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

Nvidia (NASDAQ: NVDA) has asserted itself as the leader of the artificial intelligence (AI) data revolution, primarily because of the essentialness of its graphic processing units (GPUs). 

Nvidia's GPUs are the brains behind the AI applications driving the new tech boom, like ChatGPT and similar generative AI tools, and the company is estimated to have more than a 90% share of the data center GPU market, which is where the AI revolution is happening.

The chip giant's success is the fruit of decades of planning and investment, beginning with its invention of the GPU in 1999 and followed but its CUDA software library that helps make its GPUs easy to use for developers, creating stickiness. 

Partnerships and alliances

However, since the initial frenzy following the ChatGPT launch, Nvidia has established itself as the kingpin of AI in another way. It's forged a vast network of partnerships and alliances, connecting it to many of the other top players in AI, and reinforcing their dependence on Nvidia.

Those include:

• Arm Holdings: Nvidia owns 1.1 million shares in Arm, and works closely with it on products like the Arm-based Grace Blackwell Superchip.
• CoreWeave: Nvidia owns 24.3 million shares in CoreWeave, one of the two major neocloud, or AI-specific cloud computing platforms. Nvidia helped prop up CoreWeave's IPO, and the two companies are customers of one another.
• Nebius: Nebius is the other major neocloud provider, and Nvidia owns 1.19 million shares of Nebius. Like CoreWeave, Nebius depends heavily on Nvidia hardware.
• Intel: Nvidia surprised the market by agreeing to take a $5 billion stake in Intel back in September, and the two plan to work together on certain AI and personal computing products.
• OpenAI: Also in September, Nvidia announced a deal with OpenAI to invest $100 billion in the start-up over time, while OpenAI said it would deploy at least 10 gigawatts of AI data centers with Nvidia systems over time.

On the heels of the partnerships with Intel and OpenAI, Nvidia is now making a big move with another AI start-up, Anthropic.

What Nvidia is doing with Anthropic

Microsoft and Nvidia announced a blockbuster deal Tuesday morning with Anthropic. Microsoft will invest $5 billion in the start-up, while Nvidia will put in $10 billion, a move that will push Anthropic's valuation up to around $350 billion, about double where it was in its last funding round in September.

Both tech giants will form strategic partnerships with Anthropic as well. Anthropic has committed to purchase $30 billion of compute capacity from Microsoft Azure and to contract additional compute capacity of up to 1 gigawatt, which comes from Nvidia chips, after an initial commitment of 1 gigawatt from Grace Blackwell and the upcoming Vera Rubin systems. The two companies will also work together to optimize Nvidia architecture for Anthropic workloads.

What the Anthropic deal means for Nvidia

With the investment and partnership with Anthropic, Nvidia is tying itself to the No. 2 generative AI start-up, hedging its bet against OpenAI. Microsoft is doing the same thing, in fact.

Doing so makes sense for Nvidia. By investing in these companies, it ensures it has a stake in them and a seat at the table. The partnerships mean that the start-ups are even more dependent on Nvidia, and it helps give it an edge over the competition, though OpenAI also signed a deal with AMD.

The surge in Anthropic's valuation could add to concerns about a bubble, but the start-up is aiming for $9 billion in run-rate revenue by the end of the year, and nearly tripling run-rate revenue to $26 billion. Based on that forecast, it's understandable why Nvidia and Microsoft would want to own a piece of Anthropic.

For Nvidia, the Anthropic deal might be its most important deal yet -- that title probably goes to the OpenAI deal -- but it's another savvy move that should only further cement its status as the dominant force in AI.

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

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

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• 5 ASX ETFs that could supercharge your portfolio
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• 3 fantastic ASX ETFs to buy this month
• Is this the best Vanguard ETF money can buy right now?

Jeremy Bowman has positions in Advanced Micro Devices, Arm Holdings, CoreWeave, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Intel, 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, short January 2026 $405 calls on Microsoft, and short November 2025 $21 puts on Intel. The Motley Fool Australia has recommended Advanced Micro Devices, Microsoft, and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Amazon (NASDAQ: AMZN) may have a stronger set of competitive advantages than any other company out there, including its "Magnificent Seven" peers.

It operates the biggest cloud computing business, Amazon Web Services, with a revenue run rate that is now well above $100 billion.

Its e-commerce business has grown to dominate retail across North America and Europe, thanks to complementary businesses like its Marketplace and its Prime membership program, which helps lock in customers and encourages them to spend even more on the platform.

Its marketplace also strengthens its value propositions as it ensures the company has far more products (SKUs) than any of its competitors. The success and the business model of its e-commerce division have helped it build an advertising business that is now the biggest digital ad platform after Alphabet and Meta Platforms.

Investors cheered the company's latest earnings report, sending the stock up 12% after hours. Here's what's behind the latest surge.

Is Amazon's growth accelerating again?

Amazon has bounced back from the 2022 sell-off, but its gains have been relatively muted during the AI boom compared to some of its Magnificent Seven peers.

It hasn't gotten the AI tailwind that Microsoft has from its partnership with OpenAI or that Meta Platforms has, as its revenue growth has accelerated from its advertising business, which has hit a run rate of more than $60 billion.

Revenue in the third quarter increased 13.4% to $180.2 billion, ahead of estimates at $177.76 billion, and better than its growth rate in the quarter a year ago. Growth was balanced with the North America segment up 11% to $106.3 billion; the international segment rose 14% to $40.9 billion, and AWS grew 20% to $33 billion. In fact, CEO Andy Jassy said that AWS is growing at its fastest rate since 2022.

Its profitability was strong, and operating income adjusted for severance costs rose in all three segments. After adjustments, overall operating income rose 25% to $21.7 billion, and generally accepted accounting principles (GAAP) earnings per share rose $1.43 to $1.95, ahead of the consensus at $1.56. That result included a $9.5 billion gain associated with the value of its investment in Anthropic.

Amazon also shared that Trainium, its custom AI chip, grew 150% quarter over quarter, and is now fully subscribed and a multi-billion-dollar business.

The company's guidance was characteristically broad, calling for revenue growth of 10%-13% to $206 billion-$213 billion, and operating income of $21 billion-$26 billion, ahead of $21.2 billion in the quarter a year ago.

Is Amazon a buy?

Amazon continues to execute in its core businesses, while gaining traction with AI.

At this point, the company is so big that its growth rate is restrained by the law of large numbers. At a revenue run rate of around $700 billion, growing its top line by 13% means finding nearly $100 billion in new revenue in just a year.

Management still sees opportunity in both of its core business, as it's noted that the majority of retail is still not taking place online, and the majority of computing and storage is still taking place in traditional on-premise systems. That gives the company the ability to gain share in both e-commerce and cloud computing.

Additionally, Amazon is finding new ways to accelerate delivery in e-commerce and new features at AWS. Meanwhile, experimental projects like Project Kuiper also have the ability to be disruptive and drive significant revenue for the company.

Amazon stock still isn't cheap, and its days of 20%+ revenue growth are over. However, the company looks as resilient as ever, and it is still capable of delivering upside surprises. Amazon remains a buy. 

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

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

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More reading

• Are these the best ASX ETFs to buy with $1,000 in May?
• How to invest in the AI Build-Out: Expert
• Why ASX investors dumped IVV ETF last month

Jeremy Bowman has positions in Amazon. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Meta Platforms, and 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 Alphabet, Amazon, Meta Platforms, and 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.

Stock splits don't change the fundamentals of a stock, but they still have a way of getting investors excited and capturing media attention.

First and foremost, stock splits tend to represent milestones in a stock's growth. They signal that management is confident enough in the business to lower the individual share price, effectively resetting shares for another run higher. There's also some evidence that stocks tend to outperform following a split.

According to research from Bank of America going back four decades, stocks that underwent a split rose 25.4%, more than doubling the return of the S&P 500 at just 11.9%, as the infographic below shows.

Image source: Statista.

That pattern seems to be evidence of correlation rather than causation. After all, companies are free to decide when they split their stocks, and they're more likely to do so when they're confident that the price will continue to rise. And splits are more common in bull markets, especially during surges like the dot-com boom. They're rarely seen during bear markets.

Given the propensity for outperformance following a stock split and the fact that the share price is lowered, benefiting retail investors, it's not surprising that the moves tend to attract so much attention.

One top stock that could be next in line for a split is Netflix (NASDAQ: NFLX), the streaming giant that has bucked the broader malaise in the entertainment industry to deliver monster returns over the last three years.

NFLX data by YCharts.

Netflix's shares are now hovering around $1,200, giving it one of the highest share prices in the S&P 500. The company is set to report fourth-quarter earnings on Oct. 21, and that could serve as an opportunity to announce a split since companies often choose to time them with earnings reports.

The case for a Netflix stock split

Netflix's 400% gain over the last three years hasn't come by accident. The company has delivered strong growth on the top and bottom lines as initiatives like advertising, paid sharing, and live events have resonated with its audience.

Advertising in particular has opened up a new revenue stream, giving it a way to grow without adding new subscribers or raising prices. It's also given Netflix cover to raise prices on premium tiers because it now has lower-priced ad-driven tiers for subscribers on a budget.

While some high-priced stocks have historically avoided stock splits, that isn't the case with Netflix. The company issued a 7-for-1 stock split in 2015, and a 2-for-1 split before that in 2004. Both times, the individual share price was much lower than it is today.

There's also another less obvious reason that a stock split would benefit Netflix. A lower share price would make the stock eligible to join the Dow Jones Industrial Average. At a market cap of $500 billion, Netflix is now much larger than many of the stocks in the Dow, and its industry -- entertainment -- is arguably underrepresented on the blue-chip index. While Disney is a member, no other Dow stocks derive a majority of their business from media or entertainment.

Is Netflix a buy?

Netflix isn't a member of the "Magnificent Seven," but it's outperformed many of those high-profile tech stocks in recent years. Nearly all of those have had stock splits in recent years, so it seems like Netflix is due.

When it reports third-quarter earnings on October 21, analysts expect revenue to grow 17% year-over-year to $11.5 billion. Earnings per share should increase from $5.40 to $6.94.

The stock isn't cheap at a price-to-earnings ratio of 50, but it dominates global video entertainment, and it still has a long runway of growth thanks to advertising and its local content strategy, which should drive further gains.

A stock split could help kick off the next leg up for Netflix stock. 

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

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More reading

• Are these the best ASX ETFs to buy with $1,000 in May?

Bank of America is an advertising partner of Motley Fool Money. Jeremy Bowman has positions in Bank of America, Netflix, and Walt Disney. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Netflix and Walt Disney. The Motley Fool Australia has recommended Netflix and Walt Disney. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Key Points

• Nvidia plans to gradually invest up to $100 billion in OpenAI.
• The agreement will support a massive planned data center build-out by OpenAI that could include 4 million to 5 million GPUs.
• Nvidia's portfolio of investments includes both customers and suppliers.

Nvidia (NASDAQ: NVDA) is at it again. Just days after surprising the market with a $5 billion investment in Intel, it's forming a similar tie-up with OpenAI.

However, the scale of this deal will be much larger: Nvidia plans to invest $100 billion in OpenAI over time as part of a project to build 10 gigawatts of artificial intelligence (AI) data centers, with millions of Nvidia GPUs powering OpenAI's next-generation AI infrastructure. Nvidia stock jumped 4% on the news, hitting an all-time high.

What's happening here?

The two companies signed a letter of intent for this "landmark strategic partnership" to further OpenAI's ambitions of achieving artificial superintelligence.

With 10 gigawatts, one could power between 4 million and 5 million GPUs, which Nvidia CEO Jensen Huang said is about the volume that the company will ship this year. The first phase of this ambitious project is expected to come online in the second half of 2026, using chips built on Nvidia's upcoming Vera Rubin platform.

OpenAI and Nvidia have already been working together for years, and OpenAI has run on Nvidia technology since its early days.

As for the $100 billion Nvidia plans to invest, the timeline is unclear. The chipmaker simply says it plans to invest that money "progressively as each gigawatt is deployed."

The companies said they would finalize the details over the coming weeks.

A familiar playbook

Nvidia has engaged in similar maneuvers before. It has built up a portfolio of investments in companies that are often its customers, and sometimes even its suppliers.

Among the public companies that Nvidia owns stakes in are CoreWeave and Nebius, the two leading AI neocloud providers; Arm Holdings, whose CPU designs it licenses; Applied Digital, with which it collaborates on high-performance computing data centers; and Intel, a struggling chipmaker that Nvidia just invested $5 billion in as part of a larger partnership.

The OpenAI deal, if it fulfills its ambition, would by far be Nvidia's biggest investment to date. It's also the most valuable company Nvidia has invested in. OpenAI was valued at $300 billion in its last funding round in March, but in August, it was flirting with a $500 billion valuation in its plan for a secondary stock sale.

While $100 billion is a huge amount of money for any company, it's a manageable sum for Nvidia, which will generate approximately that much in net income this year. Investing that much will also make it a major shareholder in OpenAI, but the move makes sense for Nvidia.

OpenAI is the largest and most influential AI start-up, and much of the money that Nvidia is investing will come right back to it via the purchases of GPUs to power those data centers. In fact, the investment serves as an incentive for OpenAI to buy Nvidia's products.

It also helps block challengers like AMD from cutting into Nvidia's huge market share lead in the data center GPU market.

Is Nvidia a buy?

Nvidia seems to be making all the right moves lately in AI, both technologically and strategically, and forming a network of partnerships should only entrench its market leadership. It also gives it a portfolio of investments that could deliver strong returns.

As long as the AI boom persists, Nvidia looks like a great stock to own. As recent reports by the likes of Oracle and others show, the dollars are still flowing into AI infrastructure. As they do, expect Nvidia's stock price to continue to move higher over the long term. 

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

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

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

More reading

• Are these the best ASX ETFs to buy with $1,000 in May?
• 5 ASX ETFs that could supercharge your portfolio
• How to invest in the AI Build-Out: Expert
• 3 fantastic ASX ETFs to buy this month
• Is this the best Vanguard ETF money can buy right now?

Jeremy Bowman has positions in Advanced Micro Devices, Arm Holdings, and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Intel, Nvidia, and Oracle. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nebius Group and has recommended the following options: short November 2025 $21 puts on Intel. 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.

Key Points

• Nvidia is investing $5 billion in Intel.
• The two companies are partnering in products in the data center and PCs.
• The move gives Intel a much-needed lifeline.

Apparently, the federal government isn't the only one that thinks Intel (NASDAQ: INTC) is worth saving.

Just weeks after the U.S. government made an $8.9 billion investment in Intel, a rare move by the federal government to invest in a private company, Nvidia (NASDAQ: NVDA) is following suit.

The chip giants announced Thursday that Nvidia would invest $5 billion in Intel at a share price of $23.28.

As part of the deal, the two companies will partner on a range of products across the data center and PCs. They will connect architectures through Nvidia NVLink, Nvidia's high-speed interconnect for CPU and GPU processors, combining Nvidia's strength in AI and accelerated computing with Intel's CPUs and x86 architecture.

Additionally, Intel is planning to build custom x86 CPUs that Nvidia will put into AI infrastructure platforms in data centers. In PCs, Intel plans to build x86 system-on-chips to integrate with Nvidia RTX GPU chiplets, going into a wide range of PCs.

The partnership does not include Intel's foundry division.

A win-win

Both stocks rose on the news, with Intel surging 23% in afternoon trading on Thursday, while Nvidia was up 4%. By market cap, Nvidia had the bigger gains of the two.

What was also notable about the news is that competitors' stocks broadly fell, a sign that investors believe they are getting locked out by the alliance, and it could give Nvidia and Intel a competitive advantage.

For example, Arm Holdings, a competitor to Intel in CPU architecture and also a partner of Nvidia, fell 4% on the news. Advanced Micro Devices, a competitor of both Intel and Nvidia, lost as much as 6% before recovering most of those losses. Taiwan Semiconductor Manufacturing, the world's biggest chip manufacturer, was also down 2% at the open but swung into positive territory.

Based on the gains in each stock and the business prospects for the move, the deal looks like a win-win for both companies. But who's the bigger winner here between the two? Let's take a closer look.

What it means for Nvidia

For Nvidia, the Intel investment is its latest movement to build a portfolio of other AI stocks, which now includes Arm, Intel, CoreWeave, Nebius, and Applied Digital.

Intel needs Nvidia much more than Nvidia needs Intel here, and the deal helps Nvidia put a struggling rival in its pocket. Intel's future is likely to be reliant on the new partnership and potential growth from it, and Nvidia's investment has already paid off, gaining more than $1 billion in just a day.

From a product perspective, the deal gives Nvidia more flexibility in the data center and should strengthen its presence in the PC market.

What it means for Intel

While Nvidia's results have boomed during the AI era, Intel has fallen far behind. At a time when nearly every chip company is reporting soaring growth, Intel posted flat revenue growth in the second quarter and an adjusted loss.

It needs any help it can get, and tying its wagon to Nvidia's star seems like a can't-miss move, especially as the deal gives Intel exposure to the data center, an area in which it's struggled, through the x86 CPUs it will make for Nvidia data centers. Despite the launch of its Gaudi AI accelerator, Intel's revenue from its data center and AI segment rose just 4% to $3.9 billion in the second quarter.

Finally, the deal also looks like a coup for Intel's new CEO, Lip-Bu Tan, especially coming on the heels of the U.S. government's investment. The Nvidia deal is the kind of bold move that can get Intel back on its feet, and Intel stock reached a 52-week high on the news.

Who's the big winner?

The deal means much more to Intel than Nvidia, and it could make the difference between Intel continuing to fall behind in AI or regaining its footing, returning to solid growth and profitability.

While the deal looks like a smart move for Nvidia, it doesn't quite pack the same punch as it does for Intel. Partnering with Nvidia, along with the $5 billion cash infusion, could be a game-changer for Intel.  

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

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

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More reading

• Are these the best ASX ETFs to buy with $1,000 in May?
• 5 ASX ETFs that could supercharge your portfolio
• How to invest in the AI Build-Out: Expert
• 3 fantastic ASX ETFs to buy this month
• Is this the best Vanguard ETF money can buy right now?

Jeremy Bowman has positions in Advanced Micro Devices, Arm Holdings, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Advanced Micro Devices, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Nebius Group and has recommended the following options: short November 2025 $21 puts on Intel. 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.

Key Points

• Meta continues to deliver strong growth on the top and bottom lines.

• Its advertising business is benefiting from its AI investments.

• The social media giant has some advantages over rival Alphabet.

Meta Platforms' (NASDAQ: META) hot streak continued on Wednesday after the social media giant delivered another blowout earnings report for the second quarter. The stock jumped double digits after hours, and Meta was on track to set a new all-time high on Thursday.

Revenue jumped 22% to $47.5 billion, which easily beat estimates at $44.8 billion. Revenue growth was driven by a balanced mix of growth in users, up 6%, ad impressions, up 11%, and price per ad, which rose 9%.

Those results show its ad business is firing on all cylinders, and CEO Mark Zuckerberg credited its artificial intelligence (AI) investments for the improvements, noting that its AI-powered recommendation model helped drive 5% more ad conversions on Instagram and 3% more on Facebook. The improved ad performance helped lead to the growth in price per ad, showing that Meta's AI investments in advertising are paying off.

Meta's margins continued to expand, with its operating margin rising from 38% to 43%, and earnings per share rose from $5.16 to $7.14, well ahead of the consensus at $5.90. It also sees strong growth continuing into the third quarter, calling for revenue of $47.5 billion to $50.5 billion in Q3 revenue, which compares to the consensus at $46.3 billion.

Why Meta's growth is soaring

Over the last few years, Meta has outperformed peers like Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Microsoft, and Amazon by a wide margin. And the second-quarter results show that the market may still be underestimating the company.

In the AI era, Meta has excelled at growing its core advertising business while also making investments in AI to seed emerging businesses, like its smart glasses, and to make acquisitions, including its deal to buy half of data-labeling start-up Scale AI for $14.3 billion.

That acquisition brought Scale founder Alexandr Wang into the Meta fold, where he's leading Meta's new Superintelligence Labs. The company sees superintelligence improving multiple aspects of the business, including advertising, experiences, business messaging, Meta AI, and AI devices.

In addition to the improvements to its ad-recommendation engine, Meta is gaining traction with its generative AI ad creation features, another way it's adding value for advertisers. Meta has achieved this growth in the overall business even as Reality Labs, its division focused on projects like AI and the metaverse, continues to lose upwards of $15 billion a year. However, the losses now seem to be stabilizing.

Better buy: Meta versus Alphabet

Meta's closest competitor in digital advertising is Alphabet, which, as the parent of Google Search, is the biggest digital advertising platform in the world. Both companies have strong competitive advantages, but Meta has outgrown its larger rival over the last several quarters due in part to the advances and investments in AI.

Alphabet, on the other hand, has also incorporated AI into Google Search through its AI assistant and AI mode. However, those features don't directly benefit the Google ad business. Instead, they seem to be more of a function of the company's need to defend its market share against AI-based competition such as ChatGPT and Perplexity. The innovations make sense, but they don't have the same benefit to the bottom line that Meta's do.

Additionally, the two companies seem to have different cultural approaches to AI. Alphabet has long invested in AI but was reluctant to deploy new products for fear it would disrupt its monopoly in search. Meta, on the other hand, has been nakedly aggressive in AI recently, poaching researchers from Apple and making multiple acquisitions, including Scale AI.

Overall, Meta is growing faster, and its AI strategy seems to fit better with its core business. The company seems well-positioned to continue delivering strong growth, especially as its ad machine stands to benefit from its AI investments.

Both Alphabet and Meta can be winners on the stock market, given their competitive advantages, but Meta looks like the better buy of the two today.

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

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

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

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• Is this the best Vanguard ETF money can buy right now?

Jeremy Bowman has positions in Amazon and Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Amazon, Apple, Meta Platforms, and 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 Alphabet, Amazon, Apple, Meta Platforms, and 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.

Investors may not think of Netflix (NASDAQ: NFLX) as the hot growth stock it was a decade ago, but the stock has been on a warpath over the last few years, despite the broader perception that it's a mature company.

After the stock tumbled in 2022, following two straight quarters of subscriber declines, the company went back to the drawing board, launching an advertising tier after years of saying it wouldn't. It also cracked down on password-sharing and experimented with live events, like sports.

As a result, the stock has skyrocketed, gaining more than 500% over the last three years as the chart below shows.

NFLX data by YCharts.

Netflix isn't going to repeat that feat over the next three years, at least without a major new expansion of the business, but a double seems like a reasonable goal. Can it get there? Investors just got some clues in its latest earnings report.

Q2 was a hit with viewers, but not investors

Netflix stock slipped 5% on the second-quarter report on Friday. The numbers were strong, but the recent surge in the share price has raised expectations for the company. Revenue was up 16% to $11.1 billion, marking its fastest growth rate in four quarters, but the result essentially matched estimates.

The streamer stopped reporting subscriber counts, so it's not as easy to see what's driving the business growth. Management said it was driven by a combination of subscriber additions, growth in the ad business, and price hikes in markets like North America. The company is now using its proprietary ad tech platform, Netflix Ads Suite, in all of its markets, showing it's rapidly embraced advertising as part of the core driver of its business.

Thanks to its subscription business model, the company's profit margin continues to expand as the business grows, and the ad business is likely contributing to margin growth as it's allowed the company to monetize its content in a new way and attract budget-conscious subscribers who didn't want to pay for the ad-free tier. Operating margin expanded from 27.2% in the quarter a year ago to 34.1%, and earnings per share (EPS) jumped from $4.88 to $7.19, beating the consensus at $7.06.

Management warned that margins would fall in the second half of the year as content expenses grew. Its third-quarter guidance, for example, called for 31.5% operating margin, but the company also raised its full-year guidance from $43.5 billion-$44.5 billion to $44.8 billion-$45.2 billion. It now sees currency-neutral operating margin expanding to 29.5%, up from a previous forecast at 29%.

The business seems to be firing on all cylinders as the ad engine takes off. Netflix continues to expand the breadth of its content with several series and films bringing audiences of 50 million or more in the quarter.

Members watched 95 billion hours in the first half of the year, a 1% increase, and the company's local content strategy is paying off, as well, as non-English content now represents more than a third of its viewing. Those trends all bode well for the business over the next three years.

Can Netflix stock get to $2,500?

Netflix's surge over the last three years is primarily due to the improvements in the business, but it's also benefited from multiple expansion. You can see that in the chart below, though that doesn't include the most recent quarter.

NFLX data by YCharts.

Factoring in second-quarter earnings, Netflix's price-to-earnings ratio (P/E) would be closer to 50, but that's still pricey, especially for a stock that was regarded as mature not long ago.

For Netflix to double from here, it will likely have to earn it on its own merits, as Friday's post-earnings sell-off shows, despite the strong results. Investors seem to feel the stock now has enough growth baked in, which makes further gains more difficult.

Netflix can double earnings per share, but it may take more than three years to do it. Still, with its double-digit revenue, expanding operating margins, and potential to expand into new businesses, doubling EPS in the next five years seems like a fair assumption.

The streaming stock could double by 2028 but will have to top an already high bar. That won't be easy.

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

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

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Shares of Meta Platforms (NASDAQ: META) were moving higher again in June as the social media giant benefited from the broader uptrend in the stock market, and investors reacted to Meta's deal to take a 49% stake in Scale AI, a data-labeling start-up, for $14 billion.

By the end of the month, Meta stock had finished up 14%, according to data from S&P Global Market Intelligence.

As you can see from the chart, the stock gained in two separate stages, in the beginning and end of the month.

META data by YCharts

Meta pushes deeper into AI

Meta's ambitions in AI became clearer last month as the company made a splash with the Scale AI deal. The move gives the company near-50% ownership of a promising AI start-up, and also brings Scale AI founder Alexandr Wang into the Meta fold. Wang will head up a new research lab working on superintelligence.

Additionally, other news reports emerged about Meta's poaching AI talent from OpenAI, and it also reportedly tried to buy Perplexity, the AI search-focused start-up now valued at $14 billion, as well as Safe Superintelligence, another AI start-up. Finally, the company is considering raising $29 billion to fund its data center expansion push as part of its AI ambitions.

Early in the month, Meta also signed a 20-year power purchase agreement with Constellation Energy, showing its commitment to securing an adequate source of energy as AI needs grow.

On the device front, the company also introduced Oakley Meta glasses, which it called a new category of Performance AI glasses, featuring a built-in camera, open-ear speakers, and water resistance.

Meanwhile, the stock also benefited from cooling tensions around the trade war, as well as solid economic data showing the job market continuing to expand and inflation remaining in check.

Since nearly all the company's revenue comes from digital advertising, the business is sensitive to the broader economy, so signs of continued growth are good for Meta.

What's next for Meta?

Meta's price-to-earnings ratio has risen to 28 following last month's gains, but that still looks like a fair price to pay for a stock that dominates the social media sector, has a huge competitive advantage in digital advertising, and is investing heavily into its strong AI division.

We'll hear from Meta at the end of the month when it reports second-quarter earnings. Analysts are expecting another strong quarter, with revenue increasing 14% to $44.55 billion and earnings per share rising from $5.16 to $5.84. If Meta can maintain that kind of growth, the stock should continue to move higher.

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

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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. Jeremy Bowman has positions in Meta Platforms. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Constellation Energy and 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.

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Shares of Meta Platforms (NASDAQ: META) were moving higher last month after the social media giant jumped on a better-than-expected earnings report, and the stock gained again in the second week of May on news of a detente in the trade war between the U.S. and China.

According to data from S&P Global Market Intelligence, the stock finished the month up 18%. As you can see from the chart below, the stock jumped early in the month following its earnings report and tacked on gains from there.

META data by YCharts.

Meta is back on the move

After sliding in April on concerns around the trade war, Meta delivered a solid rebound thanks to impressive first-quarter results and hopes that the impact of the trade war would be more modest than previously expected.

Meta stock gained 4.2% on May 1 and 4.4% the following day after its Q1 earnings report came in above expectations. Revenue in Q1 rose 16% to $42.3 billion, ahead of estimates at $41.4 billion. The company reported growth in users, ad impressions, and average price per ad, driving the strong growth in revenue, and its margins continued to improve, lifting its earnings per share (EPS) up 37% to $6.43, which easily beat the consensus at $5.22.

Meta's guidance was also promising as the company forecast revenue of $42.5 billion to $45.5 billion in Q2 and lowered its full-year expense guidance by $1 billion.

The other significant event lifting the stock was the broader surge in the market on May 12 after the U.S. and China agreed to temporarily lower tariff rates. Meta, which is seen as a macroeconomically sensitive stock due to its dependence on digital advertising, gained 8% on May 12 on that news, and it closed out the month 1% higher as it traded mostly sideways over the remainder of May.

What's next for Meta

Another issue that may have impacted the stock last month is pressure on rival Alphabet, which has been accused of operating a monopoly in two different businesses. Last month, the stock fell on news that Apple was considering offering AI search engines like Perplexity on its devices as an alternative to Google.

Meta should benefit from any weakness at Alphabet as the two compete for digital advertising spending and in AI.

While a weakening economy would present a challenge to the company, based on its Q2 guidance and the strength of Meta AI, the stock looks well positioned to keep gaining.

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

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

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By now, it's clear that artificial intelligence (AI) is the next major technology platform.

The new technology featured in chatbots like ChatGPT has rapidly gained adoption, and big tech companies are pouring tens of billions of dollars into data centers to run the computing power required for AI.

Thus far, Nvidia (NASDAQ: NVDA) has been the biggest beneficiary of this boom, and it's easy to see why. The company's graphics processing units (GPUs) have been flying off the shelves ever since ChatGPT launched, and demand continues to outstrip supply. Nvidia dominates market share of data center GPUs, a technology the company has been advancing for decades through innovations like its CUDA programming language that makes it easy for developers to write code that can be run directly on Nvidia's GPUs, and build high-performance applications.

For early investors, Nvidia has already delivered monster returns, but plenty of investors are wondering if the company's stock is still a good buy.

One example from recent history offers a good corollary.

Take a ride in the wayback machine

In 2012, Apple (NASDAQ: AAPL) was the most valuable company in the world, riding high from the recent launch of the iPhone and the iPad.

On May 15, 2012, the company had a market cap of $517 billion.

As you probably know, Apple has continued to deliver strong returns to investors as it now has a market cap of around $3 trillion, but that's not only due to the growth in the business.

It's also because investors drastically underestimated its growth prospects. Perhaps because it was already the most valuable company in the world, the market assigned it a price-to-earnings (P/E) ratio of just 13.5. Investors seemed unable to envision the dramatic future growth of the iPhone or Apple's services business, built around the App Store, becoming a massive cash cow.

At the time, Apple was trading at a discount to the S&P 500, which was valued at a P/E of 15.9.

While Apple's market cap has risen about six times, or 500%, the growth in the stock price has been nearly 1,000%, or 11 times, due to share buybacks.

The gains in the stock were propelled not only by growth in the business. Apple also benefited from multiple expansion as the stock now trades at a P/E ratio of 33, accounting for a significant portion of the stock's gains.

Why it matters for Nvidia

There are a number of lessons to be taken away from Apple's path over the last 13 years and its valuation in 2012.

First, it's easy for investors to underestimate the potential growth of the world's largest companies. Investors can also underestimate the potential of the next big technological shift.

Back in 2012, mobile technology was just at its dawn, and the boom that would drive Apple and many other tech stocks higher was just picking up steam. However, instead of factoring that into Apple's valuation, investors seemed to ignore it.

Nvidia may be in a similar position today. While the semiconductor industry is notoriously cyclical, leading to skepticism about future growth for Nvidia and its AI peers, the stock looks surprisingly cheap. After a run-up over the last few weeks, Nvidia stock has gotten more expensive and now trades at a P/E of 45 and a forward P/E of just 31.

That compares to a 25.7 P/E ratio for the S&P 500 and a forward P/E of 20.5. On a forward basis, the stock is also cheaper than a number of slow-growth stocks like Walmart and Costco even as Nvidia is the driving force behind the most important technology today.

Nvidia might be trading at a premium to the S&P 500, but it's also growing much faster as analysts expect its revenue to increase 53% this year and 24% next year.

Nvidia might not become a ten-bagger like Apple was in 2012, but just like investors were underestimating the growth of mobile technology back then, there's a good argument that they're underestimating the growth in AI today. If that's the case, Nvidia is likely to be a big winner over the next five to 10 years.

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

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Jeremy Bowman has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Apple, Costco Wholesale, Nvidia, and Walmart. The Motley Fool Australia has recommended Apple and Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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Shares of Nvidia (NASDAQ: NVDA) tumbled last week after the company announced that it would take a charge of up to $5.5 billion related to China export restrictions.

The company said it would no longer be able to export its H20 chip, a less powerful version of its H100 GPU and designed to comply with earlier export rules, without a license. Nvidia's filing implies that getting a license is unlikely.

Wall Street analysts had varying estimates of the impact to Nvidia's bottom line. Wedbush said that the restriction would lower its revenue by 10%. Bank of America said a "dire" tariffs scenario would reduce revenue by 9% to 13% in 2025 and 2026. The reduction in Nvidia's revenue will be more than the $5.5 billion charge since that reflects the cost of the chips rather than their selling price.

The loss of revenue from China should be limited to roughly the percentage the analysts are estimating above as Nvidia reported $17.1 billion in revenue in fiscal 2025, which ended in January 2025, or 13% of its total revenue. The percentage of Nvidia's revenue coming from China has declined in each of its last two years, so it seems like it would have fallen this year as well. It's unclear if Nvidia plans to replace the H20 with another less powerful chip, though it may give up on China altogether due to the political pressure as the export restrictions aren't Nvidia's only challenge.

Nvidia's China problems don't end there

On Wednesday, the House Select Committee, focused on the Chinese Communist Party (CCP), opened up an investigation demanding answers from Nvidia over its relationship with DeepSeek, the Chinese AI start-up. The report called DeepSeek a "serious national security threat" and noted that its models run on "tens of thousands of Nvidia chips."

Committee Chairman John Moolenaar said DeepSeek is designed to "spy on Americans" and "steal our technology," and that it used "advanced Nvidia chips that should never have ended up in CCP hands." Additionally, the report alleged that Nvidia CEO Jensen Huang "directed the company to design a modified chip specifically to exploit regulatory loopholes" following earlier restrictions.

The committee also sent a letter to Nvidia expressing concern that bad actors were diverting its chips to China against U.S. export rules, and it requested documents detailing the history of Nvidia's customer transactions in China and Southeast Asia.

In a statement responding to the committee, Nvidia said, "We follow the government's directions to the letter."

What it means for investors

It's unclear what the consequences of the investigation, if any, will be for Nvidia. The company has never faced a significant fine over its business practices before, though it was a much smaller company for most of its history.

It was fined $5.5 million as a result of a Securities and Exchange Commission (SEC) investigation-related disclosure around crypto mining and its gaming graphics processing units (GPUs) in 2022, and is now facing an antitrust investigation in both France and China.

While the Congressional investigation could put a cloud over Nvidia's reputation in the near term, looking at it from another perspective, the investigation is almost a compliment to the company and its technology.

By singling out Nvidia, the committee is essentially saying that its technology is so powerful and sought-after that it must be closely guarded so that the U.S. doesn't fall behind its primary global rival. Rep. Moolenaar concluded his statement by saying, "American innovation should never be the engine of our adversaries' ambitions," though the innovation in question belongs to Nvidia, not the U.S.

By treating Nvidia's chips as if they're nuclear secrets, the government seems to be giving the company special status. If the investigation reveals that Nvidia has complied with the law in its dealings with China and the surrounding region, this episode may only burnish the company's credentials.

While the $5.5 billion charge and the related loss of business in China is disappointing, Nvidia can overcome that. Severe government sanctions would be more devastating.

If the investigation clears Nvidia's name, however, the stock looks like an unquestionable buy as federal restrictions and intervention could be the biggest threat facing the company right now.

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

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Bank of America is an advertising partner of Motley Fool Money. Jeremy Bowman has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Bank of America and Nvidia. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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The "Magnificent Seven" soared through 2023 and 2024, but the elite group of tech stocks has gotten crushed this year as weakening consumer sentiment and President Trump's trade war have sparked fears of a recession.

However, another market darling is standing tall. While every member of the Magnificent Seven is down by double digits this year, Netflix (NASDAQ: NFLX) is up 9% year to date, outperforming those tech giants and the S&P 500 by a substantial margin.

The streaming leader pleased investors once again with its first-quarter earnings report as the stock rose after hours on April 17 following the news.

It's smooth sailing for Netflix

Netflix stopped reporting quarterly subscriber figures in the first quarter, but its overall numbers were strong on both the top and bottom lines.

Revenue rose 12.5% year over year to $10.5 billion, meeting analyst estimates, though the most impressive part of the report came further down the income statement. Netflix's operating margin hit a new record of 31.7% as operating income jumped 27% to $3.3 billion. That drove earnings per share up from $5.28 to $6.61, easily outperforming the analyst consensus of $5.66.

Netflix beat its own guidance as both subscription and ad revenue were better than expected, and revenue growth was solid in all four of its regions with a particularly strong showing in international markets where they grew 16% or more on a currency-adjusted basis.

The company continues to deliver a solid content slate, executing on its strategy of delivering a wide range of genres that can please audiences around the world.

However, the most impressive part of the company's report was its expectations for the rest of the year, even as the trade war has clouded the outlook for so many companies.

What trade war?

Netflix made it clear in its shareholder letter and on its earnings call that it is seeing no headwinds from the broader economic uncertainty. It also maintained its guidance for the full year and offered a strong outlook for the second quarter.

For the current quarter, the company expects revenue to increase 15% to $11.0 billion, while its operating margin climbs to 33.3%, which would be another record for the company. The goal Netflix set a few years ago of scaling up the business and expanding its operating margin by three percentage points each year now seems to be coming to fruition.

For the full year, the company continues to expect revenue of $43.5 billion to $44.5 billion and an operating margin of 29%.

On the earnings call, management underscored several reasons why it expects to be resilient during any economic turmoil. The entertainment sector has historically been steady during economic downturns. The company is also a global operator and brings in the majority of its revenue from outside the U.S. Additionally, the company doesn't operate in China, and it's exclusively a services business, meaning tariffs don't apply to its business.

In response to a question about any economic impact from tariffs or the related uncertainty, co-CEO Greg Peters said, "We're paying close attention, clearly, to the consumer sentiment and where the broader economy is moving. But based on what we are seeing by actually operating the business right now, there's nothing really significant to note."

If you're a Netflix shareholder, that's exactly what you want to hear.

Is Netflix a buy?

Consumer discretionary stocks aren't known for their resilience during economic downturns, but Netflix looks like an exception here, given its strengths above.

The stock does trade at a premium right now, but it's easy to see why. It's executing on its content strategy and growing its reach around the world. As the undisputed leader in streaming, it's currently sustaining its growth despite the uncertainty roiling so much of the market.

Netflix continues to be a smart buy.

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

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

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Nvidia (NASDAQ: NVDA) shares fell on Monday as the artificial intelligence (AI) chip leader continues to show sensitivity to the broader market pullback.

Semiconductor stocks like Nvidia are known for being cyclical, so it's understandable that the stock would fall on the general stock market concerns, which include weakening consumer sentiment, stubborn inflation, intensifying tariffs, and other issues. The news today that seemed to drive the market down was President Trump's reaffirming of "Liberation Day" or a new round of reciprocal tariffs that are set to go into effect on Wednesday.

As a result, Nvidia stock was down 2.1% as of 2:58 p.m. ET, after falling as much as 5.5% earlier in the session.

Nvidia's momentum is shifting

Through 2023 and 2024, Nvidia could do little wrong. The company posted blowout growth as demand skyrocketed for its data center GPUs, driven by the advent of ChatGPT.

However, despite continued strong results, including a revenue increase of 78% in its most recent quarter, Nvidia is now in its most sustained drawdown since the AI era started. Despite an increasingly attractive multiple, the price action in Nvidia seems to indicate that investors are preparing for more of the pain in the macro-level economy and hedging their bets on a recession.

Is Nvidia a buy?

Nvidia shares could certainly fall further from here, but based on the company's growth momentum, leadership in AI, and competitive advantages, the business continues to look attractive, and the valuation is very reasonable at a trailing price-to-earnings ratio of 36.5 and a forward P/E of less than 25.

For long-term investors, buying Nvidia at the current price point, but patience is required as the stock is likely to be volatile as long as economic uncertainty reigns over the market.

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

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

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Tesla (NASDAQ: TSLA) has long been a battleground stock with very divided views about where the stock will go, and the trenches only seem to have gotten deeper in recent months.

CEO Elon Musk, no stranger to controversy, has become a highly polarizing figure over his entry into politics. His alliance with U.S. President Donald Trump, his campaign to lay off federal employees as the head of the ad hoc organization known as the Department of Government Efficiency (DOGE), and his support of the far-right AfD party in Germany have all raised questions that are affecting Tesla.

Investors' doubts about Tesla stock can be seen in the stock's recent rollercoaster ride. Shares soared after Trump was elected, only to give up all those gains, as the thesis that it will benefit Tesla seems to have fallen apart since the inauguration.

Despite the challenges, at least one notable Tesla bull continues to stand behind the stock. In fact, she has a new price target calling for the stock to 10x from here. Cathie Wood, the head of ARK Invest, issued new guidance asserting that the stock will hit $2,600 per share in five years. In an interview with Bloomberg, Wood argued that robotaxis would account for 90% of its value by that time.

Musk has been hyping investors around the so-called "robotaxi" for years now, saying he believed that an autonomous vehicle marketplace would make Tesla the most valuable company in the world. However, bulls like Wood appear to be overlooking several risks to the company, and Tesla is arguably in a more vulnerable position than it's been since it turned profitable. At this point, a crash in the stock seems more likely than the company reaching a market cap of $8 trillion. Here are several reasons why.

The European business appears to be collapsing

According to registration data from January and February, Tesla's sales have fallen off a cliff. Through the first two months, registrations, which are seen as a proxy for sales, declined 42.6%. Tesla claimed just 1.8% of the total auto market, or 10.3% of the battery electric vehicle market.

Several factors seem to be weighing on the brand in Europe. In addition to Musk's political activities and the region's broader geopolitical tensions with the U.S., Tesla has also failed to update its vehicle lineup, and competition in EVs has intensified in the last few years. Cheaper Chinese models have also taken market share.

Still, the Musk-influenced brand crisis seems like the most obvious explanation for the sudden plunge in sales.

The brand is turning into political kryptonite in the U.S.

Tesla is experiencing an unprecedented bout of vandalism at several of its dealerships and charging stations in North America, which seems to be motivated by Musk's activity with DOGE. There's also been a backlash among existing Tesla owners, including some who have sold their vehicles, as they no longer want to be associated with the brand. Musk's political stance has even spawned a cottage industry of bumper stickers declaiming him.

Musk's alliance with Trump is contradictory because his customer base and the policies supporting EVs have historically come from the other side of the political spectrum. But the Tesla CEO has said before that, unlike most CEOs, he's unwilling to restrain his political speech, even if it costs him customers. In a 2023 CNBC interview, he said: "I'll say what I want, and if the consequence of that is losing money, so be it."

He seems to be standing by those words.

Even Tesla bulls are fed up

Even Tesla's biggest supporters seem to sense that the brand is in trouble. Ross Gerber, a longtime Tesla shareholder and a vocal defender of the company, is calling on Musk to step down as CEO, saying that his work with the Trump administration has become a distraction and he hasn't been focusing on Tesla.

Wedbush analyst Dan Ives, who has been cheerleading Tesla throughout the AI era, said Musk should pull back from his work on DOGE and be more engaged with his EV company.

Musk has long run several companies in addition to Tesla, but something does seem to have changed since he began working with the Trump administration.

Tesla's results have been underwhelming

Tesla trades at the valuation of a disruptive growth stock, but its recent results are more like those of a mature automaker. In 2024, Tesla's vehicle sales declined for the first time ever, and total revenue rose just 1%, while automotive revenue was down 6%.

Musk assuaged investors by telling them that production would increase by 20% to 30%. However, the electric vehicle market appears to be plateauing faster than expected. Demand, rather than production, looks to be Tesla's primary challenge, especially given the reports out of Europe.

In addition to those issues, Tesla's Cybertruck, the only new vehicle model it's released in five years, just faced a recall from the National Highway Traffic Safety Administration of nearly all 46,000 vehicles on the road due to an exterior panel that can fly off the car on the road, endangering other drivers. That marks the eighth recall on the Cybertruck in just 15 months, adding to safety concerns about it. It also appears that with just around 46,000 Cybertrucks sold, sales of the model have significantly underperformed Tesla's expectations as Musk once touted more than 1 million reservations for the futuristic vehicle.

Tesla has also issued several other recalls on other vehicles, and concerns about product safety could crush its ambitions for an autonomous vehicle ridesharing network, which has a much higher safety threshold than a conventional vehicle.

Could Tesla really plunge to $26?

I don't think it's likely that Tesla will tumble all the way to $26 a share, essentially a 90% drop from its current price, but it's not as far outside the realm of possibilities as the market seems to believe. Having gone public in 2010, Tesla stock has never endured a conventional recession (the coronavirus recession was short-lived). Plenty of growth stocks fell by 90% in the financial crisis and the dot-com bust, and Tesla's profile makes it especially vulnerable to an economic downturn.

The company sells a premium-priced durable good, which is exactly the kind of purchase that people delay or forego when times are tough. Tesla's stock is also set up for a crash if the market winds shift. After all, it trades at a triple-digit price-to-earnings ratio, even as sales were flat last year. That's not even factoring in the current brand crisis, which seems to have just started this year.

Cathie Wood could be right that Tesla's robotaxis will prove to be a disruptive innovation, but the company has yet to perform a single autonomous robotaxi ride. In contrast, Alphabet's Waymo has done more than 5 million autonomous rides, and the stock earns no premium for that. In fact, Alphabet currently trades at a discount to the S&P 500. Based on that comparison, Tesla seems grossly overvalued, even after factoring in its potential in autonomy.

We'll learn more about Tesla's prospects when it reports first-quarter deliveries on April 2. But weak results could set off a downward spiral for the stock, especially if the economy continues to weaken.

Tesla is potentially facing a combination of a politically controversial CEO, an aging product lineup, rising competition, electric vehicle fatigue, product safety concerns, a trade war, and a slumping economy. If the numbers start to go south, even Musk's hype around autonomy is unlikely to save the stock.

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

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Jeremy Bowman has no position in any of the stocks mentioned. 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 disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Nvidia (NASDAQ: NVDA) has been the biggest success story of the artificial intelligence (AI) era thus far with the stock jumping more than tenfold from the start of 2023, shortly after ChatGPT came out, to its recent peak.

Nvidia's market capitalization, which now hovers around $3 trillion, topped out at close to $4 trillion a few months ago. No other company in the history of the stock market has created as much wealth as quickly. Not surprisingly, Nvidia is still closely followed by investors, some of whom want to know if the stock can keep climbing, and others who want some assurance that their windfall gains won't suddenly disappear in a stock market slump.

Nvidia's shares have already given up some of those gains, sliding 23% (as of March 19) from its peak in January as a combination of weakening consumer and business sentiment, slowing revenue growth, and some doubts about long-term AI demand have weighed on the stock.

However, because of that pullback, Nvidia is now the cheapest it's been since 2019, arguably setting up a buying opportunity. Is Nvidia a buy right now? Let's take a look at what the company could have in store for the rest of the year.

No slowing down

Nvidia recently hosted its annual GTC conference -- all heavily focused on AI -- and if there was one takeaway from the event, it's that the company has no intention of resting on its laurels.

At the conference, CEO Jensen Huang outlined the company's product roadmap including future chip platforms like Rubin and Feynman, and touted AI forecasts, including one that showed data center capital expenditure spending reaching $1 trillion by 2028. The company also announced new partnerships, including one with General Motors to build autonomous vehicles.

Among its other announcements, the company said it would build an accelerated quantum computing research center, giving it a stake in an emerging technology that some think could be as influential as AI. Nvidia also unveiled new partnerships with cloud hyperscalers Oracle, Microsoft, and Alphabet, ensuring that it maintains close relationship with its top customers and that its chips and components continue to meet their needs.

It also introduced a multi-year plan that showed investors it would continue to push the envelope in AI. For example, Huang told the GTC audience that Rubin, its next GPU generation that is set to be released in late 2026, would power a supercomputer that is 14 times more powerful than the current equivalent, and requires less power.

The macroeconomic landscape

Nvidia faces a number of company- and industry-specific risks, namely that it needs AI spending to continue to increase, but there are also macroeconomic factors that have weighed on the stock and are keeping some investors cautious.

The semiconductor industry is cyclical, and Nvidia has gone through several economic cycles before with the stock falling sharply. That doesn't mean the AI boom is about to end, but investors should be mindful of that risk.

Tariffs also present a risk to the company, though it has already been forced to adapt to restrictions on exports to China, meaning that the trade war isn't an entirely new challenge. Given the company's 78% revenue growth in the fourth quarter and its strong guidance for the first quarter, the macro uncertainty doesn't appear to be impacting Nvidia's business, though it may be weighing on the stock.

A recession or a slowing economy could impact growth of the business. However, the big tech companies that make up its biggest customers are all well-capitalized and therefore have the resources to continue to invest in AI. They also believe that underspending on the new technology is a greater risk than overspending.

What to expect for Nvidia in 2025

It's impossible to perfectly predict a stock's performance, but 2025 is shaping up to be another strong year for Nvidia's business even if macro-level concerns are weighing on the broader stock market.

The company is continuing to be aggressive with its business expansions, partnerships, and new product launches, and demand for the new Blackwell platform, which is now in full production, is outstripping supply.

Expect Nvidia to unveil more partnerships and product advances as the year goes on. While investors may have one eye on potential headwinds facing the company, such as the impact of DeepSeek, the overall outlook for Nvidia still looks strong, and the stock is trading at an attractive valuation following the recent pullback.

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

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

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

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Jeremy Bowman has positions in Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, Microsoft, Nvidia, and Oracle. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended General Motors and has recommended the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool Australia has recommended Alphabet, 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.

In just a matter of weeks, tech stocks have gone from stretching to all-time highs to plunging on concerns around tariffs and even a recession.

As of March 11, the Nasdaq Composite (NASDAQINDEX: ^IXIC) has fallen 13.6% from its closing peak on Dec. 17, 2024. The tech-heavy index was hovering around all-time highs as recently as Feb. 19. In Wall Street terms, the Nasdaq is now in a correction, defined as a decline of 10% or more from a recent closing peak.

Understandably, investors were spooked by weakening consumer sentiment reports, chaos surrounding the on-again, off-again tariffs U.S. President Donald Trump has rolled out, and news that key economic bellwethers like Delta Air Lines and other airlines have cut their guidance for the first quarter.

There's a lot of uncertainty in the stock market right now, but seasoned long-term investors know that sell-offs like these can present buying opportunities.

One stock, in particular, has gotten a lot of attention from investors in the AI era. That stock, Nvidia (NASDAQ: NVDA), has now lost more than any other on a market-cap basis in the recent retreat. The AI chip leader has seen roughly $1 trillion in market value wiped away since its peak earlier this year. This period has included the threat from DeepSeek AI, an underwhelming response to the company's fourth-quarter earnings report, and macro-level concerns around consumer sentiment, global economic growth, and business investment.

Nvidia is now down 27% from its peak earlier this year, setting up a potentially appealing buying opportunity for the fast-growing semiconductor stock. Should investors capitalize on the sell-off or wait until the volatility settles? Let's take a closer look at what to expect from Nvidia stock.

The Nvidia setup

While Nvidia has faced some negative headlines this year around DeepSeek and the actual return on investment its customers are getting from AI, the company's growth remains stellar.

In the fourth quarter, its revenue jumped 78% to $39.3 billion. While that was a slower rate than in previous quarters, that's still much faster than any company of its size is growing. Nvidia expects its superior growth rate to continue. It's calling for around $43 billion in revenue in the first quarter, or 65% growth from a year ago.

With numbers like that, investors shouldn't doubt that the near-term outlook for the business remains strong. Nvidia also seems to be in an enviable position for the medium term. Demand for its new Blackwell platform continues to outstrip supply, and the company is ramping up production of the new components faster than it has for any product in its history.

Over the longer term, the company's prospects still seem bright. The race to artificial general intelligence (AGI) seems unlikely to be derailed even by a global recession, and the company's cutting-edge technology is likely to play a role in future innovations that investors can't yet see. The semiconductor sector has boomed over the last decade, and demand for chips that power everything from data centers to appliances to self-driving cars seems almost certain to grow over the next decade.

Is Nvidia a buy?

Any stock can move lower in the short term, and that's certainly true of Nvidia. The semiconductor sector is cyclical, and the stock is likely to react poorly to signs that the economy is weakening.

However, in addition to its prospects above, Nvidia stock is also surprisingly cheap after the recent pullback. It now trades at a forward price-to-earnings (P/E) ratio of just 24, which is comparable to the S&P 500's forward P/E of 20.7.

Considering that Nvidia doesn't seem to be directly at risk from tariffs or the simmering trade war and that demand for its cutting-edge products continues to soar, the stock looks like a bargain.

Short-term volatility shouldn't dissuade long-term investors from taking advantage of the sell-off in Nvidia shares. Down nearly 30% from its peak, the AI leader looks like an excellent buy right now.

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

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

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

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

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

Well, that didn't take long.

In just a matter of weeks, President Donald Trump's tariff threats have gone from what many believed to be just saber-rattling to a full-blown trade war with the United States' closest trading partners: Canada, Mexico, and China.

Last Tuesday, the Trump administration imposed 25% import taxes on all goods from Mexico, 25% tariffs on non-energy goods from Canada with a 10% rate on energy products. It raised the tariff on all goods from China from the 10% rate it assessed a month ago to 20%. This week, a 25% tariff is supposed to go into effect on all aluminum and steel imports, and the president has talked up other tariffs, including on agricultural products and foreign cars, and plans to reciprocate tariffs that the U.S. is charged from other countries. A few days later, Trump temporarily paused some of the tariffs against Mexico and Canada until April 2.

Despite some of his cabinet members trying to frame the tariffs as a negotiating tactic, Trump showed no signs of softening his stance in his address to Congress last Tuesday night and even acknowledged there could be "a little disturbance" and "an adjustment period" for the economy.

Investors are understandably jittery about the impact of tariffs. Through Monday and Tuesday, as it became clear that at least some of the proposed tariffs would go into effect, the S&P 500 (SNPINDEX: ^GSPC) fell a total of 3%, giving up all of its post-election gains.

There's already evidence in macro-level data that the tariff threat is having an impact on economic growth. On Wednesday, payroll processor ADP reported that private employers added just 77,000 jobs in February, far below expectations, and the February ISM manufacturing survey indicated that the tariff threat was leading to price increases and causing some businesses to pause orders.

While it's unclear what will happen with the tariffs going forward, the volatility around them seems likely to continue -- and for investors that can present an opportunity.

One way investors can take advantage of tariffs

The tariffs could do real damage to the U.S. economy, potentially contributing to a recession. Trump could pull back on them depending on how negotiations play out and the economy could recovery. It's a difficult thing to predict, but as stock prices have fallen, long-term investors are getting attractive prices on stocks that shouldn't be impacted by tariffs over the long term, regardless of what happens in the short term.

In other words, it's a good time for investors to make a watch list for stocks they'd like to buy if the price falls.

One example of a growth stock that's become more attractively priced amid the recent noise around tariffs is Cava Group (NYSE: CAVA), the Mediterranean fast-casual chain that is growing quickly and posting strong profits. Cava stock was down 11.5% last week and has fallen 44% from its peak just a few months ago, even though it reported blowout fourth-quarter results earlier this month.

There's also a good argument for buying a stock like Nvidia (NASDAQ: NVDA), whose competitive advantages can outlast a trade war, and whose stock is down roughly 25% from its recent peak in part on concerns that a trade war could cool off global economic growth. Following that pullback, Nvidia stock now trades at a forward price-to-earnings ratio of just 26, in line with the S&P 500.

Similarly, Taiwan Semiconductor Manufacturing (NYSE: TSM), the world's largest chip manufacturer, also looks like a steal now, trading at a price-to-earnings ratio of 27. It also just announced an additional $100 billion investment in new foundries in the U.S., which should help insulate it from some of the disruption around tariffs.

President Trump also cheered the recent pullback in interest rates in his address to Congress, and economic uncertainty could push Treasury yields lower in a flight-to-safety move. Falling yields tend to be good news for dividend stocks as they make high-yield dividends more attractive by comparison, and that could favor utility stocks like Dominion Energy or low-risk real estate investment trusts (REITs) like Realty Income.

Focus on the long-term

It's important for investors to remember that the tariffs are a fluid situation, and things could change quickly. For example, last Wednesday, President Trump delayed tariffs on cars from Canada and Mexico for a month after talking with executives from Ford Motor Company, General Motors, and Stellantis.

Though Trump seems likely to continue to use trade policy as a cudgel, it's a mistake to try to predict the exact details of tariffs or the specific winners and losers, especially given how fast the news can change. Investors are better off focusing on the long-term opportunity here and buying high-quality stocks as they fall on short-term concerns.

Over the long term, those companies are unlikely to be affected by tariffs, and they should overcome any temporary headwinds from the trade war.

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

The post President Trump's trade war is here: Here's how investors can benefit appeared first on The Motley Fool Australia.

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

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

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Motley Fool contributor Jeremy Bowman has positions in Dominion Energy, Nvidia, Realty Income, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Nvidia, Realty Income, and Taiwan Semiconductor Manufacturing. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Cava Group, Dominion Energy, General Motors, and Stellantis. The Motley Fool Australia has recommended Nvidia. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is well established as a tech leader and is one of the most valuable companies in the world. However, the stock is still vulnerable to the same kinds of macro-level risks as the rest of the stock market, and in February, a combination of weaker-than-expected revenue in its fourth-quarter earnings report and broader worries around the global economy sent the stock tumbling. By the end of the month, Alphabet had lost 17%, according to data provided by S&P Global Market Intelligence, erasing more than $300 billion in market value from the company.

As the chart below shows, the stock fell early in the month on the earnings report and at the end of February as part of a broader sell-off in the market.

^SPX data by YCharts

Q4 results underwhelm

For the fourth quarter, Alphabet's revenue grew 12% to $96.47 billion, though that was below estimates at $96.67 billion. It was also notably slower than rival Meta Platforms' growth, showing that the Google parent appears to be losing market share to its largest digital advertising competitor. The figure also represented a slowdown from earlier in the year.

On the bottom line, earnings per share rose from $1.64 to $2.15, which was slightly ahead of the consensus at $2.13.

Alphabet doesn't give full guidance, but investors seemed skeptical about its plans to ramp up capital expenditures to $75 billion in 2025 from $52.4 billion in 2024 to invest in artificial intelligence (AI) infrastructure as it's not clear that that's currently driving significant revenue for the company.

Later in the month, Alphabet pulled back again in line with a broader sell-off in the market on macro and tech sector issues. Tech stocks fell on reports that Microsoft was canceling some data center leases, and after Nvidia stock sold off in spite of solid earnings report, indicating that investors may believe that AI stocks had gotten overvalued.

Additionally, tariff threats seemed to push stock lower. Google also announced job cuts in its cloud division, which could improve profits, but may also be a sign of slowing growth.

What's next for Alphabet

As the leader in digital advertising, Alphabet is sensitive to global economic growth and business spending, and in a recession, companies tend to cut back on advertising spending first so investors should expect the stock to move on macro news.

Additionally, while the company has stood its ground in the AI race, there is still some concern that its search leadership is vulnerable to competition from OpenAI and others.

However, those concerns seem priced in and the stock looks cheap at a price-to-earnings ratio of just 21.5. If Alphabet can maintain its current growth rate, the stock should move higher from here.

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

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

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

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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. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Jeremy Bowman has positions in Meta Platforms and Nvidia. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, 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, 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.

After soaring following the election, Tesla (NASDAQ: TSLA) stock ran into a wall in February as a number of news items, macro challenges, and CEO Elon Musk's involvement in the Department of Government Efficiency (DOGE) initiative all seemed to contribute to a sharp pullback in the stock.

When the dust settled for February, the stock had lost 28%, according to data from S&P Global Market Intelligence.

As the chart below shows, the stock fell through most of the month.

^SPX data by YCharts

The Tesla-Trump trade is over

Tesla stock soared following the election as investors seemed to believe that Musk's close relationship with Donald Trump would benefit his EV company. However, that thinking seemed to unravel last month as there's little that Trump can do to directly support Tesla, and Musk's persona seems to be turning off some potential customers due to his leadership in federal government layoffs, support for a far-right party in Germany, and other moves.

There wasn't a single factor driving Tesla stock lower last month, but investors seemed to believe that the stock was overvalued following a post-election run-up in the price that came with little change in the business's fundamentals. Investors seem to believe that Musk's work with the Trump administration is becoming a distraction to him. Additionally, the stock fell after he put together a $97.4 billion offer with other investors for OpenAI.

Tariffs are also likely to weigh on Tesla as they will on the rest of the auto sector, and pressure on China could also impact a valuable market for Tesla.

According to European registration data, a proxy for sales, Tesla registrations in Europe dropped by 45% in January on a year-over-year basis, even as overall sales of EVs were up 37%.

That's just one month's worth of data, so it could be subject to supply chain fluctuations or similar issues, but if the trend holds, it could be devastating for Tesla. There's other anecdotal evidence that sales are declining in California, and that anti-DOGE protestors have taken to Tesla stores.

What it means for Tesla

It's difficult to say what the reputational risk or damage to Tesla stock is from Musk's embrace of politics, but there clearly is some.

If the fundamentals of the business were stronger, Tesla stock might be closer to a floor, but the company reported a decline in vehicles sales last year, and the stock is still expensive, trading at a price-to-earnings ratio well above 100, meaning it could still fall a lot further. Investors are hopeful that AI and robotaxis will drive the next leg up for the stock, but maintaining a strong reputation with consumers is key for making that happen. Musk may be destroying those prospects without knowing it.

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

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

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

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

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

Shares of Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) moved lower Wednesday after the tech giant reported fourth-quarter revenue that was slightly below estimates and its slowest top-line growth of 2024. Investors were also disappointed by the slowing growth of its cloud computing business.

At 11:15 a.m. ET, the stock was down by 8.1% but clawed back some losses to finish the session 6.94% lower.

Alphabet comes up short

Overall revenue rose 12% to $96.5 billion in Q4, slightly below analysts' consensus estimate of $96.67 billion. That revenue growth was balanced with search revenue up 12.5% to $54 billion, YouTube up 13.8% to $10.5 billion, and its third-party Google Network ad revenue continuing to decline.

Revenue from Google Cloud was up 30% to $12 billion, though that was a bit below the $12.2 billion that analysts had expected.

Wall Street also appears sceptical of the company's plans to increase capital expenditures from $52.5 billion in 2024 to $75 billion in 2025 to pursue opportunities in artificial intelligence and other areas.

Further down the income statement, Alphabet continued to deliver margin expansion. Its operating margin improved from 27% to 32%, and earnings per share rose from $1.64 to $2.15, beating the consensus expectation of $2.13.

"Q4 was a strong quarter driven by our leadership in AI and momentum across the business," said CEO Sundar Pichai in the earnings release.

What's next for Alphabet

A 7% sell-off might seem like an excessive response to a slight earnings miss, but Alphabet stock had run higher ahead of the earnings report, and also jumped after the company announced it had hit a quantum computing milestone in December.

Alphabet doesn't give guidance, so investors are judging its top-line miss more harshly than they otherwise might. Overall, there weren't any red flags in the report, and profits from Google Cloud continued to ramp up to more than $2 billion in the quarter.

The tech giant still looks well positioned for long-term growth.

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

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

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

More reading

• Are these the best ASX ETFs to buy with $1,000 in May?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Motley Fool contributor Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet. 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.