Key Points
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Nvidia keeps cashing in on the AI build-out.
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Meta Platforms looks dirt cheap for the growth it’s generating.
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Microsoft and Amazon are solid picks that have a strong future ahead.
- 10 stocks we like better than Nvidia ›
The “Magnificent Seven” is made up of some of the most dominant tech companies in the world. Every member is a top 10 company by market cap worldwide. They are:
- Nvidia (NASDAQ: NVDA)
- Apple (NASDAQ: AAPL)
- Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)
- Microsoft (NASDAQ: MSFT)
- Amazon (NASDAQ: AMZN)
- Tesla (NASDAQ: TSLA)
- Meta Platforms (NASDAQ: META)
All seven have their merits as investments, but which one is the top buy now? I’ve narrowed my list down to four that represent the best values in the group.
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Image source: Getty Images.
1. Nvidia
Nvidia takes the cake as the top stock to buy in this group. The reasoning is fairly simple: It’s the most attractively priced relative to its growth rates and long-term potential. There is massive, unmet demand for artificial intelligence (AI) computing power, and Nvidia’s GPUs are the primary computing units being used to meet it. The world is still relatively early in the AI infrastructure build-out, which many project will accelerate through at least 2030. That bodes well for Nvidia’s future, yet the stock doesn’t command a massive premium.
Nvidia is the second-cheapest stock of the group based on expected forward earnings. (Note: Because Tesla is valued at close to 200 times forward earnings, it could not be included in this chart.)
NVDA PE Ratio (Forward) data by YCharts.
Despite that, Nvidia’s revenue growth rate is far greater than its fellow Magnificent Seven members.
NVDA Revenue (Quarterly YoY Growth) data by YCharts.
With the chipmaker’s strong growth expected to last for at least a few more years, I think there’s a compelling case for buying Nvidia’s stock.
2. Meta Platforms
The cheapest stock in the Magnificent Seven is Meta Platforms, which trades for 19.3 times forward earnings. It’s also cheaper than the S&P 500 (SNPINDEX: ^GSPC), which trades at 22.4 times forward earnings. Yet it’s the second-fastest growing stock in the group. So, the two fastest-growing stocks are also the cheapest, which seems a bit backward.
There is some skepticism about Meta’s AI strategy, as it hasn’t been able to really monetize its AI efforts yet, despite tens of billions of dollars in capital expenditures to build out its data center infrastructure. Those improvements that it has seen from its AI technology are those that have made their way into its advertising technology on its social media platforms. If Meta can continue boosting its ad revenues at double-digit percentage paces, then those investments may be paying off. But if one of Meta’s long-shot AI ideas pans out, it will also be a strong pick.
3. Microsoft
Microsoft’s fiscal 2026 ends on June 30, so valuing the stock on its fiscal 2026 earnings doesn’t look forward very far. Based on fiscal 2027 estimates, the stock is valued at 22.1 times forward earnings. That drops it below Nvidia as the second-cheapest stock, which is odd because Microsoft is executing at a high level as well. It would also be cheaper than the S&P 500 at that point.
Moreover, Microsoft’s AI strategy appears to be paying off already. Annual recurring revenue from its AI business rose 123% year over year to $37 billion last quarter. Those are solid figures, and if it can keep growing rapidly, I doubt Microsoft stock will stay this cheap for long.
4. Amazon
Amazon is valued at about the same level as Microsoft, and its cloud computing division, Amazon Web Services (AWS), has been on fire recently. Q1 was its best quarter in nearly four years. The company is spending hundreds of billions of dollars on data centers, which will lead to major growth over the next few years. It has already secured clients for most of this new infrastructure, so the risk is relatively low.
With that in mind, Amazon looks like a solid investment to make in the AI realm over the next few years.
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Keithen Drury has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
