Technology stocks have been the driving force behind the market for the past decade, with eight of the S&P 500's largest weightings now in technology or tech-adjacent stocks. With technology continuing to change and advance the world we live in, there is good reason to believe that tech stocks will continue to help lead the market higher over the next decade.
Let's look at two tech-related stocks that look like no-brainer buys.
Nvidia
Nvidia (NVDA +1.67%) has become the leader in artificial intelligence (AI) infrastructure where its graphic processing units (GPUs) provide the computing needed to train AI models and run inference. It commands an astounding nearly 90% market share in the rapidly growing GPU space.
This dominance can be attributed to its CUDA software platform, which it long ago created to let developers program its chips outside their original purpose of speeding up graphics rendering in video games. As a result, CUDA became the de facto software on which developers learned to program GPUs, while in the years since the program was created, it has furthered its lead through CUDA X, a collection of GPU-accelerated microservices, tools, and libraries for AI built on top of CUDA.
NASDAQ: NVDA
Key Data Points
The company has been one of the biggest AI winners and is on pace to have its second straight year of triple-digit revenue growth. However, with AI still in early innings, Nvidia should have plenty of growth still ahead. As AI models advance, they need exponentially more computing power and chips like GPUs to be trained on.
For example, the latest iteration of Meta Platforms' Llama AI model uses 10 times as many GPUs to train on than the prior iteration. Meanwhile, Nvidia's largest customer, Microsoft, just announced it would spend an astonishing $80 billion building out AI data centers this year.
Right now, there is no sign of AI infrastructure spending slowing down, which is good for Nvidia. At the same time, despite the stock's strong performance over the past few years, it is still reasonably priced and currently trades at a forward price-to-earnings (P/E) ratio of below 31 times and a price/earnings-to-growth ratio ( PEG ) under 1, which typically indicates a stock is undervalued.
Between its valuation and the long runway of growth, Nvidia continues to look like a solid buy.
Image source: Getty Images.
Amazon
Amazon (AMZN +0.26%) is known for its e-commerce platform, but its largest business by profitability is actually its Amazon Web Services (AWS) cloud computing unit. Over the past 12 months, AWS has generated operating income of $36.4 billion compared to $24.3 billion for the rest of Amazon's businesses.
Amazon was the first company to start the infrastructure-as-a-service model back in 2006. During the time leading up to AWS, the company started to help build out the e-commerce infrastructure for various partners and affiliates, including large retailers like Target.
However, it was running into cost and scalability issues. AWS sprung up as a way to solve these problems and give all-size users access to data centers without the expensive costs to build and maintain them. Today, AWS is the largest cloud computing company in the world with an over-30% market share.
NASDAQ: AMZN
Key Data Points
Cloud computing has been one of the biggest beneficiaries of AI, as organizations turn to the cloud to build out their own AI models and applications. Amazon, meanwhile, is helping companies do this through its Bedrock and SageMaker solutions. Bedrock offers customers a number of foundational AI models, its own as well as models from other well-known companies, such as Anthropic, Cohere, Meta Platforms, and Mistral.
Customers can use them as a starting point and customize. They can also use SageMaker to build and train their own AI models and applications, and move them into production. Amazon has also developed its own custom AI chips designed specifically for both AI training and inference.
Outside of the cloud, Amazon is also using AI to help improve its e-commerce and logistics operations. This includes using AI to make better product recommendations to customers and provide helpful AI-generated overviews of reviews. On the seller side, it is using AI to make it easier to create listings. For logistics and warehousing, Amazon is deploying AI to plan better routes and train robots to more quickly find and handle items.
Throughout its history, Amazon has shown itself to be both innovative and adaptable. It isn't afraid to invest heavily in order to win, which it is doing with both its cloud computing and e-commerce businesses. This is a recipe for long-term success. All things considered, the stock is reasonably valued, trading at a forward P/E multiple of under 30 and a PEG ratio below 1.1.
