap and lofty valuation ratios. Those figures have changed dramatically in 2025 and not all for the better:

Data collected from YCharts on Dec. 2, 2025. TTM = trailing twelve months.

Amazon's stock price rose about as quickly as its total sales, so the P/S ratio didn't change much. But the P/E ratio inched lower, and the cash-flow-based ratio skyrocketed. That's an unfortunate side effect of Amazon's plunging cash flows.

The AI spending spree behind Amazon's cash crunch

The business itself is humming right along. Amazon's overall sales rose 11.9% year-over-year in the third quarter of 2025. Amazon Web Services (AWS) led the charge with an 18.2% sales jump. But AWS also raised its operating expenses by 21%, while the two e-commerce divisions hovered near the 10% level. And Amazon is investing a ton of money in the AWS segment.

You see, large AWS clients are ready to pay a premium for as much artificial intelligence (AI) processing power as possible. Over the last four quarters, Amazon spent $120 billion on purchases of property and equipment, also known as capital expenses (capex). That's up from $69.8 billion in the comparable year-ago period.

And it's no secret where the cash is going. On the Q3 2025 earnings call, Amazon CFO Brian Olsavsky explained that the heavy cash investment supported AWS' AI computing capacity and basic infrastructure. Capex is expected to hit $125 billion in fiscal year 2025, followed by further increases in 2026 and beyond.

The trillion-dollar question: Is AI worth it?

No surprises, right? Like most of its peers in the Magnificent Seven group of tech giants, Amazon is leaning into the AI boom with verve and enthusiasm. Cash expenses are way up, but so are Amazon's AWS revenues. The empire that Jeff Bezos built is setting up the computing infrastructure of a long-term winner in the cloud-based AI computing space.

The company might be overspending on AI hardware today, but will it be worth the effort by 2030 or perhaps 2035? Only time will tell, and it will certainly take years to make up for the beefy cash expenses with AI-driven profit gains. Again, Amazon can't win the AI game if it doesn't play.

It's not cheap, but those are the table stakes to stay competitive in this AI-hungry economy.

Your Amazon investing playbook for 2026

The same trends will probably remain relevant in 2026. Amazon will spend more than $125 billion on capex with a heavy focus on AI number-crunching capacity. Investors will watch this effort closely, basing the stock's daily market price on Amazon's success in the AI business.

Amazon's valuation multiples will vary as Wall Street adjusts to the latest twists and turns of the American economy. On a good day, when Federal interest rates are going down and consumer spending is up, Amazon will add to its lofty P/E and P/FCF ratios. In a more bearish market mood, Amazon investors are likely to lower the share price as they go looking for low-risk safe havens instead.

Your move: Making sense of Amazon's volatility

There are too many variables in this equation to figure out a likely price target or shareholder return for Amazon across 2026. But I can promise that the stock will be volatile again. Shrewd investors should keep an eye out for sudden price drops before buying Amazon stock next year.

The rest of us can simply keep adding to our existing positions as usual, trusting that Amazon's stock chart should match its financial success in the long run. That's how it got to this multitrillion-dollar plateau in the first place. Dollar-cost averaging is often the right move when your favorite stock is jumping around like a cat on a hot tin roof.

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

The post Is Amazon (AMZN) a Buy, Sell, or Hold 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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Anders Bylund has positions in Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Amazon. The Motley Fool Australia has recommended Amazon. 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.

Shares of Netflix (NASDAQ: NFLX) rose 21.4% in April, according to data from S&P Global Market Intelligence. You might expect the company's impressive earnings report to provide fuel for these fires. It sure didn't hurt the stock that the first-quarter numbers were strong, but the report barely moved Netflix's stock price at all. Instead, investors pushed shares higher on the basis of rumors, leaks, and lofty expectations.

Netflix's stock went wild before earnings (and then kept going)

Heading into the earnings report, The Wall Street Journal got hold of some internal Netflix memos that supposedly outlined the company's long-term goals. According to the notes, management aims to double its annual revenue and triple its operating income over the next five years.

As a result, the stock could also double and qualify Netflix for the ultra-exclusive club of trillion-dollar market caps. This scoop boosted its stock price by 4.8% in a single day.

Then it was time for the first-quarter earnings report. Netflix collected revenue of $10.5 billion, slightly above management's guidance and analysts' consensus estimates.

On the bottom line, the earnings number of $6.61 per diluted share left guidance and estimates far behind, representing a 25% year-over-year jump. But management didn't change its full-year guidance, and the stock didn't really move on the news.

However, Netflix had set the tone for a bullish investor mood. Several analysts issued optimistic reports on the stock, and the price gains started to appear. One week later, its price had gained another 12.7% while the S&P 500 (SNPINDEX: ^GSPC) market index only rose by 3.8%.

Can Netflix keep the bullish momentum going?

The media-streaming pioneer is firing on all cylinders nowadays. It's a sharp shift from the meandering subscriber growth and plunging stock chart of 2022. Whether Netflix can join the trillion-dollar market-cap club by 2030 or not, the company looks ready for another dramatically different chapter.

This time, the potential growth drivers include a low-priced subscription plan in a shaky economy, lots of live sports and other livestreaming events, and a fantastic slate of popular multi-season shows. Netflix's video games aren't making a difference yet, and only time will tell whether the company will benefit from using artificial intelligence tools on the content production side, but that's OK. The gaming idea shouldn't be rushed, and there are plenty of bullish signs in the air anyway.

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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• These 3 ASX ETFs can help protect your portfolio in 2026

Anders Bylund has a position at Netflix. The Motley Fool Australia’s parent company, Motley Fool Holdings Inc., has positions in and has recommended Netflix. The Motley Fool Australia has recommended Netflix. 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.

Shares of Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) fell 22.1% in the first quarter of 2025, according to data from S&P Global Market Intelligence. Google's parent company saw a disappointing fourth-quarter report and the same tariff-based issues as everyone else.

How Google's Q4 report caused a market retreat

Let's start with the earnings debacle.

Alphabet's Q4 report was a mixed bag, with solid bottom-line earnings but revenues just below the consensus analyst target. The Google Cloud business struggled a bit, while YouTube and search-based sales came in above expectations. But the stock closed 7.3% lower the next day, mostly due to high expectations from this holiday-quarter report.

The soft Google Cloud sales sprung from one of the nicest problems a company can have: Customer demand for Alphabet's artificial intelligence (AI) services is too high, and it's difficult to build out the supporting infrastructure fast enough. In response, Alphabet will boost its capital expense budget to $75 billion in 2025, 43% above last year's total. The extra dollars are earmarked for data centers and engineering assets in the AI space.

Some investors see nothing but lower free cash flows in that accelerated AI spending spree. Combined with mixed headline-figure results, that was enough to send Alphabet's stock dramatically lower, erasing December's boost from an impressive quantum computing achievement.

Looking way beyond one challenging quarter

Alphabet shares have largely followed the broader market's swings in the last year, though its swings to the upside and downside have been a bit exaggerated.

As a leader in next-generation technology areas such as generative AI, quantum computing, and self-driving vehicles, the company should outperform Wall Street's general trajectory in the long run. Alphabet's vote-endowed Class A stock has seen a compound average growth rate (CAGR) of 20.1% over the last five years, far ahead of the S&P 500 (SNPINDEX: ^GSPC) index's 15.5% CAGR in the same period.

That's the type of market-beating returns I expect from Alphabet in the long haul. This company was built for flexibility, always ready to roll with the market's punches and take the lead in most of the generation-switching sea changes along the way. It's not always smooth sailing, and the stock needs a quick correction when it soars too high, but that's not a problem right now.

Long story short, Alphabet stock looks like a great buy after a significant price drop in the first quarter.

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

The post Why Alphabet stock plunged 22% in the first quarter 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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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet. 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.

In a recent analysis of 16 hedge funds managed by household-name billionaires, four of the funds held lots of Advanced Micro Devices (NASDAQ: AMD) shares. What's more, the funds that ranked AMD among their ten largest holdings consistently placed the stock among the top four.

That's an interesting showing, since AMD isn't one of the commonly chosen "Magnificent Seven" stocks. Its $207 billion market cap barely ranks among the 50 largest stocks in today's market.

Have these billionaires figured out something special about AMD? Let's see what the semiconductor designer's business prospects look like in 2025.

Who owns a lot of AMD stock?

Here are the four hedge funds that ranked AMD among their largest holdings earlier this year:

Data source: Form 13F filings for each fund's Q4 2023.

It should be noted that these billionaires can't dictate AMD's strategy or future to any meaningful degree. Together, these found funds own about 2% of AMD's shares. Seen as a unified block of AMD owners, their 32.5 million stubs would qualify them as the sixth-largest institutional holder today. That's a long way behind Vanguard's and Blackrock's index funds, which hold 149 million and 130 million AMD shares, respectively.

But the index fund managers don't assess each stock in their enormous portfolios. They simply reflect the rankings and weightings of various stock market listings, which in turn usually try to paint a fair picture of the stock market from a certain perspective. As a member of at least 21 such indices, AMD is bound to attract large index-fund investments.

Hedge funds often push for changes in their most important holdings. However, none of the four AMD holders in the table above are in the habit of playing the activist investor card. With a market cap north of $200 billion, it gets expensive to build a large enough position to influence boardroom votes.

Why is AMD attracting attention from billionaires?

Above all else, AMD benefits from the ongoing market boom around generative artificial intelligence (AI).

The data centre segment, where you see revenues from the AI-training AMD Instinct line of chips, saw third-quarter revenues jump 122% year over year. Data centre products accounted for more than half of AMD's total sales in that report, up from 27% in the year-ago period.

AMD isn't all about AI and data center growth, since the PC-oriented client division also posted strong results. Revenues rose 29% in that segment amid robust demand for the Zen 5 line of Ryzen processors.

But yeah, it's fair to say that the billionaires above are betting on AMD's AI business. The Instinct chips may not outperform market leader Nvidia's (NASDAQ: NVDA) latest and greatest chips on an apples-to-apples basis, but they offer other benefits such as lower electric power consumption and more affordable prices per chip.

For example, the Lawrence Livermore National Laboratory built its latest supercomputer around AMD's Instinct MI3001 accelerators, creating the highest-performance system in the world. On the just-released Top 500 list of high-performance supercomputers, you'll find AMD Instinct chips in half of the top ten. Nvidia's H100, A100, and Grace Hopper chips only show up in three names on that list.

Supercomputers aren't the whole market for AI training systems, but AMD is clearly doing something right. You don't win these large system orders by pure luck.

AMD: A cheaper AI chip investment

So if you're looking for an alternative way to invest in the hardware side of that AI boom, you could do well by following the examples of Laffont, Griffin, Shaw, and Halvorsen. It's not the absolute cheapest AI hardware stock, since arch rival Intel (NASDAQ: INTC) is wrestling with management changes and a painful strategy shift.

But AMD's stock trades at 8.5 times trailing sales and 25 times forward earnings estimates. That's blissfully affordable next to Nvidia's multiples of 29 and 31, respectively. I can't guarantee that AMD will outperform Nvidia, the AI niche, or the market as a whole next year, but the billionaires made large bets on this stock for good reason. I'd rather start buying AMD stock today than add to my Nvidia holdings, and you should at least look into doing the same.

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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Anders Bylund has positions in Intel and Nvidia. 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 February 2025 $27 calls 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.

2024 has been a great year for investors. For example, the tech-heavy Nasdaq-100 market index has seen a year-to-date total return of 26%, as of Nov. 13.

Six stocks in that index have gained more than 70% this year. Here are the top performers on the Nasdaq 100 in 2024:

Data source: Finviz and YCharts on 11/13/2024. Table by author.

These market-beating stocks took very different paths to the top in 2024:

• Nvidia and Arm Holdings benefit from the ongoing frenzy for high-powered artificial intelligence (AI) systems.
• The Trade Desk soars as the online advertising market swings back from a multiyear downturn.
• Netflix and DoorDash are reaping the benefits of revamped service portfolios and refreshed consumer spending habits -- in very different industries.
• Constellation Energy enjoys broad demand for clean energy and a refreshed interest in nuclear power.

Where will these Nasdaq-100 winners go next?

Only time will tell where these soaring stocks might go from here. That being said, Wall Street analysts expect all of them to continue climbing for a while. Every stock on this list has earned an average analyst recommendation of "buy" or better, despite soaring charts and lofty valuation ratios.

Therefore, if the Street projections are correct, this bull market should continue in 2025.

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

The post These are the 6 top-performing stocks in the Nasdaq-100 with 2024 almost over 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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Anders Bylund has positions in Netflix, Nvidia, and The Trade Desk. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended DoorDash, Netflix, Nvidia, and The Trade Desk. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Constellation Energy. The Motley Fool Australia has recommended DoorDash, Netflix, Nvidia, and The Trade Desk. 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.

Every investor knows the "Magnificent Seven" stocks. But did you know that the group name was more of a warning than a compliment? These days, the downsides envisioned by Bank of America executive Michael Hartnett are clearer than ever.

What are the Magnificent Seven stocks?

This group of tech giants has controlled the value of the S&P 500 (SNPINDEX: ^GSPC) index over the last two years.

I came up with a handy mnemonic to keep track of the seven components shortly after Hartnett started using the Magnificent Seven name in May 2023. "MAMA ANT" didn't catch on, but it still works for me. First, you have the four software companies:

• Microsoft (NASDAQ: MSFT)
• Amazon (NASDAQ: AMZN)
• Meta Platforms (NASDAQ: META)
• Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)

Then you have the three hardware stocks:

• Apple (NASDAQ: AAPL)
• Nvidia (NASDAQ: NVDA)
• Tesla (NASDAQ: TSLA)

Easy enough, right? These six artificial intelligence (AI) experts and one pioneer in electric vehicles are shaping the stock market.

Fast-forward to November 2024, and you'll still find these seven companies at the very top of the market. They were among the 10 largest American stocks by market cap in the spring of 2023. By now, they have simply become the top 7. Only two Magnificent Seven stocks -- Microsoft and Apple -- have underperformed the S&P 500 since May of last year. The others have soared, pushing the cap-weighted index higher as a result.

What's the downside to this group of massive market-beaters?

From the vantage point of May 2023, Hartnett outlined several risks related to the Magnificent Seven stocks.

• He expected the federal funds interest rate to rise above 4% (from 0.8% at the time) amid last year's inflation-fighting efforts. In reality, the rate shot up to 5.3% three months later.
• The tech giant group accounted for nearly all of the leading market index gains in early 2023. Nearly half of the S&P 500 stocks lost value that spring, while Nvidia and Meta Platforms doubled.
• These stocks were already large when the AI boom started. Therefore, they have outsize effects on market indexes whose values are weighted by market capitalization -- such as the S&P 500 and Nasdaq Composite. The Magnificent Seven currently accounts for 32.2% of the S&P 500 index score. That's up from 27.3% in May 2023 and 20.1% at the end of 2022. Hartnett saw market risks in this skewed structure, leaning heavily on a small group of market-defining stocks.
• Hartnett talked about a "baby bubble" around AI in 2023. If he got anything wrong, this is probably it. AI is either a true game-changer and long-lasting macro trend or the largest market bubble in history. There's nothing "baby" about it anymore, either way.

Michael Hartnett identified an important stock grouping fairly early and gave it a catchy name. He could have picked many other titles but chose a classic Western movie with a tragic ending. Alternative monikers could have been "seven deadly sins" or "seven plagues" but not "seven wonders of the world" or "seven colours of the rainbow."

In the Yul Brynner and Steve McQueen movie, only three of the Magnificent Seven gunfighters survive the final battle. That's the metaphor Hartnett selected. I'm not saying that the big winners of the AI boom are doomed right now, but investors should keep an eye on potentially overheated valuations in this space.

This grouping was meant as a warning, not an investment recommendation.

How to handle the Magnificent Seven stocks today

The average S&P 500 stock is valued at 28.7 times price-to-earnings (P/E) and 23.6 times price-to-cash reserves (P/C). Alphabet and Meta Platforms stand out as reasonably priced AI giants, while Tesla and Nvidia look painfully expensive:

Data source: Finviz.com on Nov. 9, 2024. P/E Ratio = price-to-earnings ratio. P/C Ratio = price-to-cash ratio.

Meanwhile, the leading market indicators rely on these seven samurai to an extraordinary degree, and their importance is only rising. If a company like Nvidia or Microsoft runs into unexpected trouble, that event will move the stock market as a whole. That's the nightmare scenario Michael Hartnett wanted to caution his clients about 18 months ago.

Pick your investments carefully, even in hot sectors like AI and electric vehicles. Diversification will help you survive any market calamity and build wealth in the long run. And that's the point Michael Hartnett was making with his Magnificent Seven metaphor last year -- this bundle of soaring giants looked good in the spring of 2023 (and still does today), but they might hurt your portfolio someday.

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

The post Magnificent Seven: Unstoppable tech stock giants or risky buys? 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
• Why ASX investors dumped IVV ETF last month
• 3 fantastic ASX ETFs to buy this month
• Is this the best Vanguard ETF money can buy right now?

Anders Bylund has positions in Alphabet, Amazon, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Bank of America, Meta Platforms, Microsoft, Nvidia, and Tesla. Bank of America is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Bank of America, 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.

Successful investing usually involves selecting high-quality companies, buying their stocks at a reasonable price, and waiting for compounding returns to work their magic over many years.

But that's not the only way to Wall Street success. If you're willing to accept some extra risk, you could build a fortune by investing in tomorrow's business giants today. In the best of all worlds, you'll get started on these long-term winners before most investors catch on to their future greatness. You can end up empty-handed with this approach, and the strategy is best used as a small part of a diversified stock portfolio. But if you find a real winner in the early going, it can be a game changer that more than makes up for several disappointments.

On that note, let's check out a couple of stocks in the burgeoning artificial intelligence (AI) market that could make you millions a little bit faster. Everything has to work out just right, and you do have to start out with a fairly large investment stake to get in the short line to the millionaire club. Still, Life360 (NASDAQ: LIF) (ASX: 360) and Duolingo (NASDAQ: DUOL) are worth a second look as they're building their long-term plans around AI technologies.

Life360's ambitious expansion plans

Life360 may be a familiar name already. You might have used its services for years, and the company has been publishing financial results since 2019. The family and pets location-tracker expert just hasn't been on the American stock market for long. Headquartered in Sydney, Australia, Life360 listed its shares on the Nasdaq stock exchange four months ago.

This stock is flying far below most investors' radars, and you probably don't think of Life360 as an AI expert. But it has nearly 71 million monthly active users (MAUs) across 170 countries, including 2 million paid subscriptions and 10 million location-tracking Tile devices. The Life360 smartphone app does some heavy AI lifting in its crash detection and digital safety services.

The company aims to double its user count while tripling annual revenue from $328 million to $1 billion over the next few years. Earnings before interest, taxes, depreciation, and amortization (EBITDA) are approximately breakeven today, but management forecasts a 25% EBITDA margin in the long run. New products and service features should appear over time, broadening the company's market appeal and boosting its top-line sales.

The investment case for Life360

So there's a serious growth story happening here, driven at least partly by Life360's AI expertise. The company's annualised sales have nearly tripled from $113 million in calendar year 2021, which works out to a compound annual growth rate (CAGR) of 53.5%. Yet, you can buy the stock for the modest price of 9.9 times sales.

This ambitious company has a market cap of just $3.3 billion today. I can't guarantee that Life360 will hit its ambitious goals anytime soon, but the stock price should soar if the company comes close to its stated ambitions. If deep user engagement leads to solid long-term growth, the company is headed in the right direction. According to market reports from Sensor Tower, the Life360 app inspires a market-leading amount of daily user engagement. 

Duolingo's innovative learning platform

One of the few companies that can challenge Life360's towering daily engagement ratio is Duolingo.

The language-learning platform with the meme-inspiring green owl mascot has 100 million MAUs and 8 million paying subscribers. Under the visionary leadership of CEO and co-founder Luis von Ahn, Duolingo has mastered the art of making repetitive learning fun. Adding gamification features such as achievement badges, weekly leagues, and "gems" has made a fun game out of a rote routine.

The central feature is the daily usage streak, of course. About 130 Duolingo users have kept their streak alive for more than 11 years and my own unbroken stretch goes back to June 2016.

I'm not fluent in 11 languages after all that. I approach the app like a language nerd, comparing and contrasting various language families while taking the occasional deep dip into a specific tongue.

And that freedom is an important part of Duolingo's refreshing appeal.

You can pick up the basics of French or German before going on a European vacation. You can focus on the Japanese language tree for years as part of a serious attempt to become fluent. You can play it like a game, branching out into the math and music courses when the mood strikes. These are all valid ways to use the Duolingo experience -- and the company will make some money from subscription fees or in-app advertising in every case.

Duolingo's engaging AI strategies

This innovator is leaning into the generative AI opportunity, of course. The top-shelf Duolingo Max subscription features AI-generated conversations in popular languages, an immediate AI analysis of mistakes you've made in recent lessons, and more. These features require a premium subscription so far, but could work their way into the ad-supported service later on.

"Right now, a lot of the AI-based features are in Max because it costs us money to serve those, so they're in the highest tier," von Ahn said in the latest earnings call. "We expect that the price for us of some of those AI features will come down because the cost of large language models (LLMs) is going down. At that time, we may make a decision that some of those features belong in the Super subscription or even the free tier." (Lightly edited for readability.)

This fun learning platform is attracting a ton of users, as noted earlier. The MAU count rose 40% year over year in the recently reported second quarter. Paid subscriptions rose by 52%. Investors have started to notice and Duolingo's stock price is up by 69% over the last year. However, you're probably looking at a future giant of online learning with a final reach far beyond the language-learning market. The $12.6 billion market cap you see today could look quaintly cheap in a decade or two.

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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Anders Bylund has positions in Duolingo. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Duolingo and Life360. The Motley Fool Australia has positions in and has recommended Life360. 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.

There are many ways to define "the fastest-growing" stocks. You can focus on market returns, sales growth, or profits, and you can look at proven results or future expectations. Traditionalists may prefer analysing reported results and historical market data. Growth-oriented investors can lean into forward-looking projections, based on rapid top-line growth or beefy long-term profit targets.

Today, I'm looking at the fastest-growing artificial intelligence (AI) stocks of the last three years, in terms of estimated revenue growth. This way, I'll zoom in on companies with plenty of business growth expected in the years ahead, no matter what they did in the early days of the generative AI boom.

So here are the top three names of that analysis, based on their top-line sales' expected compound annual growth rate (CAGR) in the next three years.

1. Nvidia: 50.4% estimated CAGR

It's no secret that semiconductor designer Nvidia (NASDAQ: NVDA) has grown like wildfire in recent years. Its trailing 3-year revenue growth stands at a spine-chilling CAGR of 63.8% at the moment. OpenAI introduced its groundbreaking ChatGPT system in November 2022. As the primary provider of AI accelerator hardware for that platform, Nvidia has enjoyed skyrocketing sales ever since.

And analysts see no end to that trend. Your average analyst firm expects Nvidia to deliver annual sales growth of roughly 50.4% over the next three years.

I agree that Nvidia should deliver strong sales growth in this AI boom. However, it gets harder and harder to maintain these skyrocketing growth rates as the base figure for each year-over-year comparison increases. Moreover, I'm not convinced that the analyst community gives enough respect to Nvidia's current and potential rivals. If nothing else, having plenty of high-powered AI accelerator chips available could limit Nvidia's gross profit margins over time.

So Nvidia looks overpriced to me, since Wall Street's growth targets seem a bit too optimistic. I cashed in some of my paper gains on this stock several months ago. Yet, the analysts might be right. I'd be kicking myself if Nvidia continues to dominate the AI hardware space and my portfolio had no connection to that opportunity. You should check your risk tolerance before backing away from Nvidia's soaring stock -- or doubling down on it.

2. Super Micro Computers: 36% estimated CAGR

Nvidia is the leading seller of AI accelerator chips, and Super Micro Computers (NASDAQ: SMCI) sells a ton of custom server systems using those chips. As a result, Supermicro's sales growth is trailing slightly behind Nvidia's. In an alternate universe where this was the only builder of AI servers, Supermicro could have shown growth equal to or even greater than Nvidia's.

In this world, Supermicro started this surge from a much lower revenue level than Nvidia, as is currently raising its long-term growth rate faster. Supermicro stands out in the system-building market with a combination of unique cooling solutions and relatively low system prices.

That being said, Supermicro's target market is even more fragmented than Nvidia's. Hewlett Packard Enterprise and Dell sell far more servers than Supermicro, even in the AI server niche. On the upside, this situation gives Supermicro more room to take market share from rivals, outgrowing its peers in the process. On the downside, the HPs and Dells out there won't simply stand back and let Supermicro win.

So this is another challenging growth target. At the same time, Supermicro comes with lofty valuation ratios for this subsector. As such, it's far from my favourite buying idea among AI stocks.

3. Cloudflare: 27.7% estimated CAGR

Finally, network security and performance specialist Cloudflare (NYSE: NET) trails behind Supermicro's revenue growth due to a significant slowdown in the last two years.

Cloudflare isn't a pure-play AI investment, but the company has strong ties to the emerging AI space. You can already buy AI-oriented edge computing services directly from Cloudflare, using its global network of servers and AI accelerators to deliver results near the end user. Its cybersecurity and network acceleration features are also quite valuable for AI service providers. For example, ChatGPT's services always pass through Cloudflare's content delivery and data security tools.

So Cloudflare is a serious AI investment with robust revenue growth. The company is also boosting its AI computing infrastructure over time. Meanwhile, Cloudflare recently revamped its sales department, boosting both its revenue growth per sales agent and operating margin.

The stock is far from cheap, but Cloudflare is perhaps the most convincing long-term growth story on this list. This company is pulling several levers to keep the growth fires burning, and the best chapters of Cloudflare's story may still be unwritten.

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

The post These are the 3 fastest-growing artificial intelligence (AI) US stocks 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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Anders Bylund has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Cloudflare and 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.

Nvidia (NASDAQ: NVDA) shares are riding high on the seas of artificial intelligence (AI). The chip designer took an early lead in the AI hardware race, leading to incredible business results and skyrocketing stock prices.

The stock traded at a split-adjusted $14 per share when OpenAI released the ChatGPT generative AI engine, powered by thousands of Nvidia AI accelerator chips. Today, Nvidia's share price has soared to $131. With a $3.2 trillion market cap, it's one of the three most valuable companies in the stock market.

Did you miss the boat on Nvidia's AI-based opportunity, or can the stock continue to rise from this lofty plateau? Let's find out.

Nvidia's upsides

Nvidia's financial success is indisputable. Revenues more than tripled year-over-year in the last two earnings reports. Free cash flows are consistently growing by about 500% in the same time frame. Microsoft (NASDAQ: MSFT) and Apple (NASDAQ: AAPL) are still more profitable than Nvidia, but the chip expert is catching up.

Many market observers like to point out that the generative AI revolution is only getting started. ChatGPT is less than two years old. Only a couple of tech giants have come up with comparably powerful large language models (LLMs) so far, though many are working on their own long-term generative AI plans. Until further notice, Nvidia's accelerator chips are the gold standard against which other solutions must be measured. If you're building a strong AI system, Nvidia's solutions are the default and the industry standard. Others must develop and then prove some sort of unique advantage before winning AI contracts against Nvidia's killer products.

Imagine Nvidia maintaining its lead as the generative AI market grows. It's not hard to see the stock soaring even higher over the next few years.

Nvidia's potential downsides

On the other hand, the good financial news and a whole lot of forward-looking expectations are already priced into Nvidia's stock. Shares are changing hands at glossy valuation ratios such as 82 times free cash flow and 40 times sales -- levels usually reserved for small-cap start-ups with more sizzle than substance.

At the same time, Nvidia doesn't stand unchallenged in the AI accelerator market. Arch rival Advanced Micro Devices (NASDAQ: AMD) has its Instinct line of cost-effective AI chips. The Intel (NASDAQ: INTC) Gaudi series boasts impressive performance per watt of electric power. And that's just the top of a large heap. There's more than one way to design an AI-crunching system, and rival solutions may offer compelling alternatives for specific use cases. Who's to say that Nvidia will hang on to its market-defining lead in the long run?

Separately, the issues of high valuation and strong competition should be enough to give most investors pause before slamming that "buy" button on Nvidia stock. Together, it's a high-wire act with a long way down. Nvidia's stock is priced for perfection and any misstep -- such as a major AI contract lost to Intel or AMD -- will probably result in a quick and painful price drop.

Should you buy, sell, or hold Nvidia?

I'm not saying you should sell every Nvidia share right now and never look back. The company could very well stave off the army of rivals and continue to innovate on a hard-to-match level. Indeed, a bit of Nvidia exposure could serve your portfolio well over the years.

Meanwhile, I highly recommend taking some profits off the table by selling a portion of your long-term Nvidia holdings. The gains are more than substantial and I'm sure you can find more stable and secure ways to invest that money in the AI market.

So on the scale of buy, sell, or hold, I see Nvidia as a stock to hold for the long run. I'd rather sell a few shares than buy more at these nosebleed-inducing share prices. Your mileage may vary, depending on your appetite for market risk and AI-driven excitement. Feel free to do your own research and reach different conclusions. Just don't say I didn't warn you if or when Nvidia's big price correction comes.

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

The post Is it too late to buy Nvidia stock? 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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The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Microsoft, and Nvidia. Anders Bylund has positions in Intel and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Intel and has recommended the following options: long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended 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.

Semiconductor designer Nvidia (NASDAQ: NVDA) has made many millionaires in recent years. Its stock has more than tripled in the last year alone. Among stocks with a market cap of at least $50 billion today, Nvidia has outperformed absolutely everybody over the past three, five, and 10 years. It's hard to beat this wealth-building machine these days. 

So what's next? Let's say I scrape together a robust $20,000 Nvidia position today -- can I expect to make a million dollars on that investment?

The short answer is yes, but it'll take a while and the lofty target result isn't guaranteed.

Nvidia in the rearview mirror

Looking back, Nvidia's stock chart from the past eight years is nothing short of extraordinary. Starting from a respectable $23 billion market cap in 2016, the company's strategy has shifted along with the market opportunity.

Nvidia's expertise in high-performance graphics cards for gaming and professional graphics turned into a crypto bonanza when enthusiasts found the same cards to be excellent for mining Ethereum (CRYPTO: ETH) tokens. Just as Ethereum switched to a different technology with no need for miners, OpenAI came along with its ChatGPT tool, unveiling a new dawn in generative artificial intelligence (AI). Based on the same high-end graphics platforms as the gaming and crypto surges, Nvidia's AI accelerator processors powered the back-end creation of ChatGPT's AI engine.

Now, lots of companies with AI-powered ambitions are buying hundreds or even thousands of extremely pricey accelerator chips and Nvidia is the first supplier that comes to mind at this point. It shows in Nvidia's spectacular financial results and the stock chart that follows:

NVDA data by YCharts

The chart above shows the return of a $20,000 investment started on May 16, 2016, resulting in a $1.0 million value nearly 8 years later. That's an average annual return of 67.4%.

The road ahead

At the end of that market-crushing chart, Nvidia is worth $1.4 trillion. The stock rose to this height the hard way, delivering top-notch products attuned to the right market opportunities at the right times. The end result is a legendary price gain with record-high investor returns. Sorting the total stock market's 10-year gains, I don't even need to limit the field with a large market-cap requirement to weed out short-lived meme stocks and other gadflies. Nvidia simply offered the strongest decade-long returns of any stock tracked by the screeners at my disposal.

But things are different now. It may be difficult to grow a $23 billion market cap 50-fold, but even tougher when you start with a $1.3 trillion stock-value footprint. Even if Nvidia continues to dominate the AI market, and that trend delivers on the most striking predictions for years to come, it's unrealistic to assume an average annual return of 67% for another eight-year run.

By the end of that rainbow, Nvidia would be worth $67.6 trillion. That's more than double the gross domestic product (GDP) of the United States, estimated at $26.9 billion in 2023. I'm sorry, but that's going to take a while.

Balancing business growth and shareholder rewards

Nvidia's past performance has set a high bar and it's important to manage your expectations for the next phase of its AI business. The exceptional gains of recent years are not likely to continue for another 8-year span. That would require not only continued success in the booming AI sector for nearly a full decade, but also sustained hypergrowth in the market itself and unshaken investor confidence in Nvidia's lofty valuation ratios. The stock trades at 72 times earnings and 30 times sales today. These overheated ratios should cool down over time, raising the needed financial support for that $67 trillion market cap in the process.

Of course, Nvidia could lower the bar with some accounting tricks. The company can return cash to shareholders by means of generous share buybacks and dividends.

Other companies have pursued this strategy before. For example, International Business Machines (NYSE: IBM) has seen its share price fall by 2% over the last 10 years while its market cap shrunk by 14%. At the same time, Big Blue bought back 12% of its issued shares and delivered robust dividend payouts. All in all, IBM investors pocketed a respectable total return of 50% over the same period.

Nvidia could attempt a larger-scale version of this, boosting the returns by sharing cash profits with the company's investors. Of course, this cash-sharing idea takes away from the company's freedom to invest in future growth-boosting business plans, so there's a fine line between generosity and growth-blunting missteps.

And of course, anything is possible over a long enough time span. America's GDP stopped at $1.5 trillion in 1973, comparable to Nvidia's market value today. Suggesting that any single company could deserve a trillion-dollar market cap would have sounded ridiculous 50 years ago, but here we stand with 6 stocks in the trillion-dollar club. A few decades from now, that $67 trillion target might not look so silly anymore.

The real question is, will Nvidia still be around in 2064 or 2074, and will it dominate its chosen markets for that long? I don't think so, but anything is possible.

A pragmatic approach to investing in Nvidia

So yes, Nvidia just might be able to grow that a $20,000 investment into a cool million, but it's a long road to that ambitious target and many things can go wrong along the way. Remember, this stock delivered the richest shareholder returns of any company over the last decade, and even that stellar run barely exceeded the 50-fold gain it takes to meet that goal.

That being said, I'm not closing out my own Nvidia position anytime soon, though I might take advantage of its recent moonshot by diversifying some of the gains into other investment ideas. I'm still looking at a proven AI giant with a bright future, and its valuation has calmed down a bit in recent weeks. Buying Nvidia stock today makes perfect sense if you can stomach it trading at nosebleed-inducing prices. The next wave of processor orders for AI systems could make the last surge look forgettable by comparison.

So feel free to invest in Nvidia today. Just don't expect the incredible returns of the last 8 years to continue for another multi-year span. To make me a happy Nvidia investor, all the company needs to do is deliver stock price gains comparable to or exceeding the stock market as a whole.

At an annual clip of 15%, a 50-fold return would materialize after 28 years. Patience is a virtue, dear reader. 

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

The post Could investing $20,000 in Nvidia stock make you a millionaire? 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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Anders Bylund has positions in Ethereum, International Business Machines, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Ethereum and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended International Business Machines. The Motley Fool Australia has recommended Nvidia. The Motley Fool Australia has recommended and has positions in Ethereum. 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.

Semiconductor designer Nvidia (NASDAQ: NVDA) reported earnings on Tuesday evening, covering the third quarter of fiscal year 2024. The company enjoyed massive orders for its market-leading chips for artificial intelligence (AI) systems, focusing on generative AI and large language models. Nvidia's chips power the popular ChatGPT system, and many companies are tapping into that idea in 2023.

The company crushed Wall Street's consensus expectations by a wide margin. The results also exceeded management's guidance targets across the board. Let's take a closer look at Nvidia's financial data and future prospects.

How profitable is Nvidia?

Nvidia's management expected third-quarter sales to land near $16 billion, with a $300 million margin of safety on both sides. Instead, top-line sales tripled year over year to $18.1 billion. That's a large surprise, and Wall Street's consensus estimates stopped at $16.1 billion.

Adjusted gross margins were targeted at approximately 72.5%. The final tally showed a gross margin of 75%, delivering another significant shock to the upside. For the record, gross margins 2.5% above the stated target added $453 million to Nvidia's operating profit.

As the torrential influx of highly profitable revenues trickled down the income statement, Nvidia collected $10 billion of adjusted net income. Earnings under generally accepted accounting practices (GAAP) rose from $0.27 to $3.71 per diluted share. Adjusted earnings exceeded the average Street view by 20%. Free cash flow worked out to $7 billion, up from a cash burn of $138 million in the year-ago period.

So yes, Nvidia is very profitable right now. The AI fever has triggered a golden age for this provider of essential AI processing hardware.

How is the holiday quarter shaping up?

Nvidia's seasonal business pattern is changing before our eyes. The company used to rely on gaming hardware sales in the fourth quarter and back-to-school systems in the third reporting period of each year, but the ongoing AI revolution flattened those trends like a financial steamroller.

The steamroller is shifting into a lower gear, though. This quarter will probably be remembered as the peak of Nvidia's AI-powered revenue acceleration.

On a year-over-year basis, Nvidia's sales fell 21% in the first quarter, as the ChatGPT-inspired love of AI solutions hadn't translated into product sales yet. The story changed in the second quarter, and Nvidia's revenue doubled. The third quarter's top-line tripling was widely expected; what was an untapped opportunity in the early fiscal year has now evolved into a reliable business engine.

The current quarter's business trends point to a similar revenue acceleration in the next report. Guidance suggest total sales of approximately $20 billion, which would be a 162% gain compared to the fourth quarter of fiscal 2023. At the same time, gross margins are expected to widen a bit more, with a 75.5% target for the adjusted results.

In other words, Nvidia seems to have settled down to a "new normal" range of expected sales, with strong margins suggesting that the company has serious pricing power in this environment.

Is Nvidia a good AI stock?

Nvidia's results were impressive, but some investors still expected more. The stock fell more than 3% on Wednesday morning amid profit-taking and perhaps some disappointment over the slower top-line growth ambition for the fourth quarter.

Furthermore, management pointed out that regulatory limits on chip sales to China will weigh on its future results. The company is seeking workarounds for these rule changes, which may apply to as much as 20% of Nvidia's total sales.

"We expect that our sales to these destinations will decline significantly in the fourth quarter, though we believe it will be more than offset by strong growth in other regions," CFO Colette Kress said on the earnings call.

And there's no denying that the stock is expensive by traditional valuation metrics. After this blowout report, Nvidia's stock trades at 57 times trailing earnings and 27 times sales. These valuations are usually reserved for rapidly growing, asset-light software upstarts, not hardware giants with physical distribution networks.

From a business model standpoint, Nvidia is the firm leader in AI-specific processors at this crucial inflection point. But powerful semiconductor rivals like Advanced Micro Devices (NASDAQ: AMD), Intel (NASDAQ: INTC), and Qualcomm (NASDAQ: QCOM) are also developing high-powered AI chips, to say nothing of potential threats from as-yet unknown upstarts. This is the tech sector, where the sands are always shifting.

So Nvidia may be a long-term winner if it can hold on to its first-mover advantage in the long run. That's a reasonable idea, since the company now can invest tons of AI-driven cash profits into future growth projects. On the other hand, I can't blame investors for cashing in some profits, since Nvidia's stock has more than tripled in 2023.

Ultimately, the answer comes down to how you view Nvidia's prospects developing in the long run, and how comfortable you are with the stock's elevated valuation. Nvidia could be the perfect stock for you or an easy "sell," depending on your tolerance for market risk.

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

The post Nvidia's golden artificial intelligence (AI) era fuels record-breaking results beyond Wall Street's wildest forecasts 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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Anders Bylund has positions in Intel and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Nvidia, and Qualcomm. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Intel and has recommended the following options: long January 2023 $57.50 calls on Intel and long January 2025 $45 calls 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.

What happened

Shares of Netflix (NASDAQ: NFLX) rose sharply on Monday. The media streaming leader's stock closed the day 6.6% higher, driven by two very different factors.

So what

The stock market as a whole was up on Monday. First, many investors wanted to take advantage of low stock prices after a brutal sell-off on Friday. This bullish effect was amplified by news from Great Britain, as the British government cancelled most of the tax cuts it had introduced in a recent mini-budget.

Together, these activities drove the S&P 500 2.7% higher, while the more volatile Nasdaq Composite index gained 3.4%. As a Nasdaq-listed growth stock, Netflix shares benefited strongly from these positive market moves.

And Netflix is scheduled to report third-quarter results after the closing bell tomorrow. The second quarter provided a bullish response to the sell-offs that follow the reports in January and April, and Netflix investors are hanging on the edge of their seats to see how the business developed in the July to September period.

Now what

Most of all, Netflix investors hope that the subscriber losses of the first half will remain in the rearview mirror from now on. Furthermore, everyone wants to know more about the ad-supported subscription tier that will launch on Nov. 3 -- and how this new option might affect Netflix's business trends.

We are about to get the answers to these questions tomorrow. In the meantime, Netflix's stock may have recovered nicely in recent months, but the price still stands 60% lower year to date. In other words, Netflix has a lot to prove this week.

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

The post Why Netflix stock was soaring today 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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Anders Bylund has positions in Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix. The Motley Fool Australia has recommended Netflix. 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.

Every new technology needs a breakthrough before it truly becomes a success.

The PC computer turned heads with early spreadsheet apps like Lotus 1-2-3 and VisiCalc. Where would the internet and its gigantic economy be today without the Mosaic and Netscape browsers of the early 1990s?

Digital video streams are currently stealing market share from cable, satellite, broadcast, and movie-theater video options, and Netflix (NASDAQ: NFLX) kick-started that revolution a decade ago. You get the drift. One innovator (or sometimes a small group of them) provides the early excitement that makes the target audience sit up and take notice.

Cryptocurrencies are still looking for that magic moment after a number of false starts. Rumor has it that video game developer Take-Two Interactive (NASDAQ: TTWO) might bring the initial fuel to the large-scale crypto fires.

What's the big deal?

Grand Theft Auto 5 (GTA 5) is the second best-selling video game of all time, shifting 165 million units since its release in 2013.

Even now, nine years later, GTA 5 remains one of Take-Two's most important and profitable titles. According to data from GamesIndustry.biz, GTA 5 was the biggest-selling game title in Europe in August 2022. Yes, that's nine years after the original launch.

Gamers are hungry for the next helping of Grand Theft Auto, of course. You can't leave them hanging forever, even if the current title continues to sell well.

Whenever Take-Two gets around to releasing the next tentpole title in this dominant franchise, you can bet that it will break records and set standards.

OK, so what is Take-Two doing?

Last February, Take-Two confirmed that its Rockstar Games studio is actively working on the next instalment of the Grand Theft Auto series.

"Our goal is always to significantly move beyond what we have previously delivered," the development studio said at the time. "We look forward to sharing more as soon as we are ready."

Taking that next big step is quite a challenge, but the rumor mill whispers that Take-Two may be up to that task.

GTA 5 includes a simplified stock market with about 80 tickers spread across two stock exchanges. Players can invest in-game cash and earn or lose their (often ill-earned) money over time.

This system is tied to real-world dollars because you can always buy a lot of game money for a little bit of cold, hard cash.

One-hundred thousand dollars of GTA 5 cash costs $3, and an $8 million game-cash infusion will run you $100 in actual dollars.

Going the other way around is tougher. The so-called Shark Cards are changing hands in online marketplaces like eBay, often for less than half of Rockstar's official prices.

Other game companies have improved on this idea over the years, led by Roblox (NYSE: RBLX) and its reasonably liquid Robux currency. In games like Roblox, it's possible to make a real-world living by creating in-game items and experiences that other players want to buy. The Robux system is the lifeblood of that company's business plan.

Against that backdrop, Take-Two could make a real difference to the real crypto market by building blockchain-based features into the next Grand Theft Auto.

How could crypto coins work in Grand Theft Auto?

Crypto could appear in the new GTA game in several different ways. First, Rockstar could rely on actual blockchain ledgers to track in-game data such as items, money, and rewards.

Unique characters, vehicles, digital real estate properties, and weapons may be represented by non-fungible tokens (NFTs). This way, the company would create a very real trading platform for its fictional assets.

With or without crypto-based game features, the game could reward gamers for playing the game by sending out small amounts of actual cryptocurrency.

This idea could be similar to the Brave web browser, which shows extra advertising on some pages in return for sharing the ad-based revenues with the browser's users.

For example, I earned four Basic Attention Tokens (CRYPTO: BAT) last month for using the Brave browser a lot. That's worth about a dollar at current exchange rates, but Take-Two could up the game with a richer revenue-sharing flow. Gamer loyalty is important and valuable, after all.

And, of course, Rockstar could skip the real cryptocurrencies altogether and simply make fun of the crypto market instead.

Rockstar could even boost its own fortunes by signing a sponsorship deal with an entity like Coinbase or Crypto.com. That would be entirely in the dry humor spirit of the Grand Theft Auto games.

This would be the least beneficial form of cryptocurrency inclusion, but the company would still discuss digital assets in front of a massive user base where many gamers tend to engage with the game world on a daily basis. That's still valuable to the crypto market.

Fingers crossed for a serious cryptocurrency feature or two

The rumor mill has not found consistent evidence of cryptocurrency features in the upcoming Grand Theft Auto, but I'll be shocked if that game hits store shelves without even a nod to the popular cryptocurrency sector.

Rockstar and Take-Two could become the standard bearers for a new generation of blockchain games, or they might chuckle and snicker over the whole idea. But there will probably be some sort of crypto content, and that's enough to make a significant difference.

Mind you, only the in-game tokens and play-to-earn ideas would make the game count as a killer app for cryptocurrencies. Otherwise, it'll be more of a missed opportunity that leaves the pioneering action in some other innovator's hands. Either way, crypto should get its first real killer app fairly soon.

Crypto may not look cool right now, but the story will probably change again in the next year or two.

I think it would be a shame if Take-Two Interactive wasn't jumping on this opportunity to write some real-world history. Grand Theft Auto 6 might become the VisiCalc or Netflix of the crypto market for millions of people.

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

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Anders Bylund has positions in Basic Attention Token, Coinbase Global, Inc., and Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Basic Attention Token, Coinbase Global, Inc., Netflix, Roblox Corporation, and Take-Two Interactive. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended eBay and has recommended the following options: long January 2023 $115 calls on Take-Two Interactive and short October 2022 $50 calls on eBay. The Motley Fool Australia has recommended Netflix. 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.

A Coinbase (NASDAQ: COIN) executive just explained the best part of the long-awaited Ethereum (CRYPTO: ETH) Merge. Coinbase COO Emilie Choi pointed out Ethereum's most exciting strength -- and how the platform upgrade shines a spotlight on this quality.

The Merge is in the books now, and cryptocurrency investors should keep an eye on how Ethereum executes its move from a proof-of-work (PoW) platform to a proof-of-stake (PoS) system. In Choi's view, the journey is more important than the destination.

What is The Merge?

Around 2:40 a.m. ET on Thursday, Ethereum started merging its digital ledger with a new system, formerly running as a testing network known as the Beacon Chain. Ethereum's developers and blockchain node operators had executed a couple of mergers on smaller test networks, and all signs pointed to a successful platform upgrade on Ethereum's main network.

As expected, The Merge went off without a hitch. Leading crypto-trading platforms such as Coinbase, Kraken, Binance, and Robinhood Markets paused transactions for Ethereum and Ether-based tokens for a few hours, giving the technology update time to roll out. Today, Ethereum's transactions are validated by a much faster system that requires just 0.05% of the electric power that the old PoW platform consumed.

This game-changing move has been in the works for six years, and also sets the stage for three more rounds of important network upgrades. Ethereum co-founder Vitalik Buterin considers Ethereum's functionality to be 55% complete after The Merge, leaving plenty of room for further improvements.

What Choi said

That's where Emilie Choi comes in. Choi delivered this crucial insight at the annual Goldman Sachs Communacopia + Technology Conference earlier this week:

"I think the most important thing that [The Merge] represents is that there can be continued sustained technological development done by decentralized communities at scale," she said. "To me, that's the most important kind of takeaway about the Ethereum merge."

This is important. Like Buterin, Choi expects Ethereum to get better over time. This platform was designed with long-term flexibility in mind, allowing Ethereum to overcome expected challenges and uncharted surprises via platform updates. The Merge was a fantastic example of this capability, proving that the network can undergo truly fundamental changes without breaking the crypto platform.

The next few updates will continue to lower transaction costs and boost execution speeds. They will also introduce a work-sharing feature known as sharding, improve Ethereum's security model, and expand the system's scalability. In the long run, Ethereum will evolve to take advantage of improvements in computing systems. For example, the Ethereum network of 2030 might secure and validate its transactions with quantum computing systems.

What's good for the Ethereum goose may not be right for the Bitcoin gander

Every cryptocurrency indeed has some capacity for platform upgrades, but the Ethereum community takes this quality more seriously than most of its peers. Bitcoin (CRYPTO: BTC) has barely changed since its launch in 2009, apart from a few tweaks to tackle unexpected security issues. The unchanging nature of Bitcoin is an advantage because its holders can trust that the long-term supply is limited to 21 million coins.

However, the largest cryptocurrency should probably consider switching from PoW to PoS (or another validation system with lower computing and power requirements) someday. That change took years of planning and testing in the more flexible Ethereum community. Will we see a proof-of-stake version of Bitcoin in this decade? Probably not.

So the two leading crypto names are walking down strikingly different paths. One size does not fit all cryptocurrencies, and that's quite all right. Each digital coin was designed with a unique set of features and long-term goals, and those fundamental differences will always drive their development. In Ethereum's case, an openness to new ideas is the name of the game and investors should embrace that attitude.

The Merge showed us that even ambitious platform changes can take place without a hitch. As Choi said -- and Buterin would surely agree -- sustained development is the secret sauce in Ethereum's recipe for success.

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

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Anders Bylund has positions in Bitcoin, Coinbase Global, Inc., and Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin, Coinbase Global, Inc., and Ethereum. The Motley Fool Australia has positions in and has recommended Bitcoin and Ethereum. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Every time Bitcoin (CRYPTO: BTC) is showing signs of life, investors start to wonder how much the cryptocurrency could be worth in the long run. In the early days, Bitcoin didn't seem to be worth anything. The first known purchase of a physical thing with payment by digital currencies was a May 2010 order of two large pizzas in exchange for 10,000 Bitcoin. The currency surged to $1,000 per Bitcoin in 2013, stopped just short of the $20,000 mark in 2017, and soared to roughly $68,800 per coin in November 2021.

Bitcoin has come a long way from the pizza-based price of 0.2 cents per coin. At today's price of $21,230 per Bitcoin, Laszlo Hanyecz effectively spent $212 million on those tomato pies. So if the crypto's value multiplied by more than 10 million times in 12 years, it might seem fair to expect a million-dollar price tag within the next decade.

Many pundits and famous investors say "yes"

Reaching $1,000,000 per Bitcoin by 2030 is a pretty popular projection.

• Crypto-trading platform BitMEX's ex-CEO Arthur Hays made precisely that prediction four months ago
• Famous growth investor Cathie Wood set the same target in April 2022
• Serial entrepreneur Anthony Pompliano took the stage at the same Bitcoin 2022 event to say that Bitcoin could reach $500,000 or $1,000,000 in the near future -- but anything beyond that would require a social collapse and total meltdown of the US dollar.
• In early June, MicroStrategy (NASDAQ: MSTR) chairman Michael Saylor doubled down on his bullish price predictions in a CNBC interview: "It's not going to zero. If it's not going to zero, it's going to a million because it's obviously better than gold at everything that gold wants to be."

It's true that all of these Bitcoin bulls have significant financial interests in the Bitcoin market. For example, if the coin ever reaches $1 million, the company's current cache of roughly 130,000 Bitcoins would soar from $2.8 billion to $130 billion. As a result, MicroStrategy would be a financial heavyweight with Bitcoin-based cash reserves comparable to software-sector rivals Microsoft and Alphabet.

At the same time, people like Michael Saylor and Cathie Wood are putting their money where their mouths are. If they are wrong and Bitcoin never replaces gold as the standard holder of long-term value, they could lose every penny of the massive investments they have made so far. Perhaps more importantly, they could look quite silly if their big Bitcoin bets don't work out as planned. Nobody wants to lose face that way, especially in an industry where a robust reputation earns you more clients and partners.

What could go wrong?

Regulators and governments around the world are still figuring out how to deal with these newfangled digital assets. Some of them may set up overly draconian frameworks for trading, transactions, and ownership of cryptocurrencies, including Bitcoin. The domestic rulemaking effort is especially important to American investors, of course. It'll take a couple more years before this particular source of uncertainty calms down.

Bitcoin certainly has a leg up on the crypto competition when it comes to disrupting the gold market -- but that future isn't written in stone. Other digital coins could come along with better technology, more secure transactions, and other unbeatable advantages. In that world, we could see another name grabbing Bitcoin's crown, challenging early investors to adapt or get left behind.

So Bitcoin enthusiasts like Michael Saylor and Arthur Hays could still lose it all. However, I think cryptocurrencies are here to stay, and there's good reason to believe that Bitcoin will remain a cornerstone of this evolving market. There will be volatility along the way and the current crypto crisis could last for years, like the last one did. That's alright. I'm in this investment for the long run.

All things considered, I think it's a good idea to keep some Bitcoin in your long-term investment portfolio. If that lofty million-dollar price target holds up, every $10,000 you invest in Bitcoin today will be worth nearly half a million dollars by 2030. It would be a shame to miss that opportunity, right?

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

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Anders Bylund has positions in Alphabet (A shares) and Bitcoin. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet (A shares), Alphabet (C shares), Bitcoin, and Microsoft. The Motley Fool Australia has recommended Alphabet (A shares) and Alphabet (C shares). The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The Bitcoin (CRYPTO: BTC) cryptocurrency reached an all-time high of roughly $68,800 in November of 2021. Since then, a marketwide retreat from high-risk investment ideas drove the digital currency back to approximately $20,300 per coin -- a 70% price drop in nine months. Investors are worried about inflation, geopolitical tensions, and the continued fallout from the coronavirus pandemic.

Some cryptocurrency bears believe that this could be the beginning of the end for digital currencies. However, Bitcoin investors with diamond hands continue to HODL their crypto coins, expecting another upswing in this volatile market.

There are differences of opinion, and only time will tell exactly how Bitcoin's chart will shape up in the long run. Crypto investors are scratching their heads, wondering whether Bitcoin will ever be worth $100,000 per coin.

I believe that the answer to that question is a resounding "yes." Bitcoin is almost guaranteed to reach the $100,000 price point. But it could take a couple of years to get there, and you should be prepared for some rough weather on that trip.

Why is Bitcoin valuable at all?

Bitcoin's value is based on its limited supply. There will only ever be 21 million Bitcoins, and 19.2 million of those digital coins have already been created. The U.S. money supply doubled between 2013 and 2022. Bitcoin's supply will never grow more than 9.8% from today's level.

This quality makes Bitcoin similar to gold, which cannot be created in a lab and has limited supplies available even if we eventually dig up every last ounce of it. Limited supply plus rising demand equals higher prices over time.

Many investors and developers see Bitcoin as a direct replacement for gold in the long run. If that works out, it's a huge market opportunity. All gold ever mined is worth at least $9 trillion today, according to estimates by online coin dealer Golden Eagle Coin. If you assume that physical gold holds on to three-quarters of the global value-storage market it owns today, Bitcoin could be worth as much as $2.25 trillion when that balance is struck.

That's up from $386 billion today, which leaves room for more than a fivefold increase in Bitcoin prices -- landing just north of the $100,000 mark in the end. Of course, stingier or more generous estimates will move that target price back and forth, but that's the ballpark we're talking about.

And I'm not sure that the gold-replacement plan even accounts for the direct utility Bitcoin offers in frictionless digital payments. When did you last pay for your groceries with a gold coin? Sure, you probably aren't using Bitcoin that way either, but Amazon's Whole Foods Market actually accepts cryptocurrency payments today. A few years down the road, crypto-based payments could become as popular as credit cards and Zelle payments are today.

Where is Bitcoin going?

So the $100,000 price target actually looks like low-hanging fruit for Bitcoin. I'm assuming that cryptocurrencies are here to stay and that grandpa Bitcoin will remain the largest and most trusted cash-replacement option in the market for many years to come.

At the same time, I know that there's a bumpy road ahead and many things can still go wrong. Proper regulations and taxation systems are still under development in pretty much every country, including America. When lawmakers nail down their long-term rulebooks, it'll still take time to get consumers and businesses to embrace digital currencies. And of course, I can't guarantee with absolute certainty that Bitcoin won't be replaced by another cryptocurrency with similar goals and superior technology at some point.

So Bitcoin seems highly likely to ascend to that lofty $100,000 price target, but it's a risky trip with plenty of potholes. Don't expect a 400% return by the end of this year, or over the next couple of years. As the crypto market matures, the wild and unpredictable price swings we're getting so used to will become milder. Bitcoin has a lot of untapped growth left to explore, as long as you have plenty of time and unshakable patience. Otherwise, you might find this cryptocurrency (and any cryptocurrency on the market today) too frustrating in this market.

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

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What happened

Shares of Netflix Inc (NASDAQ: NFLX) gained 28.6% in July, according to data from S&P Global Market Intelligence. After two disappointing earnings reports and a gloomy first half of the year, the digital-video veteran presented a rosier picture of its subscriber growth trends in July's second-quarter update.

Investors were quick to embrace that bullish morsel, sparking several days of rising share prices.

So what

Netflix's subscriber count fell in two straight quarters, including a loss of 1 million accounts in the second-quarter report. Management signalled an end to that downtrend, forecasting the third-quarter figure to hit an all-time high of 221.67 million global paid memberships.

At the same time, the second-quarter results were a mixed bag. Earnings came in above expectations but revenue fell slightly short of guidance and analyst estimates. Furthermore, revenue growth should continue to slow down in the third quarter as the year-over-year growth rate drops to roughly 4.7%, down from 8.6% in the second quarter.

But none of that mattered. Investors and analysts are still laser-focused on Netflix's subscriber growth, so that's the guidance target that wrote all of the company's headlines for this quarter.

Now what

That extreme focus on subscriber growth is a mistake. That used to be the most important figure in Netflix's quarterly reports, but the company is shifting gears as we speak. The streaming video service is now paired with a growing portfolio of mobile games. An ad-supported service tier will soon be available for price-sensitive consumers.

Netflix is also experimenting with different methods to collect revenue from people using the platform for free via shared passwords. Notably, some of these forward-looking initiatives should add to Netflix's top and bottom lines without lifting the subscriber count. Therefore, subscriber growth shouldn't be the headline-writing metric anymore.

So the stock posted a sharp gain of almost exactly 30% in July, but that boost started from a multiyear-low market bottom. Netflix stock is still a tremendous bargain, trading 35% lower in 2022 and 57% below November's all-time highs.

These discounts will only last until market makers wise up to the shifting direction of Netflix's business goals. It could take a few quarters before that message really sinks in, much like it took about two years before the shares fully recovered from the Qwikster debacle -- also known as the start of the game-changing digital streaming era.

It looks like history is about to repeat itself here. So why not grab some Netflix stock while it's cheap?

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

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Anders Bylund has positions in Netflix. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix. The Motley Fool Australia has recommended Netflix. 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.

Ethereum (CRYPTO: ETH), or rather, the Ethereum ecosystem's Ether token, is the second-largest cryptocurrency on the market. Ether prices soared all the way to $4,892 in November 2021, but have come back down to roughly $1,500 per coin today.

Inflation concerns and a lack of robust cryptocurrency regulations have weighed on the crypto market as a whole, and on high-flying market darlings like Ether in particular.

However, the crypto market has shown some signs of stabilization and recovery in recent weeks. Ether's price has gained 67% from its three-month lows, and many investors are wondering how high this digital asset can go from here. For example, will it ever be worth $10,000 per coin?

Market cycles and volatility

First of all, some people believe that cryptocurrencies are a fad with no inherent value at all. I'm not here to change your mind about the fundamentals of the crypto market, so if you fall in this group, you'll probably be happier reading up on the best stock ideas on the market instead. It's all right -- cryptocurrencies aren't every investor's cup of Lapsang souchong.

But among those who see real-world value in ultra-secure digital ledgers with extra features such as smart contracts and decentralized management, Ethereum is expected to bounce back from this downturn.

The crypto market has been highly cyclical so far, and 2022 looks a lot like the correction in 2018. Back then, Ether had never traded above $1,450 per coin and investors were wondering whether the cryptocurrency would get back up to the $1,000 level.

So the 52-week lows nowadays are comparable to the all-time highs of the previous upswing, and the beat goes on. But things are different this time because the cryptocurrency phenomenon is growing up quickly.

What may have looked like a forgettable fad four years ago is now powering decentralized finance apps, innovative loan and insurance services, online games, and international money transfers.

Regulators around the world are taking cryptocurrencies much more seriously today, and fellow sector giant Bitcoin now serves as an official currency in two countries.

Can Ethereum get back on its feet again?

The cryptocurrency market as a whole should achieve a full recovery in a year or two, followed by continued long-term growth. Again, I'm basing my analysis on the idea that developers will keep producing crypto-based products, apps, and services that consumers and businesses find useful in the real world.

As a veteran of the sector, with unique features and an unmatched army of app developers, Ethereum is poised to lead that surge from the front. Don't forget that this crypto network is about to roll out the most important technology upgrade in its history, erasing the speed and efficiency advantages that some Ethereum rivals are boasting of today. This old dog is happy to learn new tricks.

In order to reach a price of $10,000 per Ether coin, the cryptocurrency has to double the peak prices seen in November. The target price is nearly seven times the current level. That sounds like a lot, but the volatile crypto market can deliver moves of that epic magnitude in a hurry. For example, Ether prices rose more than 20-fold from March 2020 to March 2022.

It's a question of time

There are no guarantees that the next recovery will look like that, of course. Let's just say that I wouldn't be surprised if Ether multiplied its market value by seven or more amid a general crypto market recovery, with its own platform upgrade providing more fuel for the fire.

All the components of this potential future are in place, and the bullish market move is just a matter of time -- as long as you agree that cryptocurrencies and blockchain networks have a useful future.

Under these circumstances, Ethereum looks almost certain to reach the $10,000 pricing milestone, and then keep going up in the long run. In the process, the market cap will pass the trillion-dollar mark when Ether prices reach $8,221 per coin. As I see it, these landmark metrics are coming, and probably within the next year or two.

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

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Motley Fool contributor Anders Bylund has positions in Bitcoin and Ethereum. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bitcoin and Ethereum. The Motley Fool Australia owns and has recommended Bitcoin and Ethereum. 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.

What happened

Shares of Atlassian (NASDAQ: TEAM) fell 50.9% in the first half of 2022, according to data from S&P Global Market Intelligence. The Australia-based maker of project management and collaboration tools entered this period on a high note after gaining 217% in the previous two years, but that success made Atlassian's stock an easy target when market makers backed away from high-flying growth stocks.

So what

At the start of 2022, Atlassian shares changed hands at the lofty valuation of 117 times free cash flows and 40 times sales. Together with the aforementioned price gains in recent years, this rich valuation essentially painted a target on Atlassian's back. The stock was priced for perfection, and macroeconomic events were about to bring a lot more uncertainty and imperfection into the picture. 

The company did everything it could to support the expensive share prices. Atlassian crushed Wall Street's expectations across the board in January's and April's earnings reports, exceeding Wall Street's estimates by as much as 7% on the revenue line and 47% in terms of earnings. In the recently reported third quarter, top-line sales increased by 30% year over year as the number of paying customers rose by 25%. About 42% of third-quarter revenues was retained as free cash flows. Pick your favorite business metric and you'll probably find that Atlassian delivered robust results even in this challenging market environment.

But again, none of that mattered. Atlassian's shares were richly valued and ripe for a pullback. Macroeconomic concerns on a global scale provided plenty of inspiration for this correction.

Now what

The ironic part of this situation is that companies like Atlassian can help other businesses wring more business performance out of limited budgets. Hence, market slowdowns actually play right into this company's hands. Share prices are falling because Atlassian was seen as a risky investment in the spring of 2022. The reported results tell a very different story.

I agree that the stock still looks expensive today, trading at 64 times free cash flows and 19 times sales. However, that's a much more comfortable entry point than the even loftier valuation ratios seen six months ago. Shrewd investors might want to take advantage of this imbalance between winning business results and plunging stock prices. An Atlassian investment today should serve your portfolio well for years to come. 

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

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Anders Bylund 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 Atlassian. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.