Technology stocks have driven the S&P 500 higher over the past year or so, leading the index out of bear territory and to a record high earlier this year, confirming we are indeed in a bull market. These types of markets favor growth stocks, so it's likely technology players will hold onto the momentum and climb higher in the months to come.
Some already have shown their strength in recent times, advancing even after their top performances last year. So, just because a stock has gained in the double or even triple digits doesn't mean it's too late to buy that particular player. It's essential to take a look at the company's earnings track record, future prospects, and market position. Using these as a guide, investors can determine whether the stock has what it takes to generate more gains. These days, if a company has a strong presence in the high-growth area of artificial intelligence (AI), it scores extra points. (The AI market is expected to reach more than $1 trillion by the end of the decade.)
Let's check out three supercharged tech stocks that easily pass this test, making them stocks to buy without any hesitation.
Image source: Getty Images.
1. Nvidia
Nvidia (NVDA 0.03%) stock has soared more than 200% over the past year on optimism about its dominance in the AI chip market. The company holds about 80% share, and thanks to its increases in research and development spending, and its pledge to continue releasing more and more powerful chips, its leadership is likely to last.
Just recently, Nvidia announced much-anticipated news: It plans to release its new Blackwell architecture, which includes six technological innovations, later this year.
Among these innovations are the world's most powerful chip and a second-generation transformer engine that will help Blackwell support double the computing power of its predecessors. The Blackwell platform also allows users to run generative AI at as much as 25 times lower cost and energy consumption compared to the previous platform.
Nvidia's chip dominance has helped its earnings to soar over the past few years, and in the most recent quarter, revenue and net income rose in the triple digits. Considering this track record and the strengths I mention above, the stock seems reasonably priced at 34 times forward-earnings estimates today.
2. Meta
Meta Platforms' (META -2.41%) shares have climbed more than 130% in a year as the company emerges from a period of cost cuts and ramps up investment in growth. And this growth includes a focus on AI, Meta's biggest investment area this year.
You probably know Meta more for its social media platforms than for its presence in the world of AI. The company owns Facebook, Messenger, Instagram, and WhatsApp, and every day more than 3.1 billion people use at least one of these apps. Meta has a rock-solid moat, or competitive advantage, thanks to this brand strength, and that keeps its biggest source of revenue -- advertisers -- coming back to reach users of these apps.
This has helped Meta grow revenue and profit, and the tech company reached a new level of strength recently, saying it's confident it can continue to grow and reward investors; so it launched its first dividend.
Meta is going all in on AI. Eventually, users of its products and services can rely on AI tools there to enrich their experiences. With all of this in mind, Meta is dirt cheap for 25 times forward-earnings estimates.
3. Amazon
Amazon (AMZN 0.75%) stock has advanced about 70% over the past year as the company emerges from a difficult period and shows it has what it takes to win over the long term.
The e-commerce and cloud-computing giant struggled with higher inflation back in 2022 but quickly turned things around by revamping its cost structure -- a move that should help Amazon excel in any environment. Last year, Amazon's revenue climbed in the double digits, and it returned to profitability after a loss in 2022 -- the company's first net loss in almost a decade.
Moving forward, Amazon should benefit from its dominance in the high-growth businesses of e-commerce and cloud computing, as well as its presence in AI. Amazon is using AI to improve its operations, leading to cost savings, and the company is selling AI products and services to clients through its Amazon Web Services (AWS) business. Both of these efforts should result in earnings growth in the near and long term.
That's why Amazon doesn't look expensive today, trading at 42 times forward-earnings estimates. It's a stock I'd buy with no hesitation.
