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

Artificial intelligence (AI) continues to be the biggest driving theme in the market today, and there is little reason to think that this won't continue. Demand for both AI infrastructure and services appears insatiable, and it still looks as if we're still in the very early innings of this trend.

Against this backdrop, let's look at the top two AI stocks to buy right now. 

1. Nvidia

Nvidia (NASDAQ: NVDA) is the king of AI infrastructure, and the company's recent acquisitions have made it even stronger. It's best known for its graphics processing units (GPUs), which provide the processing power for the majority of AI workloads. GPUs are particularly dominant in large language model (LLM) training, where the company's CUDA software platform adds to its wide moat. Nearly all foundational AI code was written on CUDA, and that code only works natively with Nvidia's chips.

With its recent acquisition of SchedMD, Nvidia has only expanded its software moat. SchedMD is the developer of Slurm, an open-source software platform that helps manage GPUs by determining which tasks they perform and when. With this acquisition, Nvidia now controls the primary orchestration platform for AI chips. While it says it will keep Slurm open-source, its control over the platform will allow it to more tightly integrate it with CUDA to offer an even more seamless experience.

Then, on Christmas Eve, the company acquired top talent from Groq and signed a licensing agreement with the company for its technology. The deal essentially gives Nvidia access to Groq's language processing units (LPUs), which are specialized chips designed specifically for AI inference. Demand for AI inference processing is eventually expected to become larger than demand for training, so this deal can be viewed as Nvidia playing both offense and defense to get ahead of that shift.

Overall, Nvidia remains the company best positioned to profit from the continued AI buildout, and its recent acquisitions only strengthen its position. The stock is also reasonably valued, trading at a forward price-to-earnings (P/E) ratio of about 25, based on analysts' estimates for its fiscal 2027, which will begin in late January 2026.

2. Alphabet

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) is arguably the best positioned AI company because it is the only one not reliant on Nvidia.

While other companies are working on designing their own custom AI accelerator chips, Alphabet's Tensor Processing Units (TPUs) are now in their seventh generation and have been battle-tested by running Google's workloads for more than a decade. Those years of experience aren't something that its competitors can easily emulate.

As such, the company enjoys a big structural cost advantage in both AI training (having trained its world-class AI model Gemini) and inference relative to companies that rely largely on Nvidia for chips. Its TPUs have proven so good that Anthropic signed a large deal with Alphabet to deploy TPUs to power its AI workloads. Morgan Stanley estimates that for every 500,000 TPUs that Alphabet rents out, it generates around $13 billion in revenue.

Alphabet's other advantage over its cloud computing competitors is that it owns a world-class LLM that rivals OpenAI's ChatGPT. First, this lets it capture more cloud computing revenue by offering its own model. Second, it can monetize its AI model more readily by integrating it into its products, including Google Search, its Android operating systems, YouTube, Google Maps, Gmail, and its workplace productivity tools. With lower costs for training and inference, as well as more platforms upon which it can deploy and monetize its models, Alphabet holds significant advantages over OpenAI and other LLM developers.

As the most vertically integrated AI company, Alphabet is in a strong position, and its advantages should only widen in the coming years. Meanwhile, the stock is attractively valued, trading at a forward P/E of 28. 

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

The post What are the 2 top artificial intelligence (AI) stocks to buy right now? appeared first on The Motley Fool Australia.

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

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

Two of the big three cloud computing companies are Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) and Amazon (NASDAQ: AMZN). While both Google Cloud and AWS (Amazon Web Services) have seen solid growth, Alphabet's stock far outpaced Amazon's in 2025, climbing nearly 60% as of this writing, versus a modest gain for Amazon.

Let's look at which stock is set to outperform in 2026. 

The case for Alphabet

Alphabet has been one of the best-performing mega-cap tech stocks in 2025, largely because it was able to flip the script from being viewed as an AI loser to perhaps having the potential to be one of the biggest AI winners. While the company turned in some strong numbers, its performance was much more about changing perceptions.

It did this largely through the advancements with its Gemini foundational large language model (LLM) and custom artificial intelligence (AI) chips. Gemini has become one of the best LLMs in the market today, and Alphabet has infused it throughout its products, including its core search business. AI-powered features, like AI Overviews, AI Mode, and Lens, have helped the company accelerate its search revenue, while its Gemini stand-alone app has also gained traction.

At the same time, its Tensor Processing Units (TPUs) have become increasingly viewed as one of the top alternative AI chips to Nvidia's graphics processing units (GPUs). These chips are in their seventh generation, and Alphabet uses them to power much of its internal workloads, giving it a huge structural cost advantage. Meanwhile, the chips are so highly regarded that Anthropic has committed to buying $21 billion worth of them next year.

As time progresses, the advantage Alphabet has of owning both top-notch AI chips and a top-tier LLM should only widen, as it creates a powerful flywheel that will make both better over time.

The case for Amazon

While Alphabet was able to change investor perceptions this year, Amazon was not. However, the company could now be in a similar spot to where Alphabet was heading into 2025.

Much of Amazon's lackluster recent performance can be tied to the growth of AWS, which trails that of Microsoft Azure and Google Cloud. However, Amazon saw AWS revenue growth accelerate to 20% last quarter, and the company said it was capacity-constrained. As such, it's boosting its capital expenditure (capex) budget to try to meet growing demand.

At the same time, the data center that it built for Anthropic, featuring its custom Trainium chips, is still ramping up. It is also in talks with OpenAI about making an investment in the company, where OpenAI would start to use some of its AI chips. The two companies already signed a $38 billion cloud computing deal, although that was to use Nvidia GPUs.

Meanwhile, Amazon's e-commerce business is really clicking. The company is seeing huge operating leverage come from its robotics and AI investments, while its high-margin sponsored ad business is growing quickly from a large base. This could be seen in its third-quarter results, as its North America revenue rose 11%, while its segment adjusted operating income soared 28%.

The verdict

Alphabet and Amazon are two of my favorite stocks heading into 2026. Both stocks are trading at attractive valuations with forward price-to-earnings ratios (P/Es) of below 30 times and solid growth prospects ahead.

Data by YCharts.

I think Alphabet is going to become one of the biggest winners in AI over the long term, but for 2026, I think Amazon's stock can outperform. As AWS revenue continues to accelerate and Trainium gains some traction, Amazon can begin to shift perceptions, much like Alphabet did last year. I think that will really help power a stock that is trading well below other leading retailers like Walmart and Costco, which have forward P/Es nearing 40 times.

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

The post Alphabet vs. Amazon: Which stock will outperform in 2026? appeared first on The Motley Fool Australia.

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Geoffrey Seiler has positions in Alphabet and Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Costco Wholesale, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, 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.

The "Magnificent Seven" stocks -- which include Apple, Amazon (NASDAQ: AMZN), Alphabet, Meta Platforms, Microsoft, Nvidia, and Tesla -- turned in another solid performance in 2025, up a cumulative 25%, as of Dec. 3.

Alphabet, which was my pick to be the top-performing "Magnificent Seven" stock in 2025, has led the way, easily outperforming its peers.

Data source: PortfoliosLab.

While Alphabet remains one of my favorite stocks to own for the long haul, I think another surprising stock will emerge to lead the group higher in 2026. That stock is Amazon.

Breaking out in 2026

Amazon has admittedly been a laggard among the Magnificent Seven in recent years, with the stock up less than 50% over the past five years. However, that's the same setup stocks like Alphabet and Meta experienced in recent years before they broke out. And while its stock has underperformed in recent years, the company has been doing a lot of things behind the scenes that are improving both its e-commerce and cloud computing operations.

Amazon came to dominate the e-commerce landscape not by just selling goods online, but by building out the largest fulfillment and logistics network on the planet that could get customers these items quickly. More recently, it has been turning to robots and artificial intelligence (AI) to further this mission, while also creating huge operational efficiencies.

One area that is greatly underappreciated at Amazon is its leadership in robotics. Because the company is designing and making these robots for its own use, it does not get nearly the recognition it deserves in this field. However, it now deploys more than 1 million robots at its fulfillment centers, some of which can perform advanced tasks. For example, earlier this year, it introduced a robot called Vulcan that has a sense of touch, which allows it to handle many more types of items than the average robot. It also has robots that can detect damaged products before they are sent out, saving money on costly returns, as well as robots that can fix themselves.

These robots are all now coordinated by its DeepFleet AI model to operate in the most efficient way possible. The company is also using AI in other areas, such as helping optimize delivery routes, determining the best-located warehouses to store items closer to last-mile delivery, and helping drivers find hard-to-locate drop-off spots in places like large apartment complexes. This all helps speed up delivery times and reduce costs.

Another overlooked area Amazon is seeing success with is digital advertising. The company is now the third-largest digital advertising company in the world, behind only Alphabet and Meta Platforms. This is a higher gross margin business that Amazon is growing quickly through the use of AI tools, which can help merchants create better campaigns and listings and improve targeting.

All of these efforts are driving strong operating leverage in Amazon's e-commerce business. This could be seen last quarter when the adjusted operating income for its North American segment surged 28% on an 11% increase in revenue.

Cloud computing leader

Amazon's largest segment by profitability is its cloud computing business, AWS (Amazon Web Services). The company created the entire infrastructure-as-a-service business model, and it remains the market share leader today. However, AWS' growth has trailed that of its rivals: Microsoft's Azure and Alphabet's Google Cloud. That has likely hurt the stock.

But AWS' revenue began to accelerate last quarter, increasing by 20%, and it has strong growth prospects ahead. It is still ramping up its massive Project Rainier data center, which was built exclusively for Anthropic. The data center is fully operated with its custom Trainium 2 AI chips, and it expects the AI cluster to reach 1 million chips by the end of the year. Additionally, the company signed a $38 billion deal with OpenAI, which will run some of its AI workloads on Amazon's data center infrastructure that employs Nvidia graphics processing units.

Like other cloud providers, AWS is capacity-constrained, and the company is ramping up its capital expenditures to meet increasing demand. Earlier this month, it introduced a number of new AI hardware (including its Trainium3 AI chip) and software tools. It also sees a huge opportunity with AI agents and its AgentCore offering. 

The top "Magnificent Seven" stock for 2026

Amazon is expanding its AI capabilities and moving to capture more AI revenue streams within the cloud, which should bode well for growth next year. Meanwhile, its e-commerce operations are seeing strong operating leverage and could get a boost from any economic improvement that comes from lower interest rates or reduced or eliminated tariffs in 2026.

With the stock entering the new year at one of its lowest historical valuations, trading at a trailing price-to-earnings (P/E) ratio of below 33 times, Amazon is my choice to be the best-performing Magnificent Seven stock for 2026. 

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

The post My surprising top "Magnificent Seven" stock pick for 2026 appeared first on The Motley Fool Australia.

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

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

Nvidia (NASDAQ: NVDA) is currently the world's largest company with a market cap nearing $4.4 trillion, followed by Apple (NASDAQ: AAPL) at around $4.2 billion, as of this writing. However, I think Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) will take the top spot by the end of 2026.

Alphabet is currently the world's third-largest company with a market cap of around $3.9 trillion, just ahead of Microsoft (NASDAQ: MSFT) at $3.6 trillion. They are the only four companies with market caps above $3 trillion.

Let's dig into why Alphabet is poised to become the world's largest company by the end of next year. 

Alphabet is a market leader

Alphabet is actually already the world's most profitable tech company. Its trailing 12-month earnings of $124.5 billion and quarterly earnings of $35 billion are both tops among megacap tech names. From a trailing price-to-earnings (P/E) basis, it's also the cheapest of the group.

Data by YCharts.

However, stock prices are often about the future, and Alphabet has one of the brightest futures in big tech. What is so exciting about Alphabet is that it's the company that developed the best artificial intelligence (AI) tech stack. The company has taken a vertically integrated approach, which gives it an advantage that should only grow wider in the future.

Alphabet's big edge is that it has developed both its own top-tier custom AI chips and a world-class foundational large language model (LLM). No other company has a tech stock in these areas that is as far along as Alphabet.

In addition, it also has a top machine learning software platform in Vertex AI that helps create, train, and deploy custom AI models, usually based on its Gemini model, although it also supports third-party open-source models like Meta Platforms' Llama. It's also a storage and data analytics leader with Colossus and BigQuery, and it even has its own fiber network to reduce latency. Its pending acquisition of cloud security leader Wiz will only add to its full-stack solution.

The company's biggest advantage, though, is its custom AI chips, called tensor processing units (TPUs), which entered development more than a decade ago, and they are now in their seventh generation. The chips were optimized for Google Cloud's TensorFlow framework, and have been battle-tested running Alphabet's internal workloads. Having its own custom AI ASICs (application-specific integrated circuits) gives Alphabet a huge cost advantage both over rival cloud computing and AI model companies like OpenAI. It can just train models and run inference more cost-effectively both for itself and for customers.

This all helps Alphabet achieve a better return on its capital expenditure (capex) than competitors, who depend on Nvidia's more expensive graphics processing units (GPUs) to train their LLMs, creating a virtuous cycle. Lower costs and a better ROI (return on investment) lead to better products and solutions, which allow it to invest more into them, continuing to make them better.

Meanwhile, by developing its own world-class AI model, Alphabet captures a larger portion of the revenue and can integrate it into other products like Google Search. Today, AI-powered features, such as AI Mode and AI Overviews, are helping drive queries and search revenue growth. At the same time, with its massive ad network, few companies are as capable as monetizing search and AI discovery.

On top of that, Alphabet has other huge advantages. First and foremost is the huge distribution advantage the company has through its ownership of the Chrome browser and Android smartphone operating system, which both have over 70% market share. Throw in its revenue-sharing deal to be the default search engine on Apple devices, and Google is essentially the gateway to the internet for most people. It also has a data advantage, given its decades of search queries and YouTube video uploads.

The road to becoming the world's largest company

Alphabet is already the world's most profitable tech company, and as more investors start to recognize its position as the AI company to beat, the stock should have strong upside from here. Its valuation is reasonable, and it should be able to outpace its growth expectations next year.

That should help propel it to become the world's largest company by next year.

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

The post Prediction: This will be the world's largest company by year-end 2026 (Hint: It's not Nvidia) appeared first on The Motley Fool Australia.

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

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

Nvidia (NASDAQ: NVDA) continued its streak of remarkable revenue growth in its third quarter (ended Oct. 26), as demand for its graphics processing units (GPUs) remains insatiable. However, there was one red flag in its report that investors should be aware of moving forward. Nonetheless, the stock jumped on the results, and it is now up more than 40% on the year.

Let's dig into Nvidia's results and prospects to see whether investors should buy the stock or take some profits.

Strong revenue growth, but...

Nvidia once again reported remarkable revenue growth, especially for a company of its size. For its fiscal Q3, its revenue soared 63% to $57 billion, easily topping the $54.9 billion consensus as compiled by LSEG. Adjusted earnings per share (EPS), meanwhile, climbed 67% to $1.30, coming in ahead of the $1.25 analysts expected.

Data center revenue was once again Nvidia's biggest growth driver in the quarter, with revenue jumping 66% to $51.2 billion, helped by momentum with its Blackwell chips. Within its data center segment, its networking portfolio also once again shone, with revenue surging 162% $8.2 billion. The company credited the growth to its NVLink interconnect solution, as well as its InfiniBand and Spectrum-X Ethernet products. Its report highlighted that Meta Platforms, Microsoft, and Oracle are all building huge AI factories using its Spectrum-X Ethernet switches.

On its call, Nvidia management said it saw no signs of an artificial intelligence (AI) bubble and that demand continues to exceed its expectations. Management noted that its cloud GPUs were sold out and that all generations of its GPUs are being fully utilized.

In a direct counter to famed investor Michael Burry's bearish argument on the AI infrastructure space, Nvidia also said that its older A100 GPUs that were shipped six years ago were still running at 100% utilization in large part thanks to its CUDA software platform. Burry had argued that the useful life of GPUs is only two to three years. Thus, cloud computing companies were overstating their earnings because their GPUs had been depreciating over the six years.

The company also noted that despite getting a license to sell its H20 chips in China, revenue was minimal in the quarter, with only about $50 million in sales.

Nvidia's other segments also produced solid results. Gaming revenue jumped 30% to $4.3 billion, while its professional visualization segment sales soared 56% to $730 million. Meanwhile, its automotive segment saw revenue climb 32% to $592 million. The strong auto performance was driven by self-driving solutions and partnerships like the one it established with Uber.

The company continues to be a cash-flow machine, generating operating cash flow of $23.8 billion and free cash flow of $22.1 billion in the quarter. It ended the quarter with cash and marketable securities of $60.6 billion and $8.5 billion in debt after buying back $12.5 billion in stock in the quarter.

Looking ahead, Nvidia guided for Q3 revenue to come in around $65 billion, which would represent 65% growth. The forecast does not assume any data center revenue coming from China.

While the report and guidance were strong, the one red flag with Nvidia's report was that the company continues to see its accounts receivable balloon. During the quarter, this metric climbed 89% year over year to $33.4 billion, outpacing its sales growth. Accounts receivable is how much money is owed to the company for products that have been shipped. Continued big jumps in this metric can be a sign of channel stuffing or collection problems. Given that Nvidia has started to make investments in its customers, like OpenAI and Anthropic, this makes it even more notable, as the chipmaker is essentially providing the cash these companies need to help buy its chips. This type of circular financing likely isn't sustainable over the long run. 

Is Nvidia stock still a buy?

While I think investors need to be aware of the potential pitfalls of Nvidia's circular financing and ballooning accounts receivable issue, I wouldn't dump the stock yet. The company is still seeing incredible growth and generating a ton of cash. The insatiable demand for its chips is real, and the company has created a wide moat through its CUDA software platform and NVLink interconnect solution, which helps its chips act like one powerful unit.

Whether this red flag becomes a problem in the future will likely come down to OpenAI. The AI model company is looking to spend aggressively on building out AI infrastructure, but it is currently losing money and burning through cash. However, it's also tied itself to nearly every major player in the AI space, perhaps making it too important to fail. However, this is not something that will play out until years down the road.

In the meantime, I'd expect Nvidia to continue to produce robust growth and continue to be one of the biggest beneficiaries of AI. As such, I view the stock as a buy, with the caveat that I'd continue to monitor this risk.

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

The post Nvidia: There was a red flag in its earnings report, but is the stock still a buy? appeared first on The Motley Fool Australia.

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Geoffrey Seiler 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 Meta Platforms, Microsoft, Nvidia, Oracle, and Uber 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 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.

Any time Warren Buffett's Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) adds a new investment to its stock portfolio, it tends to grab attention. And because Berkshire has been much more of a seller of stocks than a buyer of them over the past two years, the company's portfolio additions are likely to draw even more interest.  

Berkshire's latest Form 13F filing revealed that in the third quarter, the conglomerate opened an approximately $5 billion position in Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), which also happens to be one of my favorite stocks. Whether the soon-to-retire Buffett or his successor, Greg Abel, was behind that decision is unknown, but back in 2017, Buffett famously admitted that he wished he had invested in the company then called Google years earlier, when he saw that one of his insurance subsidiaries, Geico, was paying it $10 to $11 per click.

Let's look at what Berkshire Hathaway may see in Alphabet today, and why its portfolio managers decided now was the right time to invest.

A wide moat and growth opportunities

With the rise of the artificial intelligence (AI) trend, Alphabet's Google search engine is facing serious and intensifying competition for the first time in a very long time. However, the company still has a wide moat in this area. The search and AI chatbot businesses are currently merging together into what I'd describe as the "discovery" business. And in that space, Google has a couple of powerful advantages.

Before I get into those advantages, it should not be overlooked that Alphabet has developed one of the world's top foundational large language models (LLMs) in Gemini, which competes with the top models from OpenAI and others. Gemini, as a stand-alone app, has been taking market share, helped by the popularity of its Nano Banana AI image-editing tool.

But Alphabet's biggest advantage is distribution. It owns both the world's leading browser (Chrome) and the world's leading smartphone operating system (Android). Both command global market shares of more than 70%. It also has a search-revenue sharing deal with Apple that makes Google the default search engine on its devices. This essentially makes Alphabet the gateway to the internet for most people outside of China.

At the same time, the company has infused Gemini and other AI enhancements across its search solutions. AI features such as Lens, Circle to Search, and AI Overviews are helping drive query growth. Meanwhile, it has just started rolling out AI Mode, which lets users easily toggle between traditional search results and an AI chatbot experience. This is a powerful tool, as users don't have to change their behavior and use a separate app.

Alphabet's ad network is another huge edge. The company has spent decades building one of the most comprehensive digital ad networks on the planet -- one that can just as easily handle a local campaign from a small merchant as a global campaign from a major brand. Advertisers know its platform works, and they tend to stick with what they know will be successful. Many of its competitors, meanwhile, are still trying to figure out their business models and are burning through cash.

Beyond search

Outside of search, Alphabet also has what is arguably the best-positioned cloud computing platform on the planet. It has the most complete tech stack, which should be a long-term differentiator. Gemini is one of the world's leading foundational AI models, and the company has top software platforms, such as Vertex AI, to help customers create and customize their own AI models based on its Gemini foundational model. However, it doesn't stop there.

Perhaps the company's biggest edge in cloud computing comes from its custom AI accelerator chips, which it calls tensor processing units (TPUs). While other companies are starting to invest in custom AI chips, Alphabet has spent more than a decade developing its TPUs, which are now in their seventh generation. This has helped put it far ahead of the pack in its efforts, and gives it a big advantage in cost and power efficiency for certain types of AI workloads, particularly relative to more general-purpose graphics processing units (GPUs). As inference becomes a larger and larger share of the total AI-related computing workload, this will give Alphabet a huge advantage, especially given that access to enough electricity to power data centers is one of AI's biggest bottlenecks.

In addition to cloud computing, Alphabet also owns YouTube, the world's most-watched streaming service, which continues to generate solid growth. It also has some promising emerging bets. It has made real progress in quantum computing, meaningfully reducing that technology's error rate with its Willow chip, while its Waymo robotaxi business is expanding rapidly.

Trading at a forward price-to-earnings (P/E) ratio of around 25.5 times 2026 analyst estimates, Alphabet isn't expensive for a company with all it has to offer. As such, investors can feel comfortable following Berkshire Hathaway's lead and buying the stock now.

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

The post Warren Buffett's Berkshire Hathaway just bought one of my favorite stocks. Is it time to pile in? appeared first on The Motley Fool Australia.

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

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

Key Points

• Microsoft turned in a great quarter, with strength across all of its segments.

• Azure continues to lead the way with revenue growth of nearly 40%.

• The stock's valuation has increased, but it still looks like a solid long-term holding.

After being the only "Magnificent Seven" stock to trail the performance of the S&P 500 last year, Microsoft (NASDAQ: MSFT) has come out swinging in 2025. The company closed out its fiscal year with another strong earnings report, helping lift its stock price. The stock is now up more than 25% on the year, as of this writing.

Let's take a closer look at the tech giant's fiscal fourth quarter results and prospects to see if the stock's momentum can continue, or if it's time to take some profits.

Azure leads the way again

Microsoft's cloud computing unit, Azure, was in beast mode to close out its fiscal year, reporting a whopping 39% increase in revenue. It was the eighth straight quarter that Azure revenue has risen by 30% or more, and well above its forecast for 34% to 35% growth. The company credited the strong performance to accelerated growth in its core infrastructure business, primarily from its largest customers.

Despite the huge growth, Microsoft said demand still remains above its current capacity and that it will be capacity-constrained through the first half of its fiscal year. It projected Azure revenue to grow by 37% in constant currencies in fiscal Q1.

In addition to artificial intelligence (AI), the company also called out quantum computing as the next big potential accelerator for cloud computing growth. It is also deploying the world's first operational Level 2 Quantum computer in partnership with Atom Computing.

Overall "intelligent cloud" revenue, which includes Azure, climbed 26% year over year to $29.9 billion. GitHub was another strong contributor to this segment, with GitHub Copilot users soaring 75% year over year to more than 20 million users.

Other segments also showed strong growth. The productivity and business processes segment -- home to Microsoft 365 and LinkedIn -- saw revenue climb 16% year over year to $33.1 billion. Growth was solid across its four main solutions in the segment (in the table below), led by a 21% jump in Microsoft 365 Consumer product revenue, helped by an earlier price increase and 8% subscriber growth. Microsoft's family of Copilot apps surpassed 100 million monthly active users across both its commercial and consumer solutions. Dynamics products, which is part of the segment, increased revenue by 18%, driven by Dynamics 365 revenue growth of 23%.

Data source: Microsoft press release.

Revenue in its "more personal computing" segment -- home to Windows and Xbox -- rose 9% year over year at $13.5 billion. The search and news advertising business, which is also part of the segment, led the way with revenue climbing 21%. The company said the growth was driven by increases in both volume and revenue per search, as well as third-party partnerships. Windows OEM and device revenue, meanwhile, increased by 3%.

Microsoft's total revenue jumped by 18% year over year to $76.4 billion, with earnings per share (EPS) climbing 24% to $3.65. The results easily topped analyst estimates calling for $73.8 billion in revenue and $3.37 in EPS, as compiled by LSEG.

Looking ahead, the company guided for fiscal Q1 revenue of between $74.7 billion to $75.8 billion, which was above the $74.1 billion consensus.

The company plans to spend $30 billion in capital expenditure (capex) in fiscal Q1 and said full-year capex would be greater than fiscal year 2025, although grow at a slower pace. It will also put more emphasis on shorter-lived assets, like graphics processing units (GPUs), which will translate more directly to revenue.

Is the stock a buy?

While Microsoft has been seeing solid growth, it took it to another level in fiscal Q4. Nearly everything came together in the quarter, leading to one of the company's best quarterly reports in a long time.

Azure is leading the way, and the opportunity in front of it remains huge. However, cloud computing wasn't Microsoft's only growth driver. Its AI-assistant copilots are seeing solid momentum, helping drive growth in other parts of its business.

Looking at valuation, the stock now trades at a forward price-to-earnings (P/E) ratio of 35 times based on fiscal 2026 analyst estimates. While that isn't cheap, its PEG (price/earnings-to-growth) ratio of under 1.2 times is reasonable for a company seeing accelerating revenue growth that also owns a nice stake in OpenAI. Stocks with positive PEG ratios below 1 are generally viewed as undervalued, although growth stocks will often trade above this level.

Overall, I think Microsoft remains a solid long-term holding, and the growth it has been putting up is exciting. However, I wouldn't necessarily chase the stock at its current valuation, and would prefer it on a pullback.

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

The post Microsoft stock soars on the back of AI. Can the momentum continue or is it too late to buy the stock? appeared first on The Motley Fool Australia.

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Geoffrey Seiler 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 Microsoft. 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 Microsoft. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) once again defied its critics who continue to believe the company will be a loser in artificial intelligence (AI). Not only did the company once again produce strong search revenue growth in its most recent earnings report, but that growth accelerated. In addition, Alphabet said that AI was positively impacting every part of its business.

With cloud computing demand continuing to surge, the company upped its capital expenditure (capex) budget by an additional $10 billion to build out its data center capacity. It said in its Q2 earnings report that it now plans to spend $85 billion in capex this year, and anticipates spending even more in 2026, given the strong demand it's seeing for Google Cloud products and services.

AI driving growth

AI was the biggest growth driver behind Alphabet's strong results, with cloud computing once again leading the way. Google Cloud revenue surged 32% to $13.6 billion in the second quarter, while segment operating income skyrocketed from $1.2 billion a year ago to $2.8 billion. However, the company said its current capacity constraints could extend into 2026, despite its large capex investments. Ultimately, that's not a bad problem to have, as it's just a sign of how strong demand is.

Alphabet called out its Gemini 2.5 models as catalysts for growth, saying that 9 million developers have now built with Gemini. It also noted how leading AI research labs are turning to use Google's Tensor Processing Units (TPUs) as their AI chips of choice.

While cloud computing is leading the way with growth, all eyes continue to be on Alphabet's core Google Search business. On that front, the company once again delivered. Google Search revenue climbed 12% to $52.2 billion, which was an acceleration from the 10% growth it saw in Q1. Alphabet said over 2 million people in more than 200 countries use AI Overviews monthly, while AI Mode has over 100 million monthly active users, despite only being launched in the U.S. and India so far. It said that AI is contributing significantly to increased search usage, with AI Overviews now driving over 10% more queries globally.

Meanwhile, the Gemini app now has more than 450 million monthly active users. Alphabet said the number of daily requests on the app jumped over 50% sequentially. The company also called out its strength in multimodal search, with Google Lens and Circle to Search. It said visual searches grew 70% year over year, and that many are shopping queries.

YouTube continues to deliver strong results, with ad revenue rising 13% to $9.8 billion. YouTube, along with Google One (cloud storage) and Music, also helped drive a 20% increase in subscription and device revenue to $11.2 billion. The company said Shorts are becoming a significant contributor, and that the format allows for more ad opportunities on average. It recently introduced Veo 3 to Shorts; the AI tool can create videos from photos and add generative effects to make content creation easier on the platform.

Alphabet is also continuing to expand its Waymo robotaxi business. It recently launched in Atlanta and is currently testing the service across 10 cities, including New York and Philadelphia. It hopes to launch the service in all 10 cities in the near future.

Overall, Alphabet grew total quarterly revenue by 14% (13% on a constant currency basis), to $96.4 billion. Earnings per share jumped 22% year over year to $2.31. The results easily surpassed analyst consensus estimates (as compiled by LSEG), which were looking for EPS of $2.18 on revenue of $94 billion.

Looking ahead, Alphabet said it was cautious on the advertising outlook because it's lapping strong spending in the financial services vertical last year and will see no benefit from political ad spending this year. However, it does expect to see a tailwind in Q3 from current foreign exchange rates.

Is it time to buy the stock?

Alphabet yet again turned in a strong quarter, demonstrating that the company is on track to be an AI winner. It continues to see solid growth in its search business, though its new AI Mode is currently only in two countries. Gemini has become a top AI model. And with the huge distribution edge it has with the Chrome browser and Android operating system, the company is well positioned in a shifting AI-search landscape.

At the same time, Google Cloud continues to be a monster, generating robust revenue growth; it has scaled up to the point that it now has incredible operating leverage. Throw in the strength at YouTube and the emerging Waymo robotaxi business, and Alphabet is cooking.

Best of all, you can still get into Alphabet stock on the cheap. The stock only trades at a forward price-to-earnings ratio (P/E) of around 19 times 2025 analyst estimates, and a forward price/earnings-to-growth ratio (PEG) of 0.8. (Stocks with PEG ratios below 1 are typically considered undervalued.)

With AI helping drive growth and Alphabet's AI push only accelerating, now is a great time to buy the stock.

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

The post Alphabet's AI push is accelerating — Is the stock a buy now? appeared first on The Motley Fool Australia.

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Geoffrey Seiler 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.

Tesla (NASDAQ: TSLA) gets most of the media attention when it comes to robotics, thanks to its humanoid robot prototype, Optimus, and Elon Musk's bold claims. In fact, last year Musk said that Optimus could eventually be worth more than everything else from Tesla combined.

But while Tesla talks about the future of robotics, Amazon's (NASDAQ: AMZN) robots are already delivering the goods -- both literally and figuratively. In fact, Amazon is already the largest manufacturer and operator of mobile robotics in the world.

So if you're looking for the real leader in artificial intelligence (AI) robotics, it's Amazon.

1 million robots and counting

Amazon got into the robotics space in 2012 when it acquired Kiva Systems for $775 million. While a small deal at the time, it is really starting to pay dividends for Amazon. Earlier this month, the company surpassed 1 million robots operating inside its fulfillment centers. These robots now assist with about 75% of all customer orders placed through Amazon.com.

Those are some huge numbers, and they are likely only going to get bigger. The company is soon expected to have more robot workers than human ones. Amazon's robots also aren't just moving packages around. They're sorting inventory, lifting heavy loads, unloading trailers, and increasingly handling complex warehouse tasks.

AI gives Amazon an advantage

What sets Amazon apart from other robotics companies is how it's using AI to make its robots smarter to improve efficiency. Its Lab126 team is working on a new generation of warehouse robots that can follow voice commands, adjust to problems in real time, and even fix themselves when something breaks.

Amazon also just introduced an AI model called DeepFleet to manage and coordinate its entire robot fleet. The goal is to move packages faster and at lower cost by making better decisions about what robots should do and when.

These robots also go well beyond moving boxes. They can find specific parts, reroute if an aisle is blocked, and unload trucks without needing everything pre-programmed. Some can even spot damaged items before they're shipped, which should reduce returns and improve customer satisfaction.

Robots also don't take breaks or call in sick, which means they can keep working around the clock. Over time, this should lead to faster shipping, lower labor costs, and stronger operating margins in Amazon's core e-commerce business.

AI in delivery, inventory, and beyond

Robots are just part of Amazon's AI efficiency story. Amazon's new Wellspring system uses AI to map out hard-to-reach delivery locations, such as large apartment complexes and office parks. The data can also be integrated into smart glasses for real-time navigation. This all helps improve delivery times, letting drivers complete more routes per shift.

The company is also using AI to fine-tune its inventory and delivery network. Through its SCOT (Supply Chain Optimization Technology) system, Amazon is now able to forecast demand for specific products by taking into account things like regional preferences, weather, and price sensitivity. Ultimately, this keeps inventory closer to customers, helping reduce shipping costs.

These improvements are already translating into better operating performance. Last quarter, Amazon's North America segment grew operating income by 16% on just 8% revenue growth. That's great operating efficiency.

Is Amazon stock a buy?

Of course, robotics is only one part of the Amazon story. Its cloud computing unit, Amazon Web Services (AWS), is its largest business by profitability, and its fastest growing. Customers continue to turn to Amazon's cloud infrastructure to build, train, and scale their own AI models and apps. Meanwhile, Amazon has developed its own custom AI chips, which help give it a cost advantage.

It also has a fast-growing sponsored ads business that is seeing strong growth. When investors think of digital advertising platforms, they generally think of Alphabet's Google search engine or Meta Platforms' social media apps, but Amazon is actually the third-largest platform in the world. Meanwhile, the company is using AI to help third-party merchants both improve listings as well as better target potential customers.

While the stock has rebounded off its lows this year, the company still trades at a reasonable valuation, with a forward price-to-earnings (P/E) ratio of around 36 times this year's analyst estimates. That's still below its historical average.

Between its strong cloud computing growth, leading e-commerce operations, and the lead it has in automation and robotics, Amazon stock looks like a solid long-term buy.

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

The post Prediction: This company will be the robotics leader, not Tesla appeared first on The Motley Fool Australia.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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. Geoffrey Seiler has positions in Alphabet. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Meta Platforms, and Tesla. The Motley Fool Australia has recommended Alphabet, Amazon, and Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

When it comes to which "Magnificent Seven" stock is the best to buy, I think the answer is clear: Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG).

While there is some concern that artificial intelligence (AI) will disrupt its core search business, I don't see it playing out the way many fear. If anything, the market is missing just how much potential upside Alphabet still has. This includes the areas of search and AI infrastructure, as well as in new verticals like autonomous driving and quantum computing.

A plethora of opportunities ahead

One investor concern is that AI chatbots will replace search. It's easy to see why some investors worry, but AI queries are significantly more expensive to run than traditional searches. That's why products like ChatGPT have paid tiers and query limits. Alphabet's ad-supported search model, meanwhile, still dominates, and not just because it's unlimited and free. Alphabet owns the distribution. Its Android smartphone operating system and Chrome browser are both market share leaders, while it has a revenue-sharing agreement with Apple to be the exclusive default search engine for its devices. It even has revenue-sharing arrangements with smaller third-party browsers like Opera. That's a moat that no chatbot is going to unseat overnight.

Alphabet's ad network edge should also not be overlooked. The company has spent decades building one of the largest and most effective digital advertising platforms in the world. Meanwhile, its self-serve ad tools are easy to use, making it simple for businesses of all sizes to run effective campaigns. Local businesses can create listings for free and promote them with just a few clicks, while large enterprises can run complex campaigns.

And when it comes to monetization, Alphabet is just getting started. Only about 20% of its searches today have ads, but that could change in the future. Meanwhile, with its new AI-powered search experience, Alphabet is rolling out commerce-related features like "Shop by AI," virtual try-ons, and dynamic ticket searches across platforms. These tools don't just improve the user experience; they create new monetization opportunities.

At the end of the day, search and AI chatbots are likely to be complementary. AI chatbots are great for many tasks, but they often fulfill different needs than traditional search, and the monetization model for AI chatbots is still evolving. There is a very good chance they won't be completely free and that many users will stick with free, ad-based search. Also not to be overlooked is that with its new AI mode, Google lets users toggle between AI and search without having to leave an app, which is a nice feature.

On the infrastructure side, Google Cloud is hitting its stride. The cloud computing business has now reached scale and is showing strong operating leverage. Last quarter, the segment saw revenue growth of 28%, while operating income surged 142%.

Google Cloud is benefiting from customers using its Vertex AI platform to build, deploy, and manage their AI models all in one place. At the same time, they can use Alphabet's leading Gemini foundational model as a jumping-off point to develop their own models and tools. Google Cloud has a strong leadership position in both data analytics, with tools like BigQuery and Kubernetes, which are software packages that bundle apps with everything they need to run.

Not to be overlooked are Alphabet's custom-built Tensor Processing Units (TPUs). These custom AI chips have been designed specifically to optimize AI workloads within Google Cloud's TensorFlow framework. As such, these chips can be both more powerful and energy-efficient than off-the-shelf graphics processing units (GPUs). That means lower costs not just for customers but for Google Cloud, as well.

Alphabet even rents out its TPUs through Google Cloud, and it was reported that OpenAI -- one of Nvidia's biggest customers -- has been testing its TPUs. While OpenAI isn't ready to deploy TPUs at scale just yet, the fact that it's even testing Alphabet's chips says a lot about its competitiveness.

Moving forward, Alphabet will have an opportunity in the AI chip space to take some market share, especially in inference, which is less technically demanding than AI model training. The company just launched Ironwood, a TPU designed specifically for inference, and the inference market is eventually expected to become much larger than the AI training market. As such, even modest gains in inference workloads would directly translate into higher cloud usage and better margins for Alphabet.

And it doesn't stop there. Alphabet is also building a lead in autonomous driving. Waymo, Alphabet's robotaxi subsidiary, is seeing usage skyrocket, and it's expanding into new cities. It's also recently partnered with Uber for fleet services and distribution. In Austin, Waymo vehicles were more active than 99% of Uber's human drivers, showing its strong potential as it scales across the country. Waymo isn't profitable yet, but the first-mover advantage is real, and if this market scales as expected, the upside is massive.

Alphabet is also a leader in quantum computing with its Willow chip. One of the biggest issues with quantum computing is that it is error-prone, but Willow has shown that it can exponentially reduce errors as it scales up. This is a big breakthrough in one of the most promising emerging fields of technology, and while usage is likely many years away, it is another example of Alphabet's technology prowess.

A cheap stock

Despite all of this, Alphabet trades at a forward price-to-earnings (P/E) ratio of just over 18 times 2025 analyst estimates. That's a huge disconnect for a company with leading positions in search, video (YouTube), mobile (Android), cloud computing, AI infrastructure, autonomous vehicles, and quantum computing. It's the cheapest AI play among the "Magnificent Seven" and arguably the one with the most room to run.

While the market worries about disruption, Alphabet is executing on multiple fronts and planting seeds in massive future markets. With its unmatched distribution in search, an expanding cloud platform, powerful TPUs, and growing bets in areas like autonomous driving and quantum computing, this is a stock that looks undervalued.

For long-term investors looking for a cheap technology leader, Alphabet is the clear pick from the "Magnificent Seven."

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

The post Which is the best "Magnificent Seven" stock to buy right now? appeared first on The Motley Fool Australia.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet and Opera. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Apple, Nvidia, and Uber Technologies. The Motley Fool Australia has recommended Alphabet, Apple, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

When it comes to cloud computing, Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) are the clear leaders. Both are seeing strong growth, both are leaning heavily into artificial intelligence (AI), and both are investing billions to meet increasing demand.

But if I had to pick just one stock to own right now, I'd go with Amazon. Let's break down why.

Amazon

While best known for its e-commerce operations, Amazon basically invented the cloud computing industry due to its own struggles trying to scale up its infrastructure. Today, Amazon Web Services (AWS) is the largest cloud computing provider in the world, with nearly 30% market share.

AWS is also both Amazon's most profitable segment and fastest-growing, with revenue climbing 17% last quarter. AI has been a big reason for this. Customers are using AWS solutions like Bedrock and SageMaker to help them build and run their own AI models and apps. Bedrock gives companies access to foundation models they can customize, while SageMaker is more of an end-to-end solution. Once these models are built, they then run on AWS infrastructure, locking customers into a recurring, high-margin business.

On top of that, Amazon has built its own custom AI chips through its Annapurna Labs unit. Trainium is designed to train large language models (LLMs), while Inferentia handles inference. These chips are optimized for performance and cost, consuming less power and delivering better results than general-purpose graphic processing units (GPUs) for specific AI tasks. This gives Amazon a cost advantage over rivals like Microsoft and should lead to better operating leverage as usage scales.

Beyond the cloud, Amazon is also using AI to improve its e-commerce business, as well. The company is now using agentic AI to power autonomous warehouse robots. These robots continue to become more sophisticated and can perform multiple tasks. Some can even spot damaged goods before they're shipped, improving customer satisfaction and reducing costly returns. It recently just surpassed 1 million robots in its warehouses.

It's also using AI to improve efficiency in its logistics operations. AI is helping map out better routes, while mapping tools like Wellspring can help delivery drivers better navigate complicated drop-offs at places like large apartment complexes.

Amazon is also using AI tools to help third-party sellers better market products and target customers more effectively. It's worth noting that its sponsored ad business has become one of the largest digital ad platforms in the world and is growing quickly.

Microsoft

There's no denying that Microsoft is a powerhouse. The company has long been the dominant player in worker productivity software with programs such as Word, Excel, and PowerPoint, and its Windows operating system powers most non-Apple computers.

However, Microsoft's cloud computing unit Azure has been its big growth driver, with AI accelerating that momentum. Last quarter, Azure revenue jumped 33% year over year (35% in constant currency), with AI services making up nearly half of the growth.

Azure is currently firing on all cylinders, but Microsoft has been running into capacity constraints. To address that, Microsoft plans to increase its capital spending in fiscal 2026. It will also shift more investment into shorter-lived assets like GPUs and servers, which it said are more directly tied to revenue.

Microsoft made an early and aggressive investment in OpenAI, and the ability to give customers access to the start-up's leading LLM is one of the biggest reasons why Azure has been taking market share in the cloud computing space. Microsoft has also deeply integrated OpenAI's technology into its own products. For example, the technology is used to help power its AI assistant copilots in Word, Excel, and other productivity tools. At $30 per month per enterprise user, Microsoft's copilots have been a nice growth driver for the company.

Microsoft has also expanded AI beyond Office 365. It's added new copilots focused on cybersecurity and even launched Muse, an AI model designed to help develop and preserve older video games. Meanwhile, its GitHub Copilot has been one of its best-performing, helping drive solid growth for its code-hosting and collaboration platform.

However, the company's relationship with OpenAI has become strained. Microsoft is no longer the exclusive data center provider for the company, and the two have been fighting over the terms of Microsoft's investment, including whether it will get access to the intellectual property of OpenAI's pending acquisition of Windsurf.

Microsoft's investment in OpenAI is one of the most attractive parts of its story. It's currently entitled to 49% of OpenAI Global LLC's profits, capped at roughly 10 times its nearly $10 billion investment. But OpenAI is looking to renegotiate the deal as it looks to restructure into a for-profit company.

The better buy

Both Amazon and Microsoft are great companies with strong cloud computing platforms and big AI opportunities. However, Amazon has the edge.

Amazon's biggest advantage is that its cloud computing platform is vertically integrated. It can provide a wide range of services from custom chips to infrastructure to high-margin services. Its Inferentia and Trainium chips are helping lower its cloud computing costs, and AWS offers a wide array of foundation AI models, both from itself and other leading tech companies.

Microsoft, meanwhile, is reliant on expensive chips from Nvidia and AI models from OpenAI, with whom tensions have been growing. Microsoft is looking to develop its own AI chips, but it was recently reported that its next-generation Maia AI chip has been delayed. Azure has been growing more quickly than AWS, but it faces a lot more unanswered questions at the moment.

Microsoft is a solid stock to own long-term, but right now, Amazon is the better buy.

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

The post Amazon vs. Microsoft: Which cloud computing giant is the better buy? appeared first on The Motley Fool Australia.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Geoffrey Seiler 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 Amazon, Apple, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Amazon, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Technology stocks have been the driving force in the market for more than the past decade, and with the advent of artificial intelligence (AI), that should continue well into the future. Let's look at five leading tech stocks to buy right now.

1. Nvidia

When it come to AI, Nvidia (NASDAQ: NVDA) has been the biggest beneficiary thus far, and it should continue to be a big winner in the space. Its graphics processing units (GPUs) are the backbone of AI infrastructure due to their fast processing speeds, and are the chips that power AI workloads.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Nvidia's wide moat, however, comes from its CUDA software platform. It originally created the platform as a way to expand the market for its GPUs beyond video games, where its chips are used to speed up graphics rendering. Early on, it pushed the software to universities and research labs, where it became the software that developers learned to program GPUs. It later built tools and libraries on top of CUDA to improve the performance of its chips in AI.

The company's dominance was on display in the first quarter, when it captured a 92% market share in the GPU space. Nvidia continues to be one of the best ways to play the AI infrastructure boom.

2. Amazon

While Amazon (NASDAQ: AMZN) is best known as the world's largest e-commerce company, that's not its largest business by profitability. That distinction falls to its cloud computing segment Amazon Web Services (AWS). The company created the cloud and infrastructure-as-a-service model after its struggles ramping up its own data center, and it remains the market share leader today.

However, what's most impressive with AWS are its inner workings. Through its Annapurna Labs subsidiary, the company developed its own custom AI chips that give it a cost advantage.

It's Bedrock and SageMaker platforms help users customize, build, and run AI models on its infrastructure. This is leading to robust growth for AWS, and the company is investing aggressively to help keep up with demand.

On the e-commerce side of its business, Amazon is using AI to drive efficiencies and lower costs in its logistics and warehouse operations. This is helping increase margins and boost profitability. Given its opportunities, Amazon looks like a strong buy at current levels.

3. Meta Platforms

The social media and messaging company Meta Platforms (NASDAQ: META) is using AI to drive strong revenue growth. It developed its own proprietary Llama model, which it is using to boost user engagement on its social media platforms. This, in turn, is leading to more ad inventory.

It also developed AI tools that let advertisers create better campaigns and improve targeting, which is resulting in more effective ads and higher prices for them. These dynamics could be seen last quarter, when ad revenue rose 16% on the back of a 5% increase in ad impressions and a 10% jump in average price per ad.

What is most exciting about the Meta story, though, are two emerging opportunities. It just started serving ads on its popular WhatsApp messaging app, which has 3 billion monthly users. In addition, it is building out a new social media platform, Threads, on which it is also just beginning to display ads. Together, this is a huge monetization opportunity for the company.

4. Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing (NYSE: TSM) is the No. 1 semiconductor contract manufacturer in the world. Today, most leading chip companies, like Nvidia, just design chips and hire out companies like TSMC to make them.

In order for a foundry to be profitable, it needs technological expertise, high utilization rates at its factories, and large scale. As rivals struggled with this, TSMC has become the go-to maker of advanced chips and a vital partner to leading AI chipmakers. This has also allowed it to raise prices, which is expanding its gross margins.

Today, TSMC works closely with leading AI chipmakers to expand capacity to meet rising demand. As AI infrastructure spending continues to grow, the company is set to be a strong long-term winner.

5. Netflix

The video streamer Netflix (NASDAQ: NFLX) has a big opportunity as it turns to advertising. Today, Netflix generates most of its revenue from subscriptions, but its lower-priced ad-supported tiers are beginning to see strong momentum. And it added more live programs, such as WWE Monday Night Raw, which also show advertising.

On the back end, the company introduced its adtech platform in the U.S. and Canada earlier this year, with plans to expand it to 10 more markets by year-end. It's also rolling out new targeting and measurement tools, with plans to layer in machine-learning ad optimization and new ad formats over time.

Revenue from advertising is expected to double this year, but the bigger story is the foundation it's building for even more growth in 2026 and beyond.

Ad sales should become a much larger part of Netflix's revenue stream in the years ahead as it builds out its ad-supported tiers. That should bode well for its stock.

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

The post 5 Leading Tech Stocks to Buy in 2025 appeared first on The Motley Fool Australia.

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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. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Geoffrey Seiler 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 Amazon, Meta Platforms, Netflix, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia has recommended Amazon, Meta Platforms, Netflix, 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.

While not all have stayed there, there have been three tech giants that have crossed the $3 trillion market cap threshold: Microsoft, Nvidia, and Apple. The more compelling question now is: which companies are best positioned to be the next to join the $3 trillion club? In my view, the most likely candidates are Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), and Meta Platforms (NASDAQ: META).

Let's take a closer look at these three stocks and see what it will take for them to get there.

1. Amazon ($2.3 trillion market cap)

With nearly a $2.3 trillion market cap, Amazon is the closest company to join the $3 trillion club. It would need to see its stock price rise by about 33% to reach this exclusive club. The probability of this happening in the next few years looks promising.

The company is the market leader in two important fields: cloud computing and e-commerce. Its cloud computing unit, Amazon Web Services (AWS), is its largest business by profitability. It's also its fastest-growing segment, with revenue jumping 17% last quarter.

AWS is benefiting from the trend in artificial intelligence (AI) in two main ways. One is that customers are flocking to use its services, such as Bedrock and Sagemaker, to help customize, build, and deploy AI models and apps. They are then running them on its data center infrastructure, leading to a nice recurring revenue stream. Amazon has also developed its own custom AI chips through an in-house subsidiary, which helps give it a cost advantage. With the company investing heavily in AI infrastructure to keep up with demand, this is a nice advantage.

Amazon's e-commerce business, meanwhile, is a solid high single-digit to low double-digit revenue grower. However, the company is using AI to help make both its logistics and warehouse operations more efficient, which is leading to lower costs and increased profitability in this segment. It is also using AI to help power its high-margin sponsored ad business, which has become the fastest-growing part of its e-commerce segment.

With Amazon's stock trading at one of the more attractive valuations in its history, the path to hitting $3 trillion over the next few years looks pretty clear, barring a big recession.

2. Alphabet ($2.1 trillion market cap)

Not trailing far behind Amazon in market cap is Alphabet at just over $2.1 trillion. To reach $3 trillion, the stock would have to rise a little more than 42% from current levels. While I think the likelihood of this happening in the next few years is high, the company admittedly has some obstacles as well.

The biggest hurdle to Alphabet reaching a $3 trillion market cap would be if the company faced harsh penalties from its antitrust trial, such as having to sell off its Chrome browser or Android smartphone operating systems or even being forced to break up. However, it does appear that U.S. District Judge Amit Mehta is leaning more toward lighter penalties, given the rise of AI competition.

Therein lies the other risk for Alphabet, with new competition coming from AI chatbots like ChatGPT and Grok, as well as AI-powered search engines from companies like PerplexityAI. Investors are worried about the impact that AI will have on Google's search dominance, and there is certainly a shift occurring.

However, Google does have a couple of nice advantages. First, it has strong distribution through Chrome and Android, as well as deals to be the default search engine on Apple devices and other browsers. Second, Alphabet has spent decades building one of the most expansive ad networks on the planet, which allows it to serve both major brands and small local businesses.

Meanwhile, the company is no slouch in AI. Its Gemini model has received strong benchmark scores, and it's been focusing on AI features that will help with monetization, such as virtual outfit try-ons and agentic AI-powered checkout. While many AI start-ups will be struggling to scale and turn a profit, Alphabet is well positioned to turn its AI investments into earnings much sooner.

Throw in Alphabet's fast-growing cloud computing business, its emerging Waymo robotaxi business, and leading YouTube streaming platform to go along with one of the cheapest valuations in the mega-cap tech space, and the company has a solid path to joining the $3 trillion market cap club.

3. Meta Platforms ($1.8 trillion market cap)

With a market cap of just under $1.8 trillion, Meta Platforms has the most work to do to get to a $3 trillion market cap. The stock would have to climb about 72% from current levels to join the exclusive club. However, I would not count it out.

Meta Platforms was the fastest-growing of the the three companies last quarter, with its revenue jumping 16%. AI is helping power its results, with the company seeing increased user engagement and better ad performance being driven by its proprietary Llama AI model. This, in turn, is leading to more ad inventory and higher prices. Last quarter, ad impressions rose 5%, while ad prices jumped 10%.

However, what can really drive Meta's stock forward to that $3 trillion market is new monetization opportunities. Just this month, the company announced it will begin to serve ads on its popular WhatsApp messaging platform. With more than 3 billion monthly users, including more than 100 million in the U.S., these new ads represent a huge opportunity. The ads will appear in the status section of the messaging app and will be visible through the updates tab.

In addition, the company is in the midst of building out another social media platform called Threads. The platform is growing quickly and has more than 350 million active monthly users, as last reported. It has also just started to gradually serve ads on Threads, as well.

Between more ad inventory, higher ad prices due to improved effectiveness, and Meta just beginning to serve ads on two platforms it hasn't served ads on before, the company has the opportunity to reach the $3 trillion mark in the next few years.

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

The post Which 3 tech giants could cross the $3 trillion mark next? appeared first on The Motley Fool Australia.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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. Geoffrey Seiler has positions in Alphabet. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended 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.

Even with new export controls cutting off a vital market in China, demand for advanced chips used to power artificial intelligence (AI) infrastructure remains high. While there is a growing market for custom AI chips, the most commonly used chips for running AI workloads are graphics processing units (GPUs). This name stems from the fact that these chips were originally designed to speed up graphics rendering in video games.

Due to their powerful processing speeds, GPUs are now used for a variety of high-power computing tasks, such as training large language models (LLMs) and running AI inference. The GPU market is basically a duopoly at this point, headed by Nvidia (NASDAQ: NVDA) and Advanced Micro Devices (NASDAQ: AMD). The question many investors ask, though, is: Which stock is the better buy?

The leader versus the challenger

The unquestioned leader in the GPU space is Nvidia, which commands an over 80% market share. Not only is Nvidia larger than AMD, but it's also been growing its data center revenue more quickly. Last quarter, Nvidia grew its data center revenue by 73% to $39.1 billion, while AMD's data center revenue jumped 57% to $3.7 billion.

Nvidia's advantage comes from its software platform, CUDA. It launched the free software platform all the way back in 2006 as a way to let developers program its GPUs for different tasks in an effort to expand beyond the video game market. The company pushed the use of the software to universities and research labs, which made it the software program upon which developers were taught to program GPUs.

While AMD made some half-hearted efforts with software, it didn't launch a true CUDA competitor until around 10 years later with ROCm. By that time, CUDA had already become the default software used to program GPUs, and ROCm was still behind with less hardware support, limited documentation, and more difficulty to install and use. Meanwhile, Nvidia has since expanded upon its software lead through a collection of AI-specific libraries and tools built on top of CUDA, called CUDA X, which helps bolster the performance of its chips for AI tasks.

Ultimately, CUDA has given Nvidia a big network effect advantage. The more CUDA is used, the more tools and libraries are built for it, making Nvidia GPUs all the stickier. While ROCm continues to improve, it still trails CUDA, especially for use in LLM training.

However, where AMD has been able to gain more traction is in AI inference. Training AI models is a much more difficult task, which is why Nvidia has dominated this market and where its CUDA advantage really shines through. Inference, on the other hand, is easier, and there is more of a focus on things such as latency, power consumption, and cost. Due to its competitive positioning, AMD's GPUs tend to be less expensive than those from Nvidia, and while its ROCm software trails CUDA, it is generally considered good enough for running most AI inference workloads.

The good thing for AMD is that the inference market is eventually expected to become the much larger of the two markets. In fact, some pundits, including venture capitalist and former Facebook executive Chamath Palihapitiya, have said the inference market could be up to 100 times larger than the market for training AI models. But whether the inference market becomes 2 times bigger or 100 times than the training market, AMD could have an opportunity to gain some market share.

Which stock is the better buy?

When it comes to valuation, both stocks trade in a similar range. Nvidia has a forward price-to-earnings (P/E) ratio of just over 32 times this year's analyst estimates, while AMD is at 28 times. Nvidia, meanwhile, is growing its revenue more quickly.

NVDA PE Ratio (Forward) data by YCharts

With their valuations similar, the key factor to which stock will outperform in the coming years will largely come down to growth. Nvidia is the clear leader in the GPU space and should continue to see strong growth as the AI infrastructure buildout continues. However, its AI data center revenue is now 10 times that of AMD. so the law of large numbers can come into play.

As AI infrastructure begins to shift more toward inference, AMD should have a nice opportunity to take some market share. Nvidia still has the lead in inference, but the gap is narrower compared to training. AMD also doesn't need to take a lot a of share in what could be a rapidly growing market to really make a big difference off its much smaller AI data center revenue base. As such, there is a good possibility it could begin to grow more quickly than the much bigger Nvidia. If that happens, I think its stock will outperform.

Ultimately, investors can own both stocks, which is probably a good idea. With AI infrastructure spending still appearing to be in its early days, both should be winners, although I do think AMD has more potential upside. The biggest risk, meanwhile, would be if AI spending unexpectedly starts to slow.

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

The post Better artificial intelligence stock: Nvidia vs. AMD appeared first on The Motley Fool Australia.

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Geoffrey Seiler 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 Advanced Micro Devices and Nvidia. The Motley Fool Australia has recommended Advanced Micro Devices 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.

Only one "Magnificent Seven" stock lagged the performance of the S&P 500 (SNPINDEX: ^GSPC) last year, and that was Microsoft (NASDAQ: MSFT). However, after reporting strong fiscal Q3 results and issuing upbeat guidance, the software giant is well on its way to having a better 2025.

Let's take a look at the company's most recent report and guidance to see if the stock can continue to rally and shed its laggard status in 2025.

Azure continues to drive growth

While best known for its suite of software productivity tools, such as Excel and Word, as well as its Windows personal computer (PC) operating system, it is the company's cloud computing unit Azure that has become its biggest growth driver in recent years. This continued to be the case last quarter.

For fiscal Q3, Azure revenue climbed 33%, or 35% in constant currencies. It marked the seventh straight quarter of 30% or more revenue growth at Azure and was above its earlier forecast for growth of between 31% to 32% in constant currencies. The company credited capacity coming online quicker than expected, while noting that it saw outperformance in its non-AI (artificial intelligence) business. AI services, meanwhile, accounted for nearly half of Azure's overall growth.

Overall "intelligent cloud" revenue, where Azure sits, climbed 21% year over year to $26.8 billion. GitHub also continues to be a strong contributor to this segment, with GitHub Copilot users quadrupling year over year to more than 15 million users.

Looking ahead, the company forecast Azure revenue to grow by 34% to 35% in constant currencies in fiscal Q4, driven by strong demand for its portfolio of services. It noted that demand is currently growing a bit faster than expected, which will lead to some capacity constraints after June.

Microsoft plans for its fiscal 2026 capital expenditure (capex) budget to be higher than fiscal 2025, but to grow at a slower rate. It plans to invest in a greater mix of short-lived assets, which it said will better directly correlate to revenue than long-lived assets. This essentially means that it plans to invest more in things like servers and graphic processing units (GPUs) next fiscal year, as opposed to real estate and data center buildings.

Microsoft's other segments, productivity and business processes, where Microsoft 365 and LinkedIn reside, saw revenue climb 10% year over year to $29.9 billion. Growth was solid across its four main solutions in the segment.

Data source: SEC filings.

Microsoft said that Microsoft 365 Copilot customer adoption has tripled year over year, and that deal sizes continue to grow. It added that a record number of customers returned to buy more seats in the quarter. Meanwhile, its cloud-based business applications platform, Dynamics 365, continued to see strong adoption.

Revenue in its "more personal computing" segment, home to Windows and Xbox, rose 6% year over year at $13.4 billion. Its search and news advertising business, which is also part of the segment, led the way with 21% revenue growth. The company said the growth was driven by usage from third-party partnerships. Windows OEM and device revenue, meanwhile, rose 3%.

Microsoft's total revenue increased by 13% year over year to $70.1 billion, with earnings per share (EPS) jumping 18% to $3.46. The results handily topped analyst consensus estimates calling for $68.4 billion in revenue and $3.22 in EPS, as compiled by LSEG.

For its fiscal Q4, Microsoft forecast revenue of between $73.15 billion to $74.25 billion, which was above the $72.26 billion consensus.

Is the stock a buy?

After lagging its Magnificent Seven peers last year, Microsoft appears poised to continue its solid growth in the coming years. Azure has proven to be a cloud computing juggernaut. The company is carefully growing capacity to meet demand, while not getting too far ahead of itself. That's a smart move.

Meanwhile, its other businesses continue to see solid growth. Copilot 365 continues to be a nice opportunity, but the company also needs to continue to improve and innovate in this area as well. The world of AI is moving rapidly, and it remains anyone's game to win.

The stock now trades at a forward price-to-earnings (P/E) ratio of under 29 based on fiscal 2026 analyst estimates. That appears to be a fair valuation, but certainly not a bargain-basement price.

As such, I think Microsoft is a solid stock to own over the long term, but I would not necessarily chase it after its strong post-earnings gains.

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

The post Is "Magnificent Seven" Laggard Microsoft Ready to Rally? appeared first on The Motley Fool Australia.

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Geoffrey Seiler 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 Microsoft. 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 Microsoft. 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.

Going into its first-quarter results, there was a worry about how reduced spending from China-based e-commerce exporters, such as Temu and Shein, would impact Meta Platforms (NASDAQ: META). These worries appeared largely justified, as Chinese e-commerce companies accounted for about 11% of its revenue last year, and data from marketing intelligence company Pathmatics showed Temu's spending on Facebook at one point had suddenly dropped from over $1 million a day to nearly zero.

The reduction in ad spending from Chinese e-commerce exporters stems from both the current U.S.-China tariff war as well as the end to the de minimis exemption that allowed goods valued below $800 to enter the U.S. without being subject to tariffs. This de minimis exemption fueled growth for companies like Temu and Shein, which in turn spent heavily on digital advertising within the U.S.

However, when Meta released its latest results, it reassured investors by offering strong guidance for the year, while noting that a portion of the ad spending from China-based e-commerce exporters has been redirected to other markets.

Meanwhile, artificial intelligence (AI) is helping drive Meta's growth, and the company meaningfully upped its planned investment in data center infrastructure to support its AI ambition.

AI fuels strong results

Meta once again turned in a great quarter that easily topped analyst expectations. Its Q1 revenue jumped 16% year over year, or 19% in constant currencies, to $42.31 billion, while earnings per share (EPS) surged 37% year over year to $6.43. The results blew past analyst expectations, as compiled by LSEG, for revenue of $41.4 billion and EPS of $5.28.

Advertising revenue was also up 16%, coming in at $41.4 billion. Revenue at Reality Labs, which is home to Meta's metaverse efforts and its augmented reality headsets and smart glasses, fell 6% to $412 million. Operating income from its social media apps climbed 23% to $21.8 billion, while Reality Labs recorded a loss of $4.2 billion.

Meta's advertising growth was led by a 5% increase in ad impressions and a 10% jump in average price per ad. This demonstrates that Meta has been able to show more ads to its user base while also being able to charge advertisers a higher price. That's a powerful combination that is largely being driven by its AI investments.

First, AI is helping increase user engagement on its platforms, which is giving it more opportunities to show ads to its users. It said that its AI-powered recommendations have led to people spending 7% more time on Facebook and 6% more time on Instagram.

Second, AI is helping advertisers better find and target audiences that may be interested in their products. AI is also helping advertisers create better ad campaigns, which can lead to improved conversion. As a result, advertisers are more inclined to invest in ads on Meta's social media platforms, increasing ad prices.

Meta also continues to grow its user base. Family daily active people (DAP), a measurement of registered users who log in to one of Meta's apps daily, climbed by 6% year over year to 3.43 billion in March. That was also above analyst expectations for DAP of 3.39 billion.

Meta's newest app, Threads, continues to nicely grow its user base, reaching more than 350 million monthly active users. That's up from 320 million at year-end. The company has just started opening up Threads to advertisers. It expects to introduce ads gradually to the platform and not have it be a meaningful contributor this year.

Meta forecast second-quarter revenue to be between $42.5 billion and $45.5 billion, for growth of 9% to 16% year over year. That compares to the $44 billion Q2 analyst revenue consensus. The forecast reflects what the company has seen with China-based e-commerce advertisers in April. CEO Mark Zuckerberg added that the company is performing well and that it is well positioned to navigate the current economic uncertainty.

The company also significantly increased its full-year capital expenditures to a range of $64 billion to $72 billion, up from a prior forecast of $60 billion to $65 billion. It said this reflects additional data center investments to support its AI efforts, as well as expected higher hardware costs.

Is Meta stock a buy?

During the tech sell-off, Meta was hit hard, and the stock is still down more than 20% from its highs. However, the company has demonstrated this quarter that it is not reliant on advertising from China-based e-commerce exporters, and that artificial intelligence serves as the primary driver for its advertising revenue growth. While the company is not completely immune to a weak macro environment and the current U.S.-China trade war, it is showing that the secular growth stemming from its AI investments can overcome any cyclical weakness.

Meta stock trades at a forward price-to-earnings (P/E) ratio of around 23 times based on 2025 analyst estimates. Given its strong revenue growth, that's an attractive valuation.

As such, I think the stock looks like an attractive long-term buy at current levels.

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

The post Meta Platforms: AI continues to drive revenue, but is the stock a buy? appeared first on The Motley Fool Australia.

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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. Geoffrey Seiler 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 Meta Platforms. The Motley Fool Australia has recommended Meta Platforms. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Some of the best companies in the world have gotten caught up in the recent market sell-off, including Nvidia (NASDAQ: NVDA). The stock is trading down more than 25% off its highs set earlier this year as of this writing.

However, this weakness has created a nice buying opportunity in the stock. Let's look at three reasons why investors should buy the stock like there is no tomorrow.

1. Nvidia is a cheap growth stock on sale

The recent stock market pullback has left Nvidia at a very attractive valuation. It now trades at a forward price-to-earnings ratio (P/E) of only 24.5 based on this year's analyst estimates. That's not all, though; its price/earnings-to-growth (PEG) ratio is below 0.5. PEG ratios take into consideration a company's growth, and a multiple under 1 is generally considered undervalued. As such, Nvidia's stock is extremely cheap when you factor in its growth outlook.

Data by YCharts.

Nvidia has been one of the premier growth stocks in the past couple of years. Its revenue has skyrocketed 383% in the past two years, going from $27 billion in fiscal 2023 to $130.5 billion in fiscal 2025 (ended January). It's not often you see a company the size of Nvidia double its revenue in a year and then double it again the next year.

Meanwhile, its strong revenue growth is expected to continue in 2025. Analysts expect the company to grow its revenue this year by another 54% to $204.4 billion and then another nearly 24% in 2026 to $252.4 billion. While Nvidia hasn't given any full-year guidance, it did forecast its fiscal Q1 revenue to jump by 65%.

2. Nvidia's business has a wide moat

Nvidia is the clear leader in graphic processing units (GPUs), with an over 80% market share. GPUs were originally designed to speed up graphics rendering in video games. However, today, they have become the backbone of artificial intelligence (AI) infrastructure due to their ability to process vast amounts of data quickly. Along with their high memory bandwidth, this makes the chips perfect for handling the rigors of AI workloads.

Nvidia, meanwhile, has set itself apart in the field with its CUDA software platform, which it created to allow its chips to be programmed for tasks outside their original purpose. Its closest competitor, Advanced Micro Devices, didn't come out with its own software solution to program its chips until about a decade later, giving Nvidia a big lead in this area. Meanwhile, the company has since built a collection of libraries and tools on top of CUDA, called CUDA X, that now allows developers to better utilize its software for AI applications.

The moat that Nvidia has created was on display in recent testing done by semiconductor research company SemiAnalysis, which found AMD's GPUs unusable out-of-the-box for AI training due to bugs in its software and that this took away any on-paper advantages its GPUs may have had. Meanwhile, it noted that Nvidia's GPU's out-of-box performance was "amazing" with little need for any technical support from Nvidia engineers.

3. Nvidia is the AI infrastructure winner

Given its wide moat, what really matters most for Nvidia at this point is AI infrastructure spending. The company has a dominant market share, so as long as AI data center spending continues to rise, the company is well-positioned to continue to grow.

Right now, the only way to significantly improve AI models is through training them on larger and more diverse datasets. This requires more computing power, which comes from AI chips, particularly GPUs. As AI models have advanced, there has been a steep upward curve in the number of GPUs used to train them. Meta Platforms' Llama and xAI's Grok models are two of the best publicly available examples, with the latest versions of both models using 10 times as many GPUs to be trained on than their predecessors.

Meanwhile, cloud computing companies are among the biggest buyers of GPUs as they look to expand capacity to keep up with AI workload demand. In addition to building their own AI models, these companies essentially provide AI as a service where they give access to pre-trained foundation models, machine learning frameworks, and APIs, which developers use to integrate AI into their existing apps. The three big cloud computing companies will spend around $250 billion expanding their data center infrastructure this year in aggregate to keep up with the growing demand for these services.

In addition, other tech companies, such as the aforementioned Meta and xAI, are also spending big on AI infrastructure developing AI models, while OpenAI, the maker of ChatGPT, has announced plans along with Softbank and others to spend $500 billion on data center capital expenditure over the next few years through the Stargate Project. Large enterprises in various industries, meanwhile, are also investing in AI infrastructure, often taking on a hybrid cloud strategy where they use both on-premise infrastructure and cloud services.

For its part, Nvidia sees AI data center infrastructure spending topping $1 trillion in 2028. If that happens, Nvidia's stock has plenty of upside from here.

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

The post 3 reasons to buy Nvidia stock like there's no tomorrow appeared first on The Motley Fool Australia.

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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. Geoffrey Seiler 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 Advanced Micro Devices, Meta Platforms, and Nvidia. The Motley Fool Australia has recommended Advanced Micro Devices, Meta Platforms, 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.

Like many tech stocks, Alphabet's (NASDAQ: GOOGL) (NASDAQ: GOOG) stock pulled back in recent months. Investors still question its position in the artificial intelligence (AI) landscape, which isn't helping the company's stock.

However, Alphabet continues to speed ahead with innovation, announcing its newest AI model, Gemini 2.5 Pro Experimental, only about three months after introducing Gemini 2.0. Let's look at Alphabet's latest AI model to see if it can be a catalyst for the stock moving forward.

Advanced reasoning

The biggest upgrade to Alphabet's new Gemini model is that it will be a thinking model that is able to reason through its thoughts before responding. It said this leads to improved performance and accuracy. This means its model will be able to "analyze information, draw logical conclusions, incorporate context and nuance, and make informed decisions."

Alphabet said that its new model has received the highest score on the LMArena leaderboard by a wide margin, topping the performance of models from rivals such as OpenAI's ChatGPT 4.5 and o3-mini, xAI's Grok 3, Anthropic's Claude Sonnet 3.7, and DeepSeek R1, among others. LMArena is an open platform for crowdsourced AI benchmarking.

According to Alphabet, Gemini 2.5 is particularly strong in the areas of coding, math, and science. The company said that coding performance takes a huge leap over its previous Gemini model. Among its strengths include creating visually compelling web apps and agentic code applications as well as code transformation and editing.

Like other Gemini models, it is multimodal, being able to handle information from text, audio, images, and video. It can also handle data sets from an entire code repository, which is a centralized platform where developers store and manage code.

Developers and enterprises can begin experimenting with Gemini 2.5 now in Google AI Studio. The model will be available on its Vertex AI platform within Google Cloud in the coming weeks.

The Verge recently did an unscientific test comparing Gemini 2.5 with ChatGPT o3-mini, which is OpenAI's newest reasoning model. It came away impressed with both models, noting their strengths in detail, depth, speed, and reasoning. While the Verge gave o3-mini the slight edge, it shows how quickly Alphabet has caught up.

A leading innovator

One thing that keeps Alphabet's stock back is the notion that it is behind in AI and not enough of an innovator. However, I think this is far from true. The company is making great progress in catching up, and its newest reasoning model is the latest example. And it has a clear lead in some AI areas like text-to-video, where its Veo 2 platform has shone above the competition.

The company's Gemini model has already been helping to drive strong results in its cloud computing segment, where it saw segment revenue grow 30% last quarter. Here, customers use Google Cloud's Vertex AI platform to leverage Gemini as a foundation model to build out their own customer models and applications.

Meanwhile, continually enhancing Gemini will also lead to improvements in its core search business and its AI Overviews. As this gets better, it should eventually look to better monetize these AI Overviews as well.

Outside of AI, Alphabet saw strong innovation in other areas, such as quantum computing and autonomous driving. With quantum computing, the company made a major breakthrough last year. One of the big issues facing this emerging technology has been that it's error-prone, especially as the number of quantum bits (qubits) it uses increases. With its new Willow chip, Alphabet has been able to show the ability to reduce errors as it scales up the number of qubits it uses. Quantum computing could be the next big technology after AI and Alphabet has shown an early leadership position in the space.

While investors salivate over the potential of Tesla's robotaxi business, Alphabet has jumped out to a big lead with its Waymo unit being the only company to offer paid robotaxi rides in the U.S. Waymo has been taking ride-hailing share in its early markets, while it is set to expand to a number of new cities over the next few years. It needs to reduce the cost of its technology, but right now, it is the tech leader in this emerging area.

Time to buy the stock?

By itself, Alphabet's new Gemini model may not be a catalyst for the stock, but it is another building block for a company that is showing that it's an innovator. Meanwhile, its recent announcement that it will acquire Wiz will help bring the company another fast-growing business in the area of cybersecurity.

Trading at a forward price-to-earnings (P/E) ratio of around 18 times this year's analyst estimates, Alphabet stock is just too cheap to ignore at these levels.

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

The post Is a New AI Model the Catalyst Alphabet Stock Needed? appeared first on The Motley Fool Australia.

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Geoffrey Seiler has positions in Alphabet. Suzanne Frey, an executive at Alphabet, 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 and Tesla. The Motley Fool Australia has recommended Alphabet. The Motley Fool has a <a href=”https://www.fool.com.au/fool-com-au-disclosure-policy/”>disclosure policy</a>. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

The Nasdaq Composite (NASDAQINDEX: ^IXIC) has moved into correction territory (down at least 10% from all-time highs). A significant contributor to that drop has been Nvidia (NASDAQ: NVDA) stock, which is down about 20% year to date, as of this writing. The chipmaker reported outstanding results recently, but investor concerns about tariffs and the U.S. suddenly looking like it could be headed toward a recession have rattled the market in the near term.

For investors interested in Nvidia who have a long-term mindset, this price correction presents a great opportunity to scoop up Nvidia shares on the cheap. Let's look at three reasons why the stock is a must-buy for the long term on this dip.

1. Nvidia is the artificial intelligence infrastructure leader

With an approximate 90% market share for graphics processing units (GPUs), Nvidia is the dominant leader among the chip designers that are powering the artificial intelligence (AI) infrastructure buildout. While originally designed to speed up graphics rendering in video games, Nvidia's GPUs' fast processing times have made them ideal for helping train large language models (LLMs) and running inference for AI.

In addition, the company's CUDA (Compute Unified Device Architecture) platform has helped create a wide moat for the company. Nvidia became the first company to allow GPUs to be programmed for tasks outside their original purpose back in 2006 through CUDA. As such, developers learned to program GPUs using Nvidia's software platform.

Rival Advanced Micro Devices (NASDAQ: AMD) didn't introduce its ROCm (Radeon Open Compute) software platform until about 10 years later in 2016. Meanwhile, through CUDA-X, which was built on top of CUDA, Nvidia now has a full software stack comprised of libraries, microservices, and tools designed to accelerate applications in the areas of AI and high-performance computing.

CUDA and CUDA-X continue to be the primary reason for Nvidia's dominance, particularly in AI model training. In a recent study, semiconductor research outfit Semianalysis found AMD's latest GPUs unusable for AI training out of the box due to software bugs, while praising Nvidia's chips. As such, Nvidia remains the company best positioned to continue to benefit from AI infrastructure growth.

2. AI data center infrastructure continues to grow

Despite Chinese AI company DeepSeek's claims of building an effective AI model cheaply (how effective it actually is is in dispute), the best-known way to advance AI models currently is through brute compute-power force. This means building out systems with more and more AI chip clusters.

Recent AI model iterations have needed exponentially more GPU chips to be trained on than their predecessors. For example, Meta Platform's Llama 4 LLM needed 10x as many GPUs to be trained on than Llama 3. Elon Musk-backed xAI, meanwhile, originally used 5x the GPUs (100,000) to build out its Grok 3 model before bumping it up to 200,000 GPUs.

Meanwhile, cloud computing companies, along with other tech companies, are pouring money into building AI data centers. The big three cloud computing companies plan to spend a combined $255 billion building out AI data centers this year to help keep up with demand.

Cloud computing is an infrastructure-as-a-service platform, and customers have been using these services to help customize and build their own AI models and applications. Meanwhile, Meta plans to spend up to $65 billion in capital expenditures (capex) this year largely aimed at expanding its AI infrastructure, while a consortium led by OpenAI and Softbank have pledged to spend $500 billion over the next few years building out AI data centers in the U.S. through Project Stargate.

This all points to a lot of continued future spending on AI infrastructure in the years ahead. As such, Nvidia remains well-positioned to continue to grow.

3. Nvidia stock is inexpensive

The third big reason to own Nvidia is that its stock remains attractively priced. The stock currently trades at a forward price-to-earnings ratio (P/E) of 24 times 2025 analyst estimates and a price/earnings-to-growth ratio (PEG) of below 0.5. PEG ratios under 1 typically indicate a stock is undervalued, and growth stocks will often trade at PEGs well above 1.

Data by YCharts.

Nvidia isn't a software-as-a-service (SaaS) company with a recurring and predictable revenue stream, so it isn't going to command the same type of valuation multiple as these types of companies -- nor should it. However, its current valuation is inexpensive, given that we still appear to be in the early days of AI and that AI infrastructure spending will continue to rise. As such, the recent pullback looks like a solid buying opportunity in the stock long term.

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

The post Nasdaq correction: Time to buy the dip on Nvidia? appeared first on The Motley Fool Australia.

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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. Geoffrey Seiler 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 Advanced Micro Devices, Meta Platforms, and Nvidia. The Motley Fool Australia has recommended Advanced Micro Devices, Meta Platforms, 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.

Spending on artificial intelligence (AI) infrastructure is set to see a big boost this year, which will undoubtedly help a number of semiconductor stocks with ties to AI chips.

For example, the big three cloud computing companies -- Amazon, Microsoft, and Alphabet -- budgeted a combined $255 billion in growth capital expenditures (capex), largely related to AI infrastructure, this year. Meanwhile, Meta Platforms announced that it will spend up to $65 billion on AI infrastructure. Not to be outdone, a consortium of companies led by Japan's Softbank and OpenAI committed to spending $500 billion on AI infrastructure in the U.S. over the next few years through Project Stargate.

Let's look at the AI chip companies set to reap the benefits.

Nvidia

Nvidia (NASDAQ: NVDA) is the leader in graphics processing units (GPUs), which are the main chips used in AI training and inference due to their superior processing speeds. The chips were originally designed to help speed up graphics rendering in video games. But later, the company let customers program the chips for other tasks through its CUDA software program. Today, through its CUDA X platform, which was built on top of CUDA, it offers GPU-accelerated microservices and libraries designed specifically for AI.

CUDA helped give Nvidia customers a superior experience and created a wide moat for the company. This can be seen in its approximately 90% market share in the GPU space. As such, the company is poised to be one of the biggest winners from increased AI infrastructure spending.

In addition, the stock is attractively priced, trading at a forward price-to-earnings (P/E) ratio of 25 times 2025 analysts' estimates and a price/earnings-to-growth (PEG) of 0.5, with PEGs below 1 considered undervalued.

Broadcom

While Nvidia is the leader in mass merchant GPUs, Broadcom (NASDAQ: AVGO) has become the leader in helping customers design their own custom AI chips. While these application-specific integrated circuits, or ASICs, lack the flexibility of GPUs, they generally have better performance and more efficient power consumption for the specific task for which they were designed.

Broadcom's first custom AI chip customer was Alphabet, as it helped it design its tensor-processing unit (TPU) called Trillium. Since then, it added other customers that are believed to include Meta Platforms, ByteDance, OpenAI, and most recently, Apple. Broadcom noted that just its top three customers could deploy up to 1 million AI chips in 2027, representing a $60 billion to $90 billion revenue opportunity in 2027. While Nvidia will likely get a nice piece of that revenue with its GPUs, Broadcom also has a huge opportunity as well.

In addition, Broadcom also makes components needed for AI infrastructure such as switches and NICs (network interface cards). The stock is reasonably priced at a 30 times forward P/E.

Advanced Micro Devices

While Advanced Micro Devices (NASDAQ: AMD) is a distant second to Nvidia in the GPU space, the company carved out a niche with its GPUs for AI inference. As AI continues to grow, so will this market.

However, where AMD shines is with its central processing units (CPUs) designed for data centres. While GPUs provide the power, CPUs provide the brains. Its EPYC CPUs continued to gain market share in the data centre space. Last quarter, it said its market share was well above 50% at hyperscalers, which are companies that operate massive data centres.

While the number of CPUs used in AI infrastructure is not nearly as many as the number of GPUs, they still play an important role, and this part of AMD's business should continue to grow. Meanwhile, its CPUs have also been gaining share in the personal computer (PC) space as well. The company should see good AI-related growth from both its CPU and GPU offerings.

Trading at 24 times 2025 analyst estimates, the stock is attractively valued given the opportunity ahead of it.

Taiwan Semiconductor Manufacturing

With more AI chips will come more chip manufacturing, which is where Taiwan Semiconductor Manufacturing (NYSE: TSM), or TSMC, steps in. The company is the leading semiconductor contract manufacturer in the world, counting companies like Apple, Nvidia, and Broadcom among its top customers.

Chip manufacturing is not an easy process, and TSMC has become the clear leader and a valued partner to its customers in the chip-making process. With competitors such as Intel and Samsung struggling, TSMC garnered strong pricing power over the years and is slated to see a price increase this year as well. This led to both strong revenue growth as well as improving margins, which is a great combination.

In addition, TSMC continues to expand its manufacturing capacity by building new foundries (chip-manufacturing plants) to keep up with demand. New facilities in Arizona and Japan went online in Q4, and it currently has plans to build two more facilities, one in Arizona and one in Germany.

Meanwhile, the stock is cheap, trading at a forward P/E of 22 times and a PEG of under 0.8.

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

The post 4 no-brainer US chip stocks to buy right now appeared first on The Motley Fool Australia.

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Geoffrey Seiler has positions in Alphabet. 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. 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. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Intel, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Broadcom and has recommended the following options: long January 2026 $395 calls on Microsoft, short February 2025 $27 calls on Intel, 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.