The S&P 500 delivered strong returns for investors over the past three years as they piled into growth stocks in a number of fields, from technology to biotech and consumer goods. And they took a particular interest in players involved in artificial intelligence (AI), seeing this area as the next big thing. This bet has been a successful one for many, as certain AI companies have already generated fantastic revenue growth and stock performance.
But, in recent weeks, the stock market has faced a variety of challenges. Investors have worried about economic factors -- such as the pace of interest rate cuts -- as well as the possibility that AI tools, as they accomplish new tasks, may hurt demand for the products and services of certain companies.
These and other headwinds have weighed on the S&P 500, driving it to declines over the past two weeks. But, for the long-term investor, there's a silver lining in this cloud. The declines have left us with the following once-in-a-decade buying opportunities...
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1. Nvidia
Nvidia (NVDA 1.49%) has driven stock market gains in recent years thanks to its leadership in the AI market. The stock has soared more than 700% over the past three years as investors scrambled to get in on what they saw as the key player in the AI revolution. Nvidia designs the world's most powerful AI chips, and as a result, major tech companies have turned to this leader for their AI projects.
NASDAQ: NVDA
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This has helped the chip designer generate double-digit revenue growth in recent quarters, with revenue reaching record levels. And this has been done at high levels of profitability -- gross margin has steadily exceeded 70%.
Nvidia has already established itself as an AI giant, and the company's commitment to innovation should keep it in this valuable position. The tech player has pledged to update its chips annually, and the next release is set for later this year. This should spark a new wave of growth at that time and into 2027.
Considering this track record and likelihood of future strength, Nvidia looks dirt cheap at 23x forward earnings estimates.
2. Moderna
Moderna (MRNA 2.70%) has had its share of difficult times over the past few years. The coronavirus vaccine giant once was a highflier, but when demand for that product dropped, many investors lost interest in the biotech company. Meanwhile, in more recent times, Moderna has faced a challenging vaccine policy environment. The government last year cut funding for mRNA vaccine research, and just recently, U.S. regulators said they wouldn't review the company's flu vaccine application.
So, why should you buy the biotech at this point? Moderna has a full pipeline of promising potential products -- from an investigational cancer vaccine involved in phase 3 trials to earlier-stage candidates for rare diseases. Even a few successes here in the future could transform Moderna in a very positive way.
NASDAQ: MRNA
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Moderna stock started this year off with momentum, gaining nearly 50% in January after losing more than 70% over the past three years. This stock may still face some tough moments in the quarters ahead, but the headwinds we've seen so far don't change the long-term prospects. That's why now, while the stock still is in a recovery stage, is a great time to buy.
3. Amazon
Amazon (AMZN 1.58%), like Nvidia, has been an early winner of the AI boom. You may link Amazon more with e-commerce than anything else -- but the company's cloud business, Amazon Web Services (AWS), actually drives overall profit. And this unit has become an AI leader, offering a wide range of AI products and services to its customers.
NASDAQ: AMZN
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This leadership has helped AWS reach an annual revenue run rate of $142 billion, and the company recently said that as it opens up new capacity to customers, it immediately monetizes it. Even though investors have worried about Amazon's significant capital investments to support the infrastructure buildout, this message should relieve those concerns. Amazon and its peers continue to see soaring demand -- so this investment may be the ticket to revenue growth now and moving forward.
All of this means that today, as Amazon trades for 25x forward earnings estimates, the stock looks like an amazing deal -- and this could even be a once-in-decade buying opportunity.
