The stock market has rallied in recent weeks as fears of a trade war and a recession have eased. And yet, you might be surprised to learn that the S&P 500 is basically flat for the year, as those gains only made up for earlier losses. Through June 20, the index is up 1.7% for the year.
Nonetheless, a number of growth stocks have soared ahead of the broad-market index, regardless of the macro-level concerns. Here are two of them.
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1. CoreWeave
CoreWeave (CRWV +0.73%) hasn't been public for even three months, but the generative-AI cloud computing company has already delivered plenty of gains as its stock is up nearly 360% from its initial public offering (IPO) price at $40. The surge is somewhat surprising since CoreWeave's IPO was undersubscribed, and the company was forced to lower its target range. Nvidia, one of its biggest customers, even helped prop up the IPO by buying some of the offering.
Since then, those doubts have disappeared as market sentiment has shifted back to artificial intelligence (AI) stocks, and CoreWeave looks like one of the most promising in the bunch.
The company is growing like wildfire, with revenue up 420% year over year to $981.6 million in the first quarter, showing that it is seeing explosive demand for its services.
NASDAQ: CRWV
Key Data Points
Its IPO was met with some skepticism because the company's business model relies on large capital expenditures and debt to fund it. That adds significant risk to the stock since the business will have to keep growing to service its interest expense and pay down its debt.
Still, investors are likely to ignore those risks if the company continues to deliver triple-digit revenue growth. CoreWeave essentially buys components from Nvidia and rents out computing capacity to companies that need it, and that's proved to be a high-demand business.
It currently has a handful of customers, with much of its revenue coming from Microsoft and Nvidia. But it just signed an $11 billion deal with OpenAI, showing it's diversifying its customer base and adding to its backlog.
Overall, while CoreWeave is a high-risk stock, its exceptional growth and direct exposure to AI make it a good choice for risk-tolerant investors who like to ride the AI boom.
2. Robinhood Markets
Robinhood Markets (HOOD 0.53%) has been public for a few years now, but the stock has behaved much like CoreWeave, swinging up and down on different trends. Over the last two years, the stock of the online trading platform has soared as it's benefited from the rebound in the crypto market and its own diversification into retirement accounts and premium subscription accounts with Robinhood Gold.
As a result, the business is booming. In the first quarter, revenue jumped 50% year over year to $927 million, driven by a 77% increase in transaction-based revenue to $583 million. Cryptocurrencies led the way with revenue doubling to $252 million, while options revenue rose 56% to $240 million.
NASDAQ: HOOD
Key Data Points
Robinhood is also seeing underlying customer growth with funded customers up 8% in the quarter to 25.8 million and total assets on the platform jumping 70% to $221 billion.
The company has proved its ability to deliver growth on the top and bottom lines, and it continues to operate like a disruptor in the brokerage industry, launching new products and strengthening its competitive advantage.
Lastly, Robinhood's price-to-earnings ratio of 45 looks well priced, considering its growth rate. Its growth is likely to be volatile, and it could face a setback if crypto prices pull back or economic growth slows. However, the company's business model is much more diversified than it was in 2022 when the stock plunged on recessionary fears.
Over the long term, Robinhood's popularity with younger investors should help it gain market share and provide a tailwind as those investors get older and have more money to invest.
