The Magnificent Seven Lead the Charge in Market Performance
In an era where the market's dynamism is reflective of both technological advancements and consumer behavior shifts, a select group of stocks known as The Magnificent Seven—comprising Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla—has been at the forefront, driving noteworthy gains. As of year to date, this elite ensemble has surged by 15%, distinctly outshining the Nasdaq Composite's increase of 6%. Amidst this group, Nvidia and Amazon emerge as stellar performers, boasting rises of 76% and 20% respectively, while Tesla encounters challenges, witnessing a 37% decline amidst a tough environment for electric vehicles (EVs) sales rise against the backdrop of escalating interest rates.
Why do Nvidia and Amazon stand out as compelling picks despite the broader market's mixed sentiments? Both companies not only exhibit robust growth in revenue and profits—a harbinger of superior shareholder returns—but also possess near-term catalysts poised to further propel their stock prices.
Nvidia: Harnessing the AI Revolution
At the heart of the artificial intelligence (AI) revolution lies Nvidia, a company whose innovations in graphics processing units (GPUs) position it as a central player in the dateline expansion and enhancement saga. With businesses increasingly leaning into AI for a myriad of applications, Nvidia's H100 GPU has become a sought-after commodity, drawing parallels in value to a Tesla Model 3. This demand surge translated to a staggering 126% revenue uptick for Nvidia last year, a trend expected to sustain as the market transitions approximately $1 trillion of data-center infrastructure towards GPU-centric computing systems.
This pivotal role is not accidental; it's the fruit of decades of GPU innovation by Nvidia, cementing its position as an indispensable ally for industries marching towards AI-centric futures. The unveiling of its next-generation Blackwell B200 chip—with early adoption signals from giants like Amazon, Google, Meta Platforms, Microsoft, and Tesla—underscores Nvidia's integral position in the technological vanguard.
With Wall Street projecting an 89% growth in Nvidia's earnings this year, the company's forward price-to-earnings ratio of 35 is arguably modest against the backdrop of its potential for sustained double-digit growth in revenue and profits over the coming years. This foundation sets a promising stage for market-beating returns from Nvidia's shares.
Amazon: E-commerce and Beyond
Amazon's trajectory is equally compelling, underscored by accelerated growth in its online stores and an e-commerce market revival. The latter part of the year witnessed a welcomed uptick across Amazon's sectors, especially its cloud services business, which remains a significant profit generator for the company. Entering 2024, Amazon is riding a wave of growing momentum, with high anticipations for its future performance.
A pivotal factor underpinning potential share price appreciation for Amazon is its improving profitability. Years of hefty investments in logistics and same-day delivery capabilities across major cities are now bearing fruit, as evidenced by a 383% surge in operating profit in Q4. According to CEO Andy Jassy, the path toward enhanced profitability is clear, with considerable work ahead poised to translate into even higher profits.
In light of Amazon's progress and the market's response—where the stock currently trades at a price-to-sales ratio aligned with its ten-year average—the case for market-beating returns gains further traction, particularly if Amazon continues on this profit margin expansion journey.
In conclusion, Nvidia and Amazon stand out within The Magnificent Seven for their impressive year-to-date performances and the tangible growth drivers in their respective domains. These factors collectively reinforce the prospects of these juggernauts continuing to offer market-beating returns to their investors, mirroring their indelible mark on the technological landscape.
Analyst comment
Positive news.
As an analyst, with their impressive performances and strong growth drivers, it is likely that Nvidia and Amazon will continue to provide market-beating returns to their investors. Their innovative technologies and expanding market presence position them well for sustained growth in the coming years.
