Two Tech Shares Worth Investing in Immediately without Deliberation
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 tech or tech-adjacent stocks. As technology continues to revolutionize and shape our world, there's a good reason to believe that tech stocks will continue to lead the market higher over the next decade.
Let's delve into two tech-related stocks that are potential no-brainer buys:
Nvidia
Nvidia, (NVDA 3.10%), has established itself as the leader in artificial intelligence (AI) infrastructure. Its graphic processing units (GPUs) provide the computing power needed to train AI models and run inference. Nvidia commands a whopping 90% market share in the rapidly growing GPU space.
This dominance is due in large part to Nvidia's CUDA software platform, a tool that developers have long used to program the company's chips, which were originally designed for enhancing graphics rendering in video games. The versatility of CUDA has allowed Nvidia to further expand its lead in the AI market, through innovations such as CUDA X: a collection of GPU-accelerated microservices, tools, and libraries for AI.
With AI still in its infancy, Nvidia is uniquely positioned to capitalize on the growing demand for more computing power to train advanced AI models. The latest iteration of Meta Platforms' Llama AI model, for example, uses 10 times as many GPUs to train on than its previous version. Meanwhile, Nvidia's largest customer, Microsoft, has announced plans to spend an astounding $80 billion building out AI data centers this year.
Despite its strong performance over the past few years, Nvidia's stock is still reasonably priced. It currently trades at a forward P/E ratio of below 31 times and a PEG ratio under 1, which often indicates an undervalued stock.
Amazon
Amazon, (AMZN 2.39%), is best known for its e-commerce platform. However, Amazon Web Services (AWS), its cloud computing unit, is now its largest business by profitability. 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 has been at the forefront of the cloud computing industry since 2006, when it became one of the first companies to offer infrastructure as a service (IaaS). As the company grew, it began to help partners and affiliates, such as large retailers like Target, build out their e-commerce infrastructure.
However, this led to cost and scalability issues, which AWS quickly addressed by offering all-size users access to data centers without the prohibitive costs of building and maintaining them. Today, AWS is the largest cloud computing company in the world, with an over-30% market share.
Cloud computing has been a major beneficiary of AI, as organizations turn to the cloud to build out their own AI models and applications. Amazon is helping companies do this through its Bedrock and SageMaker solutions. Bedrock provides customers with a variety of foundational AI models, while SageMaker allows users to build and train their own AI models and applications.
Outside of cloud computing, Amazon is also using AI to improve its e-commerce operations and logistics. The company is using AI to make better product recommendations to customers, provide helpful AI-generated overviews of reviews, and simplify the process of creating listings for sellers. For logistics and warehousing, Amazon is deploying AI to plan more efficient routes and train robots to quickly and accurately process items.
Throughout its history, Amazon has demonstrated both its innovation and adaptability, investing heavily in order to stay at the forefront of the tech industry. The stock is currently reasonably priced, trading at a forward P/E multiple of under 30 and a PEG ratio below 1.1.
Enrichment Insights
- Nvidia: Nvidia's stock has enjoyed explosive growth in recent years, driven by the rapid adoption of AI and the increasing demand for powerful computing resources. The company's dominant market position and strong fundamentals make it a prime candidate for continued growth, with bulls predicting a potential price range of $106 to $140 in 2025. However, bears warn of a possible correction if growth slows or macroeconomic conditions worsen. Long-term (to 2030), Nvidia could see significant growth to $362 due to the exponential growth of AI, autonomous vehicles, and perhaps even quantum computing.
- Amazon: Amazon's cloud computing business, led by AWS, is poised to redefine the cloud landscape in 2025 with advancements in multi-cloud and hybrid strategies, quantum computing, and sustainability. The company's AI capabilities are also expanding across its products, leading to a more integrated AI ecosystem. Amazon reported record revenue growth in its AI and cloud services division, surpassing $110 billion in the last fiscal quarter. By 2025, AI-driven revenue could account for 35% of Amazon's total revenue, significantly enhancing its market position and profitability. Amazon's diversified portfolio and commitment to sustainability position it well for continued growth in AI and cloud computing in the long term.
In light of the market's reliance on tech stocks, investing in companies like Nvidia and Amazon could be strategic. Nvidia's dominance in the AI market, with its 90% market share, and Amazon's leading position in cloud computing and AI services, make them solid contenders for future growth in finance. For instance, Nvidia's GPU-powered AI models are in high demand, as seen in Meta Platforms' Llama AI model and Microsoft's AI data center plans, indicating a promising future for tech stocks in the finance sector. Similarly, Amazon's expansion into AI-driven e-commerce operations and logistics, as well as its cloud computing services, positions it well for continued growth in the coming years.
