AI adoption is scaling rapidly, and it is now being considered a structural growth theme in global equities.

Rising earnings and visible demand

According to the report, the investment in infrastructure required to build, train, and deploy AI systems at scale represents a multi-year capital cycle with visible demand, rising earnings, and strong competitive positions across the supply chain. 

The commercial applications for AI are broad: 

• automating software engineering
• improving ad targeting
• accelerating scientific research
• optimising supply chains
• transforming enterprise workflows. 

Deploying these systems at scale requires substantial infrastructure, spanning advanced semiconductors, hyperscale data centres, high-performance networking, and significant power generation capacity. 

The depth of this capital requirement, combined with the breadth of end-market demand, is what makes AI a structural rather than cyclical investment theme.

The pillars supporting AI infrastructure

Canaccord said that adoption and monetisation are accelerating. 

Data shows ChatGPT reached 900 million weekly active users in February 2026 – a 350% increase in 18 months. 

AI adoption has moved well beyond  early experimentation. Revenue has followed. Enterprise generative AI spending surged from approximately US$11.5 billion in 2024 to May-24 US$37 billion in 2025, a threefold increase.

At the same time, falling AI costs are accelerating demand and valuations have de-rated while earnings revisions remain positive. 

The pullback in AI-linked equities over the past six months has compressed valuations to levels where the market appears to be pricing in deceleration risk. 

What should investors be targeting?

Canaccord's preferred exposure is to AI semiconductors and capital equipment. 

It listed 6 stocks for AI themed exposure: 

• Amazon (NASDAQ: AMZN)
• ASML (NASDAQ: ASML)
• Broadcom (NASDAQ: AVGO)
• Microsoft (NASDAQ: MSFT)
• Nvidia (NASDAQ: NVDA)
• Taiwan Semiconductor Manufacturing (NYSE: TSM). 

NVIDIA dominates AI-training GPUs, Broadcom leads custom silicon design, TSMC fabricates the leading edge chips both depend on, and ASML holds a monopoly in the lithography systems underpinning advanced production. 

Amazon and Microsoft offer the largest and most profitable cloud platforms, where AI workloads are driving revenue reacceleration and backlog growth.

For investors looking to basket these companies together, Canaccord pointed towards the Global X Semiconductor ETF (ASX: SEMI). 

The report said SEMI is the most accessible option for Australian-based investors: ASX-listed in Australian dollars, across the 30 largest global semiconductor companies, with meaningful weight in TSMC, ASML, Nvidia, and Broadcom.

However it did note that no single ETF isolates the combination of semiconductors and selective hyperscalers from the report. 

The post How to invest in the AI Build-Out: Expert appeared first on The Motley Fool Australia.

IVV ETF has been a popular choice among investors seeking exposure to the roaring US stock market over the past three years.

IVV is now the third largest ASX ETF out of more than 400 on the market, with more than $11.67 billion invested in it.

However, last month, IVV ETF recorded the highest investment outflows, indicating an exodus amid the Iran war.

Aussie investors took $461 million out of the exchange-traded fund (ETF) in March, based on ASX data analysed by Betashares.

However, investors have not given up on US shares, with $232 million flowing into IVV ETF's currency-hedged counterpart in March.

That's the iShares S&P 500 AUD Hedged ETF (ASX: IHVV), which is up 1.62% to $62.68 per unit today.

This indicates investors still want US exposure but are mindful of the weaker USD against the stronger AUD today.

Stronger Aussie dollar weakens IVV ETF returns

The Australian dollar has risen almost 20% from just over 60 US cents 12 months ago to a three-year high of 70.8 US cents today.

As James Gruber, Equity Market Strategist at CommSec, explains:

When the Australian dollar strengthens, your international ETF returns shrink, and if the Australian dollar weakens, your returns improve.

To put that into perspective: last year, the S&P 500 delivered total returns of 17.88%, but IVV ETF investors received just 10.75%.

The US dollar has weakened due to expectations of interest rate cuts, concerns over the impact of tariffs, and geopolitical uncertainty.

Meanwhile, the AUD has strengthened given Australia has entered a tightening rate cycle, with two rate hikes so far in 2026.

There is also strong demand for our commodities, which foreign buyers purchase with Australian dollars, amid a new mining boom.

Investors prefer IHVV over IVV today because hedged ETFs reduce the impact of currency movements on investments. 

Gruber explained:

For example, you may invest in an ETF that tracks the S&P 500 index. If it is unhedged and if the Australian dollar strengthens after you buy it, your returns in AUD may drop, even if the underlying investments do well in their home currency. 

Conversely, if the Australian dollar declines, the value of an unhedged ETF may rise in AUD terms, assuming the underlying asset holds or increases in value.

Gruber points out that currency-hedged ETFs typically cost more than unhedged ETFs.

Case in point: IHVV has management fee of 0.1% while IVV has a fee of 0.03%.

US shares vs. ASX 200 in 2026

The S&P 500 has substantially outperformed the S&P/ASX 200 Index (ASX: XJO) over the past three years.

But change is afoot this year.

So far in 2026, the S&P 500 has lifted 0.6% while ASX 200 shares have increased 2.9%.

Gruber points out that a key difference between the two benchmark indices is their exposure to technology companies.

That's significant because a global tech wreck is underway, as investors fret over the impact of artificial intelligence (AI).

Illustrating the difference, the IVV ETF is 34% tech stocks, while the ASX 200 has just a 3% exposure to technology.

Gruber said:

… the S&P 500 leans heavily on technology stocks. 

If you add the likes of Amazon and Tesla – classified as consumer discretionary stocks in the S&P – and Meta and Alphabet – included in the communications sector – to the technology sector, then tech accounts for more than 40% of the S&P 500 index. 

The post Why ASX investors dumped IVV ETF last month appeared first on The Motley Fool Australia.

Thanks partly to our unique system of franking, as well as some good old fashioned love of country, it's fair to say that ASX investors have a strong local bias.

When we do branch out to invest beyond our shores, it is usually a direct flight to the US markets. As I've written here before, the US is, as it should be, the first port of call for ASX investors seeking international diversification. No one can deny that the US is home to the vast majority of the world's best and most dominant businesses. No other country's share market constituents can match the size, scope and scale of top US stocks like Amazon, Alphabet, Microsoft, Netflix, Mastercard, Procter & Gamble, Apple, and countless others.

However, that doesn't meaning investing in US stocks isn't without risk. The US-Iran war that has been raging all month proves that. As such, I think the prudent investor might wish to consider diversifying beyond just Australia and America. The easiest way to do this, by far, is by using exchange-traded funds (ETFs).

Let's go through some of the best options for stocks outside Australia and the US.

3 ASX ETFs that can help diversify a portfolio

First up, there's the Vanguard All-World ex-US Shares Index ETF (ASX: VEU). This ETF, as its name implies, throws a whole bunch of different countries' stock markets together, with the notable exception of the US. The largest contributors to VEU's portfolio include Japan, the United Kingdom, China, Canada, India, and Taiwan. A healthy mix of advanced and developing economies there. ASX do feature in this ETF as well, although they make up just 4.3% of the entire portfolio.

Another option to consider is the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). VGE focuses exclusively on emerging economies, so you won't find European, British or Japanese stocks here. Instead, VGE's largest contributors are countries like China, Taiwan, Brazil, South Africa and Saudi Arabia.

Finally, investors can consider the iShares MSCI EAFE ETF (ASX: IVE). This fund covers markets from Europe, Asia and the Far East (EAFE). It offers exposure to countries ranging form Japan, Spain and the UK to Germany, Singapore and Israel. Again, Australia is included as well, but contributes just over 6% to IVE's holdings.

Foolish takeaway

All three of these ASX ETFs offer Australian investors an easy way to add exposure to stocks from Europe, Asia and Africa to their portfolios. These regions are under-represented in the vast majority of ASX portfolios, and can help insulate investors from adverse movements on the American or Australian markets.

The post These 3 ASX ETFs can help protect your portfolio in 2026 appeared first on The Motley Fool Australia.

In Australia and globally, several powerful themes are driving investment. Electrification is reshaping energy systems, requiring significant spending on transmission infrastructure, renewable generation, and storage. At the same time, strong commodity prices are supporting mining companies, while large-scale infrastructure projects — including those linked to the Brisbane 2032 Olympics — are lifting activity domestically.

Against this backdrop, two ASX-listed companies, Wagners Holding Company Ltd (ASX: WGN) and NRW Holdings Ltd (ASX: NWH), have delivered standout share price performance over the past 12 months, rising over 157% and 94%, respectively.

But after such strong gains, are the fundamentals keeping pace?

Riding the infrastructure and construction wave

Wagners is a construction materials and infrastructure business with exposure to concrete, cement, composite materials, and aviation services. The company generates revenue by supplying essential inputs into infrastructure, civil construction, and mining projects — sectors that are currently benefiting from elevated investment levels.

Recent updates suggest Wagners has been experiencing strong trading momentum, supported by higher demand across its key divisions. In particular, infrastructure activity in Queensland and major project pipelines have been contributing to increased volumes and improved pricing outcomes.

The company has also continued to invest in its proprietary composite technologies, which offer lighter and more durable alternatives to traditional materials. This positions Wagners to benefit not only from near-term construction demand but also longer-term structural shifts in how infrastructure is built.

Looking ahead, the outlook appears supported by sustained infrastructure spending and population growth, particularly in regions such as southeast Queensland. If project activity continues to ramp up, Wagners could see further earnings growth, provided cost pressures remain controlled.

NRW Holdings: Leveraged to mining services growth

NRW Holdings operates as a mining services contractor, providing civil, mining, and drill and blast services to resource companies. Its revenue is largely tied to contract work across mine development, production, and infrastructure.

The company has benefited from strong commodity prices, which have left many miners with robust balance sheets and the ability to fund expansion projects and exploration programs. This has translated into a growing pipeline of work for contractors like NRW.

Recent results highlight solid profit growth and a healthy order book, with the company securing new contracts and maintaining strong utilisation across its fleet. Importantly, NRW's diversified exposure across commodities and clients helps mitigate reliance on any single project or resource.

The outlook remains favourable as mining investment continues, particularly in bulk commodities and critical minerals linked to the energy transition. As long as commodity markets remain supportive, demand for mining services is likely to stay elevated.

What could drive the next leg of growth?

Both ASX shares are benefiting from trends that appear durable rather than cyclical in nature.

Electrification requires significant capital investment in infrastructure. Mining companies are expanding to meet demand for key resources. And government-backed infrastructure pipelines remain strong.

However, after such significant share price appreciation, future returns may depend more heavily on continued earnings growth rather than multiple expansion.

For Wagners, this means maintaining margins while scaling production and delivering on project demand. For NRW, it comes down to converting its order book into sustained revenue and profit growth while managing costs.

If both companies can continue to grow revenue and earnings, maintain or expand margins, and avoid valuation compression, there is potential for further upside over time.

As always, the key will be execution.

The post 2 ASX shares booming on electrification and mining. Is there more upside ahead? appeared first on The Motley Fool Australia.

The ASX currently has more than 2,000 listed companies to choose from, not to mention access to international stocks as well. 

That's why a base portfolio of a few ASX ETFs can be a great starting point. 

ASX ETFs offer instant diversification in one simple trade. 

This can be especially attractive when the market is experiencing significant volatility, as has occurred over the past couple of weeks.

Current conflict in the Middle East is causing significant fluctuations day to day for many Australian and global blue-chip stocks.

With this uncertainty and volatility likely to continue in the short-term, it is important to have a portfolio spread across various sectors and countries. 

These three funds would make an ideal starting point for a new investor aiming for a broadly diversified portfolio. 

Global X Australia 300 Etf (ASX: A300)

As the name suggests, this fund offers exposure to the 300 largest Australian companies listed on the ASX.

Typically, investors track the performance of the S&P/ASX 200 Index (ASX: XJO). 

However, this fund offers exposure to a broader set of companies than the typical 200 Australian companies.

Its largest exposure is to Australia's two largest companies by market cap: 

• Commonwealth Bank of Australia (ASX: CBA)
• BHP Group Ltd (ASX: BHP). 

These two holdings represent roughly 20% of the fund. 

BetaShares NASDAQ 100 ETF (ASX: NDQ)

With Australia's market covered by the A300 fund, adding the BetaShares NASDAQ 100 ETF provides a US focus. 

This ASX ETF comprises 100 of the largest non-financial companies listed on the Nasdaq market, and includes many companies that are at the forefront of the new economy.

The NASDAQ 100 is often referred to as the "new economy." 

With its strong focus on technology, NDQ ETF provides diversified exposure to a high-growth potential sector that is under-represented in the Australian sharemarket.

It includes some of the biggest global companies like Apple Inc (NASDAQ: AAPL) and Amazon.com Inc (NASDAQ: AMZN). 

It has a strong track record, rising 84% over the last 5 years. 

Betashares Global Shares Ex Us Etf (ASX: EXUS)

With bases covered in Australia and the US, this ASX ETF provides a more global outlook. 

It provides exposure to 900+ large and mid-cap companies from 22 developed markets excluding the US and Australia.

Its largest exposure by country is to: 

• Japan (23.8%)
• Britain (13.2%)
• Canada (12.6%). 

With the US historically representing the majority of developed markets, adding exposure outside the US provides both geographic and sector diversification. 

Compared to US focused exposures, EXUS WTF has a higher weighting to sectors such as financials and industrials, and a lower weighting to technology.

The post 3 ASX ETFs for new investors to consider in 2026 appeared first on The Motley Fool Australia.

With one trade, you get exposure to hundreds – even thousands – of companies, spreading risk and reducing the need to pick individual winners.

Here are 3 ASX ETFs that can offer a genuinely stress-free start to investing.

Betashares Australia 200 ETF (ASX: A200)

This ASX ETF is a straightforward way to own Australia's 200 largest listed companies. Blue chips such as Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and CSL Ltd (ASX: CSL) dominate its portfolio.

In one trade, you're effectively buying a slice of the Australian economy. It spans from banks and miners to healthcare leaders and retailers. A200 ETF is known for its ultra-low management fee, which helps maximise long-term compounding.

While banking and mining heavyweights dominate the Australian market, this ETF provides broad, diversified exposure. All without the stress of choosing individual blue chips.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

This fund opens the door to developed markets worldwide. This ASX ETF holds thousands of companies across the United States, Europe and parts of Asia.

Among its largest holdings are global giants such as Apple Inc (NASDAQ: AAPL), Amazon.com Inc (NASDAQ: AMZN) and NVIDIA Corp (NASDAQ: NVDA). That exposure adds powerful technology and innovation leaders that are underrepresented on the ASX.

By spreading your money across multiple economies and industries, VGS ETF can help smooth returns over time. However, currency movements may influence performance in the short term.

iShares Core S&P/ASX 200 ETF (ASX: IOZ)

This ASX ETF is rounding out the trio. Like A200, IOZ ETF focuses on Australia's largest 200 companies, tracking the S&P/ASX 200 Index (ASX: XJO). Its top holdings closely mirror the leaders of the local share market, including retail giant Wesfarmers Limited (ASX: WES) and Macquarie Group Ltd (ASX: MQG), alongside the major banks and miners.

This ASX fund offers strong liquidity and exposure to the companies that drive much of the ASX's overall performance.

Foolish Takeaway

The beauty of these ASX ETFs is their simplicity. You can choose one as a starting point or combine Australian exposure through A200 or IOZ with global diversification via VGS.

Instead of chasing hot tips, you own broad sections of the market and let time and compounding do the heavy lifting.

For investors who want a calm, disciplined entry into the share market, that kind of structure can make all the difference.

The post 3 ASX ETFs for a stress-free start to investing appeared first on The Motley Fool Australia.

Building a globally diversified portfolio doesn't require dozens of holdings or a constant stream of trading decisions. This structure with 5 diversified ETFs is simple, transparent, and built for the long haul.

Global X Australia 300 ETF (ASX: A300) 

The foundation starts at home. This ASX ETF provides exposure to the 300 largest companies on the ASX. That means ownership across the full spectrum of Australia's corporate heavyweights.

It includes banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC), miners such as BHP Group Ltd (ASX: BHP) and Rio Tinto Ltd (ASX: RIO), as well as to healthcare leader CSL Ltd (ASX: CSL) and retail giant Wesfarmers Ltd (ASX: WES).

A300 is broad, diversified and low cost, making it well suited to anchor roughly 30% of a portfolio in domestic equities.

iShares S&P/ASX 200 ETF (ASX: IOZ) 

This ASX ETF offers a slightly tighter focus on the 200 largest Australian companies. While there is overlap with A300, IOZ remains one of the lowest-cost ways to gain exposure to the core of the Australian market.

Together, these funds ensure investors capture dividends, franking credits and the performance of Australia's biggest listed businesses.

Betashares Global Shares ETF (ASX: BGBL) 

Global diversification is where long-term growth often accelerates. This Betashares ETF delivers exposure to around 1,500 companies across developed markets.

Investors gain access to global leaders such as Apple Inc. (NASDAQ: AAPL) and Amazon.com Inc (NASDAQ: AMZN), alongside major European and Japanese corporations.

It spreads risk across sectors including technology, healthcare, financials and consumer goods, reducing reliance on any single economy.

Betashares Global Quality Leaders ETF – Currency Hedged (ASX: HQLT) 

For a sharper tilt toward financially strong businesses, this ASX ETF narrows the field to approximately 150 high-quality global companies selected for strong profitability, stable earnings and solid balance sheets.

The currency hedging back to Australian dollars reduces exchange rate volatility, which can smooth returns over time. This ETF adds a disciplined growth overlay to the global allocation.

SPDR Bloomberg AusBond ETF (ASX: BOND)

No portfolio is complete without a defensive component. BOND ETF invests in a diversified basket of Australian government and investment-grade corporate bonds.

Bonds typically move differently to shares, helping cushion portfolios when equity markets fall. They also provide income, adding stability to overall returns.

Foolish Takeaway

An allocation could look like this: around 30% in Australian equities through A300 and IOZ, approximately 35% in global shares via BGBL and HQLT, with the remaining portion in BOND to provide defensive ballast.

The result is a diversified, low-cost portfolio spanning thousands of companies worldwide, supported by high-quality bonds.

There is no need to predict which individual stock will outperform next year. Instead, investors gain broad exposure to the engines of global growth while maintaining stability through disciplined asset allocation. It's a structure designed to endure market cycles rather than chase them.

The post 5 low-cost ASX ETFs for a global diversified portfolio appeared first on The Motley Fool Australia.

This isn't about picking a single winner. It's about spreading bets across global growth engines and letting time do the heavy lifting.

Here's where I'd put $500 each.

Vanguard FTSE Asia Ex-Japan Shares Index ETF (ASX: VAE)

The Vanguard FTSE Asia Ex-Japan Shares Index ETF gives exposure to one of the most important long-term growth regions in the world.

This ETF invests across Asia excluding Japan, with meaningful weightings to China, Taiwan, India, South Korea, and Hong Kong. These markets are home to globally significant companies and industries, including semiconductors, financial services, ecommerce, and infrastructure.

What I like about allocating a modest amount here is diversification. Asian economies don't always move in sync with Australia or the US, and long-term growth rates in parts of the region remain structurally higher. It can be volatile at times, but as a long-term allocation, I think Asia deserves a seat at the table.

Putting $500 into the VAE ETF feels like a sensible way to tap into that growth without taking on single-country risk.

Vanguard FTSE Europe Shares ETF (ASX: VEQ)

The Vanguard FTSE Europe Shares ETF is a region many investors overlook, but I think it's worth considering.

European equities tend to trade at more conservative valuations than US markets and offer exposure to world-class global businesses across healthcare, consumer goods, industrials, and financials. These are companies that generate revenue globally, not just within Europe.

The VEQ ETF provides broad exposure across developed European markets, which helps smooth out country-specific risks. It's not the fastest-growing region in the world, but it does offer diversification and a different return profile to US-heavy portfolios.

For me, allocating $500 here would be about balance. It reduces reliance on a single market and adds exposure to high-quality global operators at reasonable valuations.

iShares Global 100 AUD ETF (ASX: IOO)

The iShares Global 100 AUD ETF is the ETF I'd choose for simple, concentrated exposure to the world's largest and most influential companies.

The IOO ETF tracks the S&P Global 100 Index, which includes 100 multinational blue-chip businesses that dominate their industries. Its top holdings read like a who's who of global corporate powerhouses, including NVIDIA, Apple, Microsoft, Amazon, Alphabet, Broadcom, JPMorgan Chase, Eli Lilly, and Exxon Mobil.

What appeals to me here is clarity. You know exactly what you're getting. These are companies with scale, pricing power, and global reach. They're not early-stage growth stories, but they've proven their ability to generate cash flow and compound earnings over time.

As a long-term holding, the IOO ETF provides instant access to global leaders across technology, healthcare, energy, and financials, all in a single trade.

Foolish takeaway

If I were investing $1,500 today, I'd be very comfortable spreading $500 each across the Vanguard FTSE Asia Ex-Japan Shares Index ETF, the Vanguard FTSE Europe Shares ETF, and the iShares Global 100 AUD ETF.

Together, they offer exposure to emerging growth in Asia, established global businesses in Europe, and the world's largest blue-chip companies. It's not about perfection. It's about sensible diversification, global reach, and staying invested for the long term.

The post Why I would invest $500 in each of these ASX ETFs appeared first on The Motley Fool Australia.

However, it's my view that these balanced options are not a great fit for everyone. As I've discussed before, Australians under the age of 40 might be better off investing in a more growth-oriented fund that forgoes the stability that cash and bonds provide for a higher potential return by going all in shares. As anyone under 40 probably isn't going to retire anytime soon, stability and capital protection arguably shouldn't be high priorities at this stage of life.

When it comes to my own superannuation, I've put my money where my mouth is. My superannuation provider offers the choice of selecting individual index funds that I can invest my super into. So today, let's talk about the three ASX ETFs that I use within my super fund to achieve the best returns possible. The funds themselves aren't publicly traded, but have ASX counterparts which are essentially the same offering.

Three ASX ETFs that I've built my super fund around

Australian and international stocks

First up, we have a good old-fashioned S&P/ASX 200 Index (ASX: XJO) fund. Roughly 40% of my super fund goes towards an ASX 200 index fund, one rather similar to the iShares Core S&P/ASX 200 ETF (ASX: IOZ) or the SPDR S&P/ASX 200 ETF (ASX: STW). This fund holds the largest 200 stocks on the ASX. That's everything from Westpac Banking Corp (ASX: WBC) and Woolworths Group Ltd (ASX: WOW) to JB Hi-Fi Ltd (ASX: JBH) and Suncorp Group Ltd (ASX: SUN).

This index fund represents the best of Australian business. As ASX shares have historically delivered meaningful growth and healthy dividend income, I am very happy for this fund to receive some of my retirement cash.

Next up, another 50% or so of my super capital goes towards an international shares ETF. This ETF holds hundreds of different stocks from dozens of advanced economies around the world. These include the United States of America, the United Kingdom, Japan, Germany and France, among many others. A listed equivalent might be the Vanguard MSCI Index International Shares ETF (ASX: VGS).

Australia is a wonderful place to invest, but its best companies simply don't have the firepower that international markets do. That's why I'm happy that this component of my super fund invests in world-dominating stocks like Apple, Amazon, NVIDIA, Mastercard, Alphabet, Toyota and Nestle.

Adding some diversity to my super fund

My super fund's final holding, making up that final 10% or so, provides even more diversification. It is an emerging markets fund, drawing thousands of holdings from emerging economies around the globe. An ASX equivalent might be the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). It offers exposure to countries like China, India and Taiwan. I think these economies will offer a lot of growth over the next few decades, and, as such, I am happy to have part of my super fund invested there.

Foolish takeaway

As I am still a few decades away from the traditional retirement age, I am happy to have 100% of my super fund invested in shares. With the three ETFs mentioned above, I feel that I have adequate diversification across multiple markets and currencies, whilst still maintaining exposure to some of the world's best companies. Individually selecting these investments also keeps my super costs as low as possible, which is of vital importance for building wealth over decades.

The post Here are the 3 ASX ETFs I use for my super fund appeared first on The Motley Fool Australia.

Only two Mag 7 shares delivered impressive capital growth, while the other five underperformed the major US indices.

Yep, they underperformed.

The health of the Mag 7 companies matters to Australian investors because we are heavily invested in them, whether we like it or not.

Got a superannuation fund? Chances are a chunk of your retirement savings are invested in these seven high-tech companies.

Own exchange-traded funds (ETFs) tracking the US or global markets?

You're definitely invested in the Mag 7 stocks.

The Mag 7's high market caps mean they dominate the S&P 500 Index (SP: .INX) and the Nasdaq Composite Index (NASDAQ: .IXIC).

Therefore, their performance has a direct impact on many Australians' investments.

Let's take a look at how the Magnificent 7 stocks performed in 2025, starting with the No. 1 riser.

And no, it's not the stock you think!

Magnificent Seven stocks in 2025

To set the scene for you, the S&P 500 rose 16.39% and the Nasdaq Composite lifted 20.36% last year. (Compare that to ASX shares here.)

Here's how the Magnificent Seven stocks compared to the broader market.

1. Alphabet Inc Class A (NASDAQ: GOOGL)

Both Class A and Alphabet Inc Class C (NASDAQ: GOOG) shares lifted 65% in 2025.

Class A stock closed at US$313 per share, and Class C shares closed at $313.80.

Nvidia Corp (NASDAQ: NVDA)

US stock market darling Nvidia still put in a good performance as it continues to leverage the artificial intelligence megatrend.

Stock in the US graphics and AI chip designer rose 39% to close at US$186.50 per share on 31 December.

In October, Nvidia became the first company in the world to reach a US$5 trillion market cap.

Investment platform Stake reports that Nvidia was one of the five most traded US stocks by Australian traders last year.

According to Stake's 2025 Retail Investor Report Card:

It beat revenue estimates every quarter in 2025 by an average of 8.9% and is on track to generate US$212B in FY26.

Its earnings have become a global market catalyst: Nvidia's results serve as a directional signal for traders worldwide.

For Stake investors, the biggest 'buy-the-dip' moment came during the DeepSeek moment in January, when Nvidia lost US$260B in market cap but buy orders surged 460%.

Microsoft Corp (NASDAQ: MSFT)

The Microsoft stock price rose 15% to close 2025 at US$483.62 per share.

Meta Platforms Inc (NASDAQ: META) 

Meta Platforms shares rose 13% to finish the year at US$660.09.

Tesla Inc (NASDAQ: TSLA)

Stock in electric vehicle manufacturer Tesla rose 11% to US$449.72 per share.

Stake analysts said Tesla was the only Magnificent Seven stock not to set a new share price record in 2025.

Apple Inc (NASDAQ: AAPL) 

US technology stock Apple rose by 9% to close at US$271.86 per share on 31 December.

Amazon.com, Inc. (NASDAQ: AMZN) 

The Amazon share price inched 5% higher to close at US$230.82 on 31 December.

Interesting sidenote

My US Fool colleague Trevor Jennewine recently covered the third-quarter report from Warren Buffett's Berkshire Hathaway Inc (NYSE: BRK.A) (NYSE: BRK.B).

The report showed that the 'Oracle of Omaha', who retired at the end of last year, bought Alphabet stock — the best performer of the Magnificent Seven in 2025 — and continued to sell down Apple — the second-worst performer of the group — during the third quarter.

Berkshire Hathaway purchased 17.8 million shares in Alphabet, which now accounts for 2% of the company's $267 billion portfolio of 41 stocks.

Berkshire sold 41.7 million Apple shares, and although the company remains Berkshire's largest holding at 21%, its position has reduced by 74% in just two years.

The post Here's how the US Magnificent Seven stocks performed in 2025 appeared first on The Motley Fool Australia.

Given this enduring popularity, it's a great time, as we start another lap around the sun, to do a deep dive into this index fund. So let's talk about two reasons ASX investors might want to buy the Vanguard Australian Shares ETF in 2026, and two reasons why they might wish to reconsider an investment.

Two reasons why the VAS ETF is an ASX buy in 2026

VAS: Simple and cheap

One of the reasons ASX investors love investing in VAS is its simple nature. This index fund offers exposure to the largest 300 stocks listed on the ASX, weighted by market capitalisation. Nothing more, nothing less. Like all index funds, this avenue is appealing for many investors who wish to take a hands-off, passive approach to investing. The largest 300 companies in Australia change over time, VAS changes with them though, periodically rebalancing its portfolio to ensure that the successful stocks are added to, while the losers are weeded out.

The Vanguard Australian Shares ETF charges a relatively cheap 0.07% per annum for this service.

A stellar long-term track record

We can point to decades of historical data that show the Australian share market has always generated wealth-building returns for investors. The Vanguard Australian Shares Index ETF has itself returned an average of 9.15% per annum since its inception in 2009. But, as we looked at in August of last year, Vanguard itself has calculated that the Australian market returned 9.3% per annum over the 30 years to 30 June 2025.

Past performance is never a guarantee of future returns, of course. But it still gives us an insight into the potential benefits of long-term investing.

Two reasons to sell the Vanguard Australian Shares ETF (VAS)

So there are plenty of positives in buying the VAS ETF for an ASX portfolio. But this is arguably no slam dunk. Many investors have justified concerns about ploughing more capital into this fund in early 2026. Let's go through two.

Banks and miners

One of the primary concerns over buying more VAS units in the ASX investor community is its over-concentration on two sectors of the Australian share market. Most ASX investors know that bank stocks like Commonwealth Bank of Australia (ASX: CBA) and mining shares like BHP Group Ltd (ASX: BHP) dominate the ASX. But a look at VAS' portfolio throws this dynamic into sharp relief.

As it currently stands, more than 50% of any investment in VAS today would go into either financial or mining shares. That's 32.1% to financials and 22.1% to miners. The next most influential sector in this ASX ETF is healthcare, making up just 7.9% of VAS' portfolio. The big four banks alone attract more than $1 of every $5 invested in the fund.

This might be just fine with investors who prioritise dividend income. But any investor who wants true diversity might wish to at least dilute this heavy exposure to banks and miners with other ASX ETFs.

VAS: Where's the innovation?

Another potential concern that some ASX investors might have with the Vanguard Australian Shares ETF is the lack of innovative, exciting and quick-growing companies at its highest echelons. VAS' banks and miners might be mature, profitable businesses. But there aren't too many companies in this ETF that are moving fast or breaking things, to paraphrase Mark Zuckerberg.

While the flagship S&P 500 Index that tracks the US markets holds innovators like Amazon, Microsoft, NVIDIA and Zuckerberg's own Meta Platforms among its top holdings, most of the ASX's top stocks have been delivering steady but slow growth for decades.

If you'd like to invest in an index fund that includes at least some innovative, exciting companies that are growing at healthy clips, VAS might not be the fund for you.

The post 4 pros and cons of buying the Vanguard Australian Shares ETF (VAS) in 2026! appeared first on The Motley Fool Australia.

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

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

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

1. Nvidia

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

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

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

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

2. Amazon

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

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

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

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

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

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

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The good news is that exchange-traded funds (ETFs) remove much of that pressure and offer a simple way to invest.

With a single investment, you can gain instant diversification and exposure to hundreds or even thousands of companies.

For Australians starting their investing journey in 2026, here are five ASX ETFs that stand out as sensible, beginner-friendly options.

Vanguard Australian Shares ETF (ASX: VAS)

The Vanguard Australian Shares ETF is often considered a cornerstone ETF for local investors. It provides exposure to the 300 largest shares listed on the ASX, making it an easy way to invest in the Australian economy as a whole.

Its portfolio includes blue-chip names such as BHP Group Ltd (ASX: BHP), Commonwealth Bank of Australia (ASX: CBA), CSL Ltd (ASX: CSL), and Wesfarmers Ltd (ASX: WES). For beginners, this fund offers simplicity, diversification, and a steady stream of income over time.

iShares S&P 500 ETF (ASX: IVV)

If you want global exposure without complexity, the popular iShares S&P 500 ETF is a strong place to start. It tracks the S&P 500 Index, giving investors access to 500 of the largest stocks in the United States.

Holdings include Microsoft Corp (NASDAQ: MSFT), Apple (NASDAQ: AAPL), NVIDIA Corp (NASDAQ: NVDA), Johnson & Johnson (NYSE: JNJ), and Visa Inc (NYSE: V). For beginners, this fund offers exposure to some of the world's most profitable businesses with a single, low-cost investment.

Vanguard MSCI Index International Shares ETF (ASX: VGS)

The Vanguard MSCI Index International Shares ETF could be worth considering. It is designed for investors who want broad international diversification beyond Australia. It invests across developed markets such as the United States, Europe, and Japan.

Its holdings include companies like Alphabet Inc (NASDAQ: GOOGL), Nestlé (SWX: NESN), Toyota Motor Corp (TYO: 7203), and LVMH Moët Hennessy Louis Vuitton (FRA: MOH).

Betashares Australian Quality ETF (ASX: AQLT)

The Betashares Australian Quality ETF takes a quality-focused approach to Australian shares. Rather than simply tracking the biggest companies, it targets businesses with strong balance sheets, reliable earnings, and solid cash flow.

Top holdings include Telstra Group Ltd (ASX: TLS), Macquarie Group Ltd (ASX: MQG), National Australia Bank Ltd (ASX: NAB), and Woodside Energy Group Ltd (ASX: WDS). This ETF could suit beginners who want a more selective take on the local market. It was recently recommended by analysts at Betashares.

Betashares Nasdaq 100 ETF (ASX: NDQ)

Finally, the Betashares Nasdaq 100 ETF adds a growth tilt to a beginner portfolio by tracking the Nasdaq-100 Index. It provides exposure to innovative companies shaping technology, healthcare, and consumer trends.

Holdings include Amazon.com (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Broadcom (NASDAQ: AVGO), and Netflix (NASDAQ: NFLX).

The post 5 fantastic ASX ETFs for beginners in 2026 appeared first on The Motley Fool Australia.

So today, let's talk about five US stocks that I would love to buy, or buy more of, this year.

5 US stocks I'd love to buy in 2026

Amazon.com Inc (NASDAQ: AMZN)

First up, no one will be surprised to see Amazon. This e-commerce and cloud giant has been in my portfolio for many years. But I would love to add some more in 2026. I am still excited about this company's future growth. Amazon's online marketplace has never looked more dominant, given that it is entrenched in economies right around the world.

This company's AWS cloud platform also continues to grow at an astounding pace, and seems to be carving out a place as the clear market leader in cloud-based infrastructure.

Amazon stock had a fairly flat 2025, so I wouldn't be surprised if it is my first US stock purchase this year.

Duolingo Inc (NASDAQ: DUOL)

Duolingo is another US stock that I've owned for a while now, and one that has been particularly lucrative to my portfolio. I am delighted to see this language-learning company report seemingly evergreen growth year after year, both in active users and through the number of courses users can engage with (chess was a notable 2025 addition).

Despite its impressive growth rates, Duolingo is a stock that tends to be highly volatile. Over 2025, for instance, it got as high as US$544.93 and as low as US$166.27 a share. I'm hoping for more volatility this year, and a low price to pick up more shares at.

S&P Global Inc (NYSE: SPGI)

Now onto a stock that I don't yet own, but would like to by this time next year. S&P Global is a financial services company you might know best from its stewardship of many of the world's most important stock market indexes. These include both the S&P/ASX 200 Index (ASX: XJO) and the S&P 500 Index.

The rise of index investing over the past decade or two has been a boon for S&P Global. It has been able to compound revenues and profits at a remarkably consistent rate. This is evidenced by its 52-year streak of annual dividend increases, which have averaged an inflation-crushing rise of 7.46% per annum over the past five years. If there is a pullback opportunity to buy this company in 2026, I won't miss it.

Costco Wholesale Corp (NASDAQ: COST)

Costco is the US stock behind the eponymous supermarket chain. Costco's unique membership model and bulk-oriented grocery warehouses have helped the company stand out against fierce global competition, including in Australia. We can see this in action through Costco's 21-year streak of dividend increases, which have averaged an impressive 12.97% per annum over the past five years.

Costco stock also had an uncharacteristically poor year in 2025. If this trend continues in 2026, I will be happy to add some more shares to my existing position.

Mastercard Inc (NYSE: MA)

Our final US stock is a company we'd all be familiar with, and one that is probably in your wallet as we speak. Mastercard is the global payments giant that forms a near-duopoly with its fierce rival, Visa.

Mastercard has one of the most picture-perfect growth trajectories you can imagine, with more than a decade of double-digit growth in revenues, earnings, profits and dividends in the bank. Its annual dividend growth has averaged 13.7% over the past five years.

I've held Mastercard shares for many years, but have always regretted not loading the boat to the brim at the time of my first purchase. If I have the opportunity to rectify this mistake in 2026, I would be delighted to.

The post I want to buy Amazon and these 4 US stocks in 2026 appeared first on The Motley Fool Australia.

At the time of writing, the S&P 500 Index (SP: .INX) is up 17% and the Nasdaq Composite Index (NASDAQ: .IXIC) is up 21% for 2025.

Meanwhile, the ASX 200 is up 6%.

Many Australian investors, particularly younger generations, own US stocks via broad-based exchange-traded funds (ETFs).

However, some investors still prefer to buy US shares directly in the hope of outsized returns.

Investment platform Stake has revealed the top five most traded US stocks by its Australian customers in calendar year 2025.

Let's take a look.

Most traded US stocks of the year

1. NVIDIA Corp (NASDAQ: NVDA)

The Nvidia share price closed at $187.54 overnight and has risen 40% in 2025.

According to Stake's 2025 Retail Investor Report Card:

Nvidia officially became the world's largest company this year – its market cap reaching a peak US$4.93T in November.

Despite landing in the short-seller crosshairs of Michael Burry, the firm proved AI demand isn't going anywhere.

It beat revenue estimates every quarter in 2025 by an average of 8.9% and is on track to generate US$212B in FY26.

Its earnings have become a global market catalyst: Nvidia's results serve as a directional signal for traders worldwide.

For Stake investors, the biggest 'buy-the-dip' moment came during the DeepSeek moment in January, when Nvidia lost US$260B in market cap but buy orders surged 460%.

2. Tesla Inc (NASDAQ: TSLA) 

The Tesla share price closed at $454.24, up 12.5% over the year.

Stake analysts summed up Tesla's performance in 2025:

Tesla shares managed a [12.5%] YTD gain despite declining sales, margin compression, and intensifying competition from Chinese EV makers like BYD. It was the only member of the elite Mag7 group to not hit a record high this year.

Investors who are still bullish are banking on Tesla's autonomous driving or 'robotaxi' tech and future-oriented business lines.

Another bright spot for its balance sheet was its energy and storage revenue, which hit US$3.41B in Q3 with a 31.4% gross margin.

The biggest day of $TSLA buying on Stake was 5 June, amid a very public feud between CEO Elon Musk and President Trump over a Republican budget bill eliminating EV tax credits.

3. Palantir Technologies Inc (NASDAQ: PLTR)

This US artificial intelligence stock rode the wave of rising global defence spending in 2025.

The defence software developer closed at $180.84 per share overnight, up 139% in 2025.

Stake analysts said:

Palantir has been one of the best performing stocks in 2025, recording a 140% YTD gain on the back of record earnings and major government contracts. It landed a US$10B software contract with the U.S. Army alongside multi-year deals with AI enterprise clients.

CEO Alax Karp swiped at critics who called him 'batshit crazy' in an earnings call where the firm raised full-year guidance.

But the short sellers are circling: on 18 Aug, Citron Research said a US$40 share price would be generous for $PLTR, effectively implying its trading 80% higher than fair value.

It was also the day Stake traders bought the most $PLTR this year.

4. Amazon.com Inc (NASDAQ: AMZN)

The Amazon share price closed at $232.53 overnight, up 6% this year.

Stake analysts commented:

Amazon hasn't seen the most significant share price growth in 2025, trailing the S&P 500 and the Nasdaq. That didn't stop investors from trading large volumes of this stock, particularly during moments of turbulence following the Liberation Day tariff announcements.

Despite the high capex spend on AI infrastructure, its high-margin AWS segment grew 20% YoY to US$33B in Q3.

AWS and advertising growth make Amazon's future less dependent on traditional retail cycles, but more reliant on cloud and AI demand.

5. Advanced Micro Devices Inc (NASDAQ: AMD)

US semiconductor stock, Advanced Micro Devices, closed at $215.34 apiece overnight, up 78% this year.

According to Stake's report:

AMD saw multiple re-ratings from analysts this year as it transitioned from being seen as a CPU/GPU maker for PCs to a major player in AI and data centre infrastructure.

The turning point might have been its multi-year strategic partnership with OpenAI, leading to a 30% rally – its best day since 2016.

Stake investors took the opportunity to lock in profits, with the 6 October seeing the largest sell volume on record.

AMD has also been eating away at Intel's x86-based chip market share. It accounts for 30% of that market, providing demand for its CPUs is still strong in a year where CEO Lisa Su claimed its AI chips can match Nvidia's performance.

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Warren Buffett has never been one to push Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) into hot trends. He gave an excellent reason for that in his 1996 letter to shareholders: 

We are searching for operations that we believe are virtually certain to possess enormous competitive strength ten or twenty years from now. A fast-changing industry environment may offer the chance for huge wins, but it precludes the certainty we seek.

In other words, Buffett would rather be the tortoise than the hare. So, hot trends like internet stocks in 1996 or booming artificial intelligence (AI) companies today don't interest him too much as an investment manager.

Nonetheless, Buffett finds himself in charge of a stock portfolio where roughly 23% of the assets are invested in three companies that are heavily tied to AI -- among them, one of Berkshire's biggest equity purchases of the last few years. But all three have qualities that he generally seeks in investments -- and qualities that will surely set up his successor, Greg Abel, to deliver excellent returns for the next 10 or 20 years or more. 

1. Apple (20.5%)

Apple (NASDAQ: AAPL) has been the largest position in Berkshire Hathaway's equity portfolio since Buffett and his right-hand man, the late Charlie Munger, built up a massive stake in the company between 2016 and 2018. At this year's shareholder meeting, Buffett jokingly thanked Apple CEO Tim Cook for making Berkshire Hathaway shareholders more money than he ever has.

But Buffett has been selling shares of Apple since late 2023. There may be a few reasons for that. First, the stock's weight in the portfolio might have been too much, even for Buffett, who historically keeps a highly concentrated portfolio. At its peak, Apple accounted for about half of the portfolio's value. It remains Berkshire's largest marketable equity holding heading into 2026, based on the conglomerate's most recent SEC disclosures.

Second, Buffett saw what he viewed as an opportunity to take gains while corporate tax rates are low, as he expects that Congress will have to increase tax rates due to the federal government's massive deficits and debts. Lastly, Buffett assessed the valuation of Apple stock and deemed it to be well above its intrinsic value.

That last point is key. Apple hasn't benefited as much as other tech giants from the increase in AI spending on semiconductors, cloud computing infrastructure, and advanced software. It has continued to exhibit steady revenue and earnings growth, though, and its earnings per share have been further boosted by its massive share-repurchase program. But the stock now trades for a premium valuation of about 33 times forward earnings estimates, in line with other big AI stocks.

However, Apple will push its AI ambitions forward next year with the long-awaited release of a revamped Siri that will feature numerous new generative AI capabilities. The advanced AI assistant may spur a big upgrade cycle for the company's devices, pushing iPhone sales higher. Additionally, the introduction of more on-device AI capabilities could increase its high-margin services revenues significantly in the coming years. Based on those expectations, it may be worth paying a premium for Apple stock.

2. Alphabet (1.8%)

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) is the latest major addition to Berkshire Hathaway's portfolio. The conglomerate acquired 17.8 million shares during the third quarter, which are worth $5.6 billion as of this writing.

The stock has been on an incredible run since September, when a federal judge imposed remedies upon Alphabet that were much more lenient than expected following its conviction for maintaining an illegal monopoly in online search. Strong financial results and continued momentum for both its cloud computing business and its large language model (LLM) development have helped propel the stock materially higher.

Its cloud computing business has seen strong growth. Revenue climbed 33% last quarter, and its operating margin expanded to 24%, but there could be even more room for margins to expand as it scales. That's especially true given the momentum for its custom Tensor Processing Units (TPUs), which can offer its cloud computing clients a more cost-effective alternative to graphics processing units (GPUs) for AI training and inference. It has signed several big deals with major AI developers to use its TPUs, helping push its remaining performance obligations 46% higher year over year to $155 billion.

The core search business remains a cash cow despite the threat of AI chatbots taking market share away from Google. The company has effectively integrated AI into its search results through AI Overviews and AI Mode, resulting in an increase in search traffic without negatively impacting monetization. As a result, Google Search revenues continue to climb. And that may have been the key to Buffett's decision to invest in the company -- the "enormous competitive strength" of its core business.

As mentioned, Alphabet shares have climbed significantly in Q4, pushing their valuation to almost 30 times expected earnings. It's unclear if Buffett and his team will keep buying shares at that significantly higher valuation, but they could be worth it given the AI-driven momentum behind the company.

3. Amazon (0.7%)

Amazon (NASDAQ: AMZN) has been a small position in Berkshire Hathaway's marketable equity portfolio since 2019. Based on the size of the investment, many believe one of its other investment managers, Ted Weschler or Todd Combs, made the decision to buy it. The driving force behind Amazon's operations when Berkshire first acquired shares in 2019 was its cloud computing division, Amazon Web Services (AWS). That remains true today. 

AWS is the world's largest public cloud computing platform. Its revenue is more than double Google Cloud's, and its operating margin of 35% dwarfs it. Management notes its AI services on AWS are growing at a triple-digit percentage pace, and demand continues to outstrip its ability to add capacity despite three years straight of building as fast as possible.

Like Alphabet, Amazon's massive investment in cloud capacity to capitalize on the AI opportunity is supported by a stalwart business with a wide competitive moat. Amazon's e-commerce business has become increasingly profitable over the past few years. That profitability has been driven by an increase in high-margin advertising sales as a percentage of total revenue, improvements to its logistics network to reduce shipping costs and operating expenses, and the continued growth and scale of its Prime subscription service. As a result, the operating margin for the North American retail business has expanded to 6.6% over the last 12 months, and the international segment's margin sits at a respectable 3.2%.

Amazon shares have recently been weighed down by investors' concerns about the high capital expenditures for its cloud computing business. As of Q3, its free cash flow over the last 12 months fell to $14.8 billion. But as sales continue to grow, margins expand, and capital spending levels off, Amazon should see its free cash flow soar to new highs. That could push the stock price significantly higher, making the stock worth paying a premium multiple of free cash flow for today. 

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

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Nine publicly traded American companies are worth $1 trillion or more, but only four have graduated into the exclusive $3 trillion club so far: Nvidia, Apple, Alphabet, and Microsoft.

I think Amazon (NASDAQ: AMZN) could join them by the end of 2026 thanks to the accelerating revenue growth in its cloud computing division, and the surging profits in its legacy e-commerce business. The company has a market capitalization of $2.48 trillion as I write this, so investors who buy its stock today could earn a 21% return over the next year if it does cross the $3 trillion milestone.

Read on, and let's consider Amazon's growth prospects in the year ahead. 

All eyes on Amazon Web Services

Amazon's potential pathway to the $3 trillion club next year starts with its industry-leading cloud computing platform, Amazon Web Services (AWS). It used to be a place where businesses would simply store data and host their critical digital applications, but it has evolved to become the center of Amazon's artificial intelligence (AI) strategy.

AWS operates state-of-the-art data centers and it rents the computing capacity to AI developers who don't have the financial resources to build their own infrastructure. These data centers are filled with advanced AI chips from suppliers like Nvidia, but Amazon also designed its own chips called Inferentia and Trainium. Top developers like Anthropic are using hundreds of thousands of the latest Trainium2 chips, which offer up to 40% better price performance than competing hardware when training AI models.

Then there is the AWS Bedrock platform, where businesses can access hundreds of completed AI models from third-parties including Anthropic and Meta Platforms. Developing models from scratch is time consuming and expensive, so using a ready-made solution can help businesses achieve their AI goals much faster.

AWS generated a record $33 billion in revenue during the third quarter of 2025 (ended Sept. 30), which was up 20% year over year. That was the fastest growth rate since the fourth quarter of 2022, which highlights the platform's incredible AI-driven momentum. But it gets better, because AWS has a whopping $200 billion order backlog from customers who are waiting for more data center capacity to come online, so the strong top-line results are likely to continue.

Amazon's earnings continue to crush Wall Street's estimates

The $33 billion in third-quarter revenue that AWS brought in accounted for just 18% of Amazon's total revenue of $180 billion. However, the cloud business is the company's most profitable by far, contributing 65% of its total operating income. E-commerce is actually Amazon's largest source of revenue, but its profit margins are very thin because its Amazon.com site focuses on selling a high volume of products at low prices.

However, Amazon is pushing to improve profitability in its e-commerce business by boosting efficiency and implementing new technologies. In 2023, it broke its U.S. logistics network into eight distinct regions, so now the products in each fulfillment center are specific to their geographic region. As a result, orders travel shorter distances to reach customers, which brings down packing and shipping costs.

Amazon also uses AI-powered software like Project Private Investigator in its fulfillment centers, which uses computer vision to identify defective products before they ship. This reduces returns and refunds, creating further cost savings.

The accelerating growth at AWS combined with improved efficiency in the e-commerce business is driving a huge increase in Amazon's overall profit. The company generated earnings of $5.22 per share during the first three quarters of 2025, which was a whopping 42% jump from the same period in 2024. Plus, Amazon's earnings have beaten Wall Street's consensus estimates in every single quarter of 2025, by an average of 22%.

How Amazon can cross the $3 trillion milestone in 2026

Amazon stock trades at a price-to-earnings (P/E) ratio of 32.8 as I write this. That's roughly in line with the Nasdaq-100 index which trades at a P/E ratio of 32.1, so Amazon stock is basically sitting at fair value relative to its peers in the tech sector.

Wall Street's consensus estimate (provided by Yahoo! Finance) suggests Amazon could generate earnings of $7.86 per share in 2026, placing its stock at a forward P/E ratio of 29.6.

AMZN PE Ratio data by YCharts

Assuming Wall Street is right, Amazon stock would have to climb by 11% next year just to maintain its current P/E ratio of 32.8, lifting its market cap to $2.75 trillion. But remember, the company has a habit of beating Wall Street's expectations.

If its 2026 earnings beat the consensus estimate by 22% like they have so far in 2025, then its stock could be poised for a 35% gain next year instead. That would catapult its market value to a whopping $3.35 trillion.

However, even an earnings beat of just 9% next year would be enough to see Amazon join the $3 trillion club. Given the incredible momentum across its e-commerce business and AWS, I think that's an achievable target. 

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

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

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

The case for Alphabet

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

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

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

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

The case for Amazon

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

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

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

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

The verdict

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

Data by YCharts.

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

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

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Artificial intelligence (AI) has been the driving force behind many of the stock market's biggest winners over the last three years. Big companies like Microsoft (NASDAQ: MSFT) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) have seen their share prices reach new all-time highs, driven by strong AI-related business results across both software and cloud computing. Both companies are pushing toward $4 trillion valuations. Meanwhile, Nvidia briefly touched a $5 trillion market cap this year as big tech companies continue to buy up its graphics processing units (GPUs) as fast as it can sell them.

But not every AI-related stock has zoomed higher this year. One company, in particular, has seen its stock stuck in neutral, climbing less than 5% this year while the S&P 500 is up more than 17%. But that could be a buying opportunity for long-term investors. In fact, the stock could produce very strong returns as soon as next year. Here's why you'll want to own Amazon (NASDAQ: AMZN) in 2026.

A dominant force across three major industries

Amazon may have started as a small online bookseller, but it has grown to be much more. Its marketplace offers nearly everything you can think of, and it can ship millions of items to U.S. customers within one to two days thanks to its massive fulfillment network. It has built a burgeoning advertising business that has expanded from retail media ads to video ads served through its Prime Video service and other streaming partners. And it's the largest cloud computing platform in the world, operating Amazon Web Services (AWS).

All three businesses are experiencing rapid growth and demonstrating strong momentum.

The online retail business continues to produce high-single-digit revenue growth despite generating over $250 billion in annual sales. Its third-party seller services, which enable other businesses to sell through Amazon's marketplace, are showing accelerating growth, up 11% in the most recent quarter. The entire ecosystem rests on Amazon's Prime subscription service, which has steadily pushed subscription revenue 10% higher.

Amazon's advertising business is accelerating, climbing 24% in the most recent quarter, reaching a $70 billion run rate. Prime Video is a key catalyst for that continued growth, as 80% of subscribers are on the ad-supported tier and Amazon adds more live sports content to the service. It has also partnered with several major streaming platforms through its demand-side ad-buying platform.

Overall, Amazon is seeing operating margin expansion in its North American and International reporting segments. A couple of factors are leading to higher margins. First, advertising sales have extremely high margins relative to product sales and even third-party services. The second is that Amazon's improvements to its fulfillment center have reduced its shipping costs. Shipping costs have increased at a slower pace than paid units in each of the last eight quarters.

Amazon's cloud computing business remains the company's most important segment, accounting for most of the operating income and growing quickly. Management has successfully reaccelerated revenue growth for the segment, achieving 20% year-over-year growth last quarter, driven by strong triple-digit revenue from AI services. That rate is significantly slower than both Microsoft and Google, but AWS is also growing off a larger base.

CEO Andy Jassy expects sales to continue at the current pace for the foreseeable future. That's supported by a growing backlog, which reached $200 billion by the end of the third quarter. Amazon also signed deals in October with commitments exceeding everything it booked in Q3, so there's a lot of momentum behind the cloud computing segment to keep growing.

Amazon looks undervalued right now

Amazon is investing heavily to capitalize on the opportunities it sees in both cloud computing and e-commerce. It spent $90 billion through the first three months of the year on capital expenditures (capex), and management expects full-year cash capex to come in around $125 billion. That's well above Alphabet's planned $92 billion in capex for the year and slightly more than Microsoft (which spent $80 billion through the first nine months of the year).

That high spending has weighed heavily on Amazon's free cash flow, which fell to $14.8 billion over the trailing-12-month period. That's down from $47.7 billion in the previous 12-month period. Indeed, the high capex has hit Amazon's cash flow much harder than capex has hit either Microsoft or Alphabet. That's in part because its competitors have high-margin software businesses that continue to grow quickly, offsetting their spending, while Amazon's retail business still has relatively low margins.

But Amazon has gone through multiple investment cycles throughout its history. Each time, it has emerged with much stronger cash flows than it had before the investment cycle. Considering the growing backlog of cloud computing contracts and the secular trend toward migrating to cloud computing services, investors should remain confident that the pattern will hold. While management expects to increase its capex further in 2026, free cash flow will eventually trough as capital intensity levels off. With strong operating cash-flow growth, Amazon should see a rapid recovery in free cash flow.

Amazon has historically traded around 50 times its free cash flow near its peaks. With its current market cap of $2.5 trillion, investors are merely expecting it to return to its peak free-cash-flow levels from a bit over a year ago. It seems very likely that Amazon will far exceed those levels over time, pushing its stock price significantly higher.

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

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The "Magnificent Seven" is the name given to the group of Nvidia, Apple, Microsoft, Alphabet, Meta, Tesla, and Amazon (NASDAQ: AMZN). These seven companies are bundled together because they have driven much of the stock market's gains in recent years. As of Dec. 15, they are seven of the world's top nine most valuable companies and represent nearly 35% of the S&P 500.

So far this year, every "Magnificent Seven" stock has produced double-digit returns except for one: Amazon.

Once the face of growth stocks, Amazon has lagged over the past year, frustrating its investors along the way. Despite that retreat, Amazon may be positioned to bounce back in 2026.

^SPX data by YCharts.

Why has Amazon's stock been lagging?

There hasn't been one issue that's caused Amazon's underperformance. It's more a combination of factors. First, Amazon has spent a lot of money this year, with capital expenditures (capex) of around $90 billion through the first nine months of 2025.

Given how much Amazon has been spending (mostly on AI infrastructure), investors have been wanting more to show for it -- especially when it comes to Amazon Web Services (AWS) growth. With many of the "Magnificent Seven" stocks making big splashes in AI, some people viewed Amazon as falling behind in the race.

AMZN Capital Expenditures (Quarterly) data by YCharts.

Amazon's heavy spending has weighed on its free cash flow, and that's not something investors typically like without seeing more immediate results. Add in how expensive Amazon's stock has been, and there was little room for error in many investors' eyes.

AWS is positioning itself for the future

AWS may not have been producing the results that we've grown used to seeing over the years, but investors jumping ship seems like a premature overreaction (which is no surprise if you know investors). Yes, AWS has been losing market share to Microsoft's Azure and Alphabet's Google Cloud, but it's still the world's largest cloud platform by far.

Cloud platforms are, and will continue to be, crucial to AI training and scaling. That's why Amazon has been focusing so much on building out more infrastructure and adding computing capacity. It has added more than 3.8 gigawatts in the past 12 months and plans to double its capacity through 2027.

This investment is noteworthy because, according to calculations from investment bank Oppenheimer, each incremental gigawatt of capacity could add $3 billion in revenue. The high capex might be weighing on Amazon's financials right now, but it's poised to pay off in the long term.

Amazon has an underrated profit machine

There's no doubt that AWS is Amazon's profit engine, accounting for most of its operating income. However, advertising is a high-margin business that has been growing steadily over the past couple of years.

On one hand, Amazon has access to data from its millions of customers and Prime members, making it more effective at helping advertisers with targeted ad campaigns. They know what customers buy, when they buy it, what they watch, what they listen to, what they browse, and other information that allows advertisers to target with greater precision. 

On the other hand, Amazon's massive reach means it has plenty of places to set these ads. Whether it's online, when you search for a specific product, stream something on Prime Video, watch Twitch, or listen to music, there's no shortage of real estate for advertisers looking to reach potential customers. Amazon also announced that it recently struck partnerships that allow its advertisers to buy ad space on Netflix, Spotify, and SiriusXM.

In the third quarter, Amazon's advertising services revenue grew 24% to $17.7 billion, outpacing its revenue from subscriptions ($12.5 billion). Beyond revenue growth, advertising is a high-margin business that can help Amazon boost its overall profitability. I expect the momentum to continue in 2026.

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

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