Buying and holding solid technology companies is a tried and true way of making money in the stock market, and that's not surprising as this strategy will allow investors to capitalize on disruptive growth trends that could help them enjoy outsized gains.
This explains why the Nasdaq-100 Technology Sector index recorded gains of 366% in the past decade, easily outpacing the 196% gains registered by the S&P 500 index over the same period. Of course, putting all your money into only technology stocks may not be the best idea since any headwinds that this sector faces could result in big losses for investors.
However, there are certain names in this sector that are worthy of taking a closer look at since they are on track to make the most of huge end-market opportunities. Nvidia (NVDA 2.94%) and Meta Platforms (META 2.33%) are among the dominant forces in the industries they serve, and buying them for the long haul could turn out to be a smart move since they can help investors become significantly richer.
Let's look at the reasons why.
1. Nvidia
Semiconductor giant Nvidia was a life-changing investment for anyone who bought it a decade ago and held on to their investment. An investment of just $1,000 in Nvidia stock 10 years back is now worth $275,000. So, it won't be wrong to say that Nvidia would have definitely set up savvy investors with the foresight and patience to hold on to this chipmaker for life.
NASDAQ: NVDA
Key Data Points
Of late, there have been doubts about whether Nvidia could continue its stellar stock market rally. From concerns about a slowdown in spending on artificial intelligence (AI) chips to stiffer competition to the potential restrictions on sales of Nvidia's chips to foreign countries, there is a lot for investors to take into consideration if they are looking to buy this chipmaker now.
However, investors would do well to look past the short-term factors weighing on Nvidia lately. The company has a massive addressable market beyond AI. Of course, AI is its biggest growth driver right now, thanks to Nvidia's dominant position in the market for data center GPUs (graphics processing units), but there is a greater opportunity lying ahead in the form of accelerated computing.
Nvidia CEO Jensen Huang pointed out last year that the transition of data centers from general-purpose computing to accelerated computing is likely to open up a $1 trillion revenue opportunity for the company. Huang added that this transition is going to happen regardless of AI adoption. That won't be surprising, as accelerated computing allows data centers to finish tasks faster, resulting in higher energy efficiency and performance.
Accelerated computing isn't just going to reduce the operating costs of data centers, but it could also help keep a handle on rising electricity consumption. Meanwhile, there are other multibillion-dollar opportunities as well for Nvidia, such as cloud gaming.
Throw in the fact that the global AI chip market is expected to see an outstanding annual growth rate of almost 35% through 2035, when it is expected to generate annual revenue of $847 billion, and it can be concluded that Nvidia still has a lot of room to grow, considering that it has generated $96 billion in revenue in the trailing 12 months.
All this indicates that buying Nvidia can still turn out to be a smart decision in the long run, which is why investors should consider adding this tech stock to their portfolios as it trades at an attractive 33 times forward earnings on account of the terrific earnings growth that it is set to deliver.
2. Meta Platforms
The digital advertising market is massive, generating an estimated $667 billion in revenue last year. Third-party estimates believe that the digital ad market could generate more than $1.5 trillion in revenue by 2030, and Meta Platforms is one of the best ways for investors to capitalize on this lucrative opportunity.
NASDAQ: META
Key Data Points
The social media giant is expected to report $163 billion in revenue for 2024, an increase of 21% from the same period last year. Based on the estimated $667 billion revenue that the digital ad market generated last year, Meta Platforms would have controlled just over 24% of this space in 2024. Assuming that the company holds onto this share until the end of the decade, it could witness a healthy increase in revenue over the next six years.
However, the good thing is that Meta is seeing faster growth than the digital ad market. Last year, for instance, the digital ad market grew an estimated 11% from 2023 levels of $602 billion. The fact that Meta is growing at a faster pace than the market it serves means that it is gaining more share. Again, that's not surprising, as the company's huge user base and the integration of AI tools for advertisers are helping it attract a bigger share of digital advertising budgets.
There were 3.29 billion daily active people across Meta's family of apps in September 2024. More importantly, advertisers and brands can target this huge audience with the help of Meta's AI-powered advertising solutions that are reportedly driving higher returns on ad dollars spent. Not surprisingly, advertisers are willing to pay more money to advertise on Meta's apps.
The company's average price per ad increased by an impressive 11% year over year in the third quarter of 2024. All this indicates that Meta is nicely positioned to make the most of the $1.5 trillion opportunity in the digital ad market, which is why this stock could turn out to be a terrific investment.
Even better, investors can buy Meta Platforms at 29 times earnings right now, which is quite attractive considering that it is expected to deliver bottom-line growth of 52% for 2024 to $22.66 per share. The good part is that Meta seems to be in a position to sustain solid levels of growth over the long run based on the discussion above, and that could lead the market to reward it with more upside.
