History shows that buying and holding growth stocks is one of the best ways to build wealth for retirement. It's only when stocks of great companies fall that investors can buy shares cheap enough to earn extraordinary returns.
Two of the best tech stocks to buy right now are Nvidia (NVDA 2.94%) and Meta Platforms (META 2.33%). These stocks were big losers in 2022, but that's why they might be able to deliver impressive returns from here. These companies are leaders in their respective industries and are continuing to invest in new products and technologies to drive more growth.
NASDAQ: NVDA
Key Data Points
Nvidia
Share prices of the leading graphics processing unit (GPU) supplier rallied at the end of 2022 after a brutal sell-off last year. One reason to consider buying the stock on the dip is Nvidia's leading position in one very important market to the global economy.
Nvidia sells chip hardware and systems to enterprises in the burgeoning data center market. These GPU accelerators are mission critical for the use of artificial intelligence (AI) to process massive data workloads. Spending on data centers is only going to grow over time as AI becomes widely adopted for everything from oil exploration to chatbots.
Nvidia is also a leader in gaming, which is a big reason the stock fell last year. Gaming is the company's second-largest revenue source after data center. Lower demand for gaming GPUs led to oversupply in the retail channels, which will take a few quarters to work through. This is why gaming revenue was cut in half last quarter, causing Nvidia's total revenue to decline 17% over the year-ago quarter.
Nvidia has been through these demand cycles before, but it's important to keep the long-term growth trajectory in perspective. Consider that Nvidia's $5.9 billion in total revenue last quarter was double the same quarter five years ago. It's this long-term growth trajectory that should keep the stock climbing higher over the long term.
NVDA Revenue (Quarterly) data by YCharts
There are several growth catalysts to watch this year.
First, Nvidia is preparing to launch its RTX 40-series gaming chips for laptops. Gaming demand could be bottoming out right now. The recent launch of the GeForce RTX 4090 for consumer PCs sold out quickly, which shows a solid floor of demand in the gaming market.
Plus the company is launching the new Hopper chip architecture for data centers, which is designed to handle the latest types of data workloads.
Nvidia is also set to launch the "Grace" central processing unit (CPU). This positions Nvidia to go after the $30 billion server CPU market, which was dominated by Intel and Advanced Micro Devices. For Nvidia, Grace rounds out an impressive offering of data center products across GPUs, CPUs, data processing units (DPUs), networking equipment, and software, which combined means a $300 billion addressable market.
Nvidia should bounce back. It provides the technological backbone of artificial intelligence and recommendation systems, which are pivotal to e-commerce and many other industries in the economy. Investors who buy the stock at these lower share prices should earn a great return on their investment.
NASDAQ: META
Key Data Points
Meta Platforms
Share prices of Meta Platforms are down 50% over the last year as advertisers held back on spending in the face of uncertainty in the economy. Social media platforms have also had a difficult time navigating around the effects Apple's privacy changes on iOS have had on ad tracking. These headwinds contributed to a sluggish year of growth.
Despite revenue falling 4% year over year in the third quarter, engagement across Meta's family of apps is still strong. Meta's social media platforms now reach over 3.7 billion people every month. That is a massive pool of users that brands will want to connect with.
Meta is investing billions in AI to make its platform more valuable to those advertisers. This should create better content recommendations across its apps, which in turn will translate to higher ad spending and revenue.
The company's capital expenditures in the third quarter were more than double the same quarter in 2019, driven by increased spending on AI capacity.
META Capital Expenditures (Quarterly) data by YCharts
The increased spending is already showing signs of the effect it will have more broadly across the company down the road. For example, management previously reported that improved AI recommendations led to a 15% increase in watch time in Facebook Reels in the second quarter of last year.
Improvements to the discovery engine using AI are a big opportunity to drive higher engagement and ad revenue. In the third quarter, there was a 50% increase in the number of played Reels compared to the previous six months. Management believed this represented a market share gain against top competitor TikTok.
These investments are widening the company's competitive moat and setting up the next leg of growth, including the moonshot opportunity the company has in the metaverse and virtual reality. With negative sentiment hovering over the stock, this is an ideal point to start building a position before better news sends the stock higher.
