Magnificent Seven tech stocks fueled S&P 500 through this market so far — that’s because investors like solid, well-established businesses and their promise in the high-potential artificial intelligence (AI) market. Some are bigger AI players than others, but all participate in this technology to some extent. Investors are excited about AI because it can supercharge the earnings and performance of stocks over time.
And as mentioned, the stock’s performance has already begun, with Magnificent Seven shares each advancing by double or triple digits over the past three years. That’s great, but it has resulted in one thing that may prevent investors from buying at least certain players right now: stocks have gotten more expensive.
In fact, some analysts and investors have even worried about an AI bubble. Those concerns weighed on the S&P 500 in the early weeks of November, though tech company earnings reports and commentary on demand did not support the idea of a bubble forming. Earnings are up and companies have talked about strong demand for AI products and services.
Still, it’s clear that many AI actions are expensive these days. But the good news is that there are bargains to be had — even among Magnificent Seven AI stocks. And two in particular may offer investors a once-in-a-decade buying opportunity before the new year: they’re the cheapest of the Magnificent Seven, but given their potential in AI, that might not last long. Let’s check out these stocks to buy now.
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Meta platforms(NASDAQ: META)trading at 26 times forward earnings, it is the cheapest Magnificent Seven stock currently. This is a fantastic deal given the company’s long history of growing earnings, which gives it the ability to invest in AI and reward shareholders with dividends.
You may know Meta primarily for its leadership in social media — the company owns a number of apps, including Facebook and Instagram — and that platform has been the ticket to growing revenue. Advertisers come to Meta to reach out to us, and this has led to billions of dollars in revenue and profit for the company.
Meta now aims to use artificial intelligence to revolutionize advertising by automating ads on its platform and making them more successful. Meanwhile, the presence of AI in its apps can keep us on them longer. All of this may cause advertisers to increase their ad spend here. And Meta’s investments in AI could also lead to the development of new products and services that could generate revenue down the road.
All of this makes the Meta look like a steal at today’s valuation.
Alphabet(NASDAQ: GOOG)(NASDAQ: GOOGL) it’s the second cheapest of these seven tech titans, as it trades for 29 times forward earnings estimates. Like Meta, Alphabet may not stay at that level as long as its investment in AI grows revenue.
Alphabet uses artificial intelligence in its Google Search business, and this should boost advertising revenue as it follows a similar path to Meta’s — improving the overall ad experience and ad results. And Alphabet also benefits from AI through its Google Cloud business — here, it offers customers a wide range of AI products and services, and these have fueled revenue growth.
Last quarter, for example, Google Cloud revenue rose 34% to more than $15 billion, and for the first time, Alphabet reached total quarterly revenue of more than $100 billion. As a leading cloud player, Google Cloud should be well-positioned to attract AI customers looking for capacity—demand has already grown and shows no signs of slowing down. This quarter, Alphabet said demand for AI infrastructure and generative AI systems drove cloud revenue.
So Alphabet, like Meta, is on track for more growth as this AI boom continues — and that means getting into these stocks at current levels may be a once-in-a-decade opportunity.
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Adria Cimino has no position in any of the actions mentioned. The Motley Fool has positions in and recommends Alphabet and Meta Platforms. The Motley Fool has a disclosure policy.
These 2 magnificent seven AI stocks could offer investors a once-in-a-decade buying opportunity before the New Year. was originally published by The Motley Fool
