Nvidia (NASDAQ:NVDA) has established itself as the artificial intelligence (AI) chip leader, delivering double- and even triple-digit growth in recent quarters. This is thanks to the company's early presence in the space and its commitment to constant innovation.

Though Nvidia clearly dominates, it isn't alone in this high-growth field, and rivals are also seeing success here. This increasing competition is one risk that investors have kept on their radar screens, with the idea that this market giant may eventually lose some share.

But, in recent times, Nvidia has made key moves to stay ahead. One of these is the development of stand-alone central processing units (CPUs) -- an area where Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD) dominate. Nvidia's entry may represent a threat to these players. And now a fresh $12 billion move could represent yet another challenge for Intel and AMD. Did Nvidia just say checkmate to its fellow chip players? Let's find out.

Image source: Getty Images.

Nvidia's leadership

First, let's consider Nvidia's competitive path so far. As mentioned, Nvidia ensured its market position by entering early -- that headstart, along with frequent launches of updated platforms and an expansion of products and services, has maintained the company's market position. Though rivals such as AMD and Intel have launched AI chips and systems and have delivered growth, Nvidia remains significantly ahead.

AMD and Intel, however, are longtime leaders in CPUs, the type of chips found in all computers. In the earliest stages of the AI boom, the CPU didn't play a big role. Instead, chips such as graphics processing units (GPUs) powered tasks like model training. But in the next stages of the boom, the CPU is expected to shine as it fuels the actions of AI agents.

Nvidia, aiming to benefit from this next phase of AI growth, is launching its first stand-alone CPU -- and already forecasts $20 billion in CPU sales this year. The company says it expects to dominate this market too.

This isn't great news for AMD and Intel, and Nvidia's latest move might represent an even bigger challenge. Nvidia this past week announced its plan to buy open-source AI platform Hugging Face for $12.9 billion.

What is Hugging Face?

What exactly is Hugging Face? It's a place where developers, researchers, companies, and tech fans can go to freely access, build, and test AI models. The acquisition, Nvidia's second-largest after the purchase of Groq assets last year, is a wise move for Nvidia as it broadens the company's position in the AI ecosystem and brings it into contact with a wide range of developers who require compute.

Nvidia has pledged to keep Hugging Face neutral, a platform supporting the use of compute from any provider.

"Nvidia compute will not be required to build on or deploy through Hugging Face," chief Jensen Huang wrote in a blog post announcing the deal.

But analysts have speculated that Nvidia software stacks could eventually see better integration than those of others, a point that could work in Nvidia's favor.

So, considering all of this, did Nvidia just say checkmate to AMD and Intel? This latest acquisition isn't the best news for Nvidia's rivals, as it further expands this leader's presence in the AI ecosystem and offers it a certain level of control in yet another area. But it's unlikely Nvidia would take steps that would significantly weigh on rivals -- if developers relying on AMD or Intel compute face difficulties on Hugging Face, they may not stick around. Nvidia must ensure a high-quality user experience for everyone to maintain Hugging Face's usefulness and popularity.

All this means Nvidia didn't exactly say checkmate to AMD and Intel – they may face some headwinds, but I expect growth to continue, as there is plenty of room for more than one player in this space. At the same time, the acquisition of Hugging Face is a fantastic move for Nvidia, further broadening its role in this AI revolution.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, and Nvidia. The Motley Fool has a disclosure policy.

The S&P 500 has blasted higher over the past few years, with artificial intelligence (AI) stocks leading the way in this bull market. Over the past three calendar years, the famous benchmark has advanced 78%, and the momentum has generally continued this year, with the index heading for a 13% increase.

All of this has helped investors score many wins, but one of the world's most successful investors isn't exactly happy with what he's seeing these days. Warren Buffett delivered a track record of six decades of market-beating gains as chief executive officer at Berkshire Hathaway. The billionaire retired from that position at the start of this year, but he remains chairman and continues to be involved in investing.

And as the stock market flashes a warning signal only witnessed twice in 155 years, Buffett takes notice. Against this backdrop, this stock market legend has delivered a blunt message to investors.

Image source: The Motley Fool.

Buffett's strategy

First, let's talk quickly about Buffett's investment strategy. Buffett, often called the "Oracle of Omaha," generated fantastic returns thanks to his commitment to certain investment principles he has stuck to regardless of the market environment. Buffett believes in buying quality stocks for reasonable prices -- he particularly likes picking up bargains -- and holding onto them for the long term. A great example of this is his investment in Coca-Cola. He opened a position in the beverage giant in the late 1980s and has held onto it ever since. In fact, Coca-Cola remains among Berkshire Hathaway's top five positions.

This top investor also isn't influenced by others, so he doesn't follow market trends. You won't find him rushing to buy the latest popular stock in a bull market or fleeing stocks during a bear market. In fact, Buffett often goes against the trends, looking for quality stocks that have fallen out of favor or haven't yet gained favor. The idea is to invest early when the price is right and then benefit as the rest of the market discovers the stock.

Now, let's consider the current market environment and Buffett's recent warning. As mentioned, the S&P 500 has soared amid this AI revolution and generally bullish environment. Meanwhile, some headwinds, such as concerns about rising inflation and turmoil in Iran, have slowed momentum at times.

The S&P 500 Shiller CAPE ratio

But the overall increase in the market has resulted in one thing in particular. The stock market now is flashing a warning signal only seen twice in 155 years, and it says: Stocks are historically expensive. The S&P 500 Shiller CAPE ratio has reached beyond the level of 41 -- something it's only done once before, during the dot-com boom.

S&P 500 Shiller CAPE Ratio data by YCharts

The Shiller CAPE ratio is a reliable valuation measure as it considers stock price relative to earnings per share over a 10-year period to account for economic fluctuations. Today, this measure tells us that stocks are trading at their loftiest levels, and history shows us declines often follow.

S&P 500 Shiller CAPE Ratio data by YCharts

As for Buffett, just a few months ago, in an interview with CNBC, the billionaire said that many market participants are "gambling," and this "gambling mood" is at a peak.

"If you're buying one-day options or selling them, that's not investing, it's not speculating -- it's gambling," Buffett said.

This trend in the market, along with current high valuations, could result in the stock market following a frequent historical pattern -- and declining.

What does this mean for you as an investor right now? It doesn't mean you should flee the market. Instead, as always, it's important to consider a stock's valuation and the company's financial health and prospects further down the road before buying. When you do this and commit to holding onto a stock for the long term, you're investing like Buffett and may find opportunities in any market environment.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

Peter Thiel is the name behind two massive tech success stories, and he's also demonstrated his ability to identify a top tech business, even in that company's earliest days. The billionaire and venture capitalist is co-founder of PayPal and Palantir Technologies, and he was the first outside investor in Facebook, now known as Meta Platforms.

All of this makes him a great person to look to for investing inspiration, particularly in the field of technology. Thiel's fund, Thiel Macro, brought its investments to zero for two straight quarters -- the fourth quarter of last year and the first quarter of this year -- but in the most recent three-month period, he made a bold move. He picked up shares of an artificial intelligence (AI) player that's climbed 200,000% since its initial public offering and made it his No. 1 position.

Now you might be wondering whether this stock, which has already soared over time, still has room to run. Thiel's proven ability to select winning companies should offer us confidence. Let's zoom in for a closer look.

Image source: Getty Images.

Thiel's investments in technology and energy

So, first, let's consider Thiel's moves. After two quarters of absence from stocks, he deployed more than $418 million across eight. One of them is the technology company I'll focus on here, and the others are involved in the energy space -- but it's important to keep in mind that certain energy players, fueling power for AI, actually may be a bet on the AI growth story. To support high-level compute, energy sources are greatly needed, and this means a number of these companies could deliver tremendous growth in the years to come.

In the quarter, Thiel bought the following energy stocks:

Vista Energy

Vistra Corp.

American Electric Power Co.

DTE Energy

FirstEnergy Corp

CMS Energy

X-Energy

But the biggest purchase of all was Thiel's investment in tech giant Amazon (NASDAQ:AMZN), a company that's winning in the e-commerce and cloud computing markets. Thiel bought 495,000 Amazon shares, and the company now represents 28% of his portfolio.

Leadership built over time

Amazon isn't a new kid on the block. The company has built its leadership over time, generating billions of dollars in revenue and profit quarter after quarter. In the most recent full year, revenue topped $716 billion.

Prior to the AI boom, Amazon already was an e-commerce and cloud powerhouse, but the good news is AI offered this well-established company a new growth driver. Amazon is a user, developer, and seller of the technology, so it benefits in many ways. For example, AI has helped streamline processes across the e-commerce fulfillment network, lowering Amazon's cost to serve. And Amazon's sales of its own AI chips, as well as the AI products of others, have helped Amazon Web Services' (AWS) revenue to skyrocket.

In the recent quarter, Amazon said its chips business revenue increased in the triple digits to an annual run rate of more than $25 billion. And its AI revenue run rate also advanced in the triple digits to more than $25 billion. The key to Amazon's success is that it's the world's biggest cloud services provider; the company offers a wide range of products and services, including AI and non-AI.

"Customers choose AWS because we offer the broadest capabilities," chief Andy Jassy said in the latest earnings call.

Amazon continues to invest heavily to build out AI infrastructure to meet high demand, and as AI is applied more frequently in the real world, it's clear that more growth may be on the horizon. Thiel hasn't revealed a reason behind his big Amazon stock purchase, but it's very likely that he sees this potential and aims to get in on it early.

Meanwhile, Amazon stock today trades for 20x forward earnings estimates, which looks dirt cheap considering the company's track record of earnings performance and long-term prospects. That means right now is a great time to get in on this Peter Thiel favorite.

Adria Cimino has positions in Amazon and PayPal. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Palantir Technologies, PayPal, and Vistra. The Motley Fool recommends the following options: short December 2026 $62.50 calls on PayPal. The Motley Fool has a disclosure policy.

Space Exploration Technologies (NASDAQ:SPCX) has been one of the most exciting stock market stories of the year. For good reason. The company, better known as SpaceX, completed the biggest initial public offering ever and launched with a trillion-dollar market value -- to put this into perspective, well-established tech giants such as Nvidia and Microsoft took years as publicly traded companies to reach such valuations.

The stock priced at $135, opened at $150 on June 12, and closed above $200 just a few days later. However, in the weeks to follow, SpaceX traded close to its IPO price and even fell below it. Today, it trades at about $140.

Investors have looked to specific events such as entry into the Nasdaq-100 in July, the company's first earnings report in August, and the expiration of share lockups as triggers for stock price movement. And now, we're days away from the next potential catalyst. What move will SpaceX stock make after Sept. 9? The evidence is piling up, and here's what it shows.

Image source: Getty Images.

Why investors are watching SpaceX

Before we consider the stock price, though, let's take a closer look at why investors have focused on SpaceX. As mentioned, the sheer size of the company's operation -- raising more than $85 billion in the IPO and after underwriters exercised an overallotment option -- helped it stand out.

But, even before this point, SpaceX has intrigued investors for a couple of reasons. One is the company's combination of growth businesses, including artificial intelligence (AI), space, and satellite-based connectivity. Though they require significant investment and come with a fair share of risks, they also offer enormous opportunity. The AI market, for example, is set to reach beyond $3 trillion early next decade, and SpaceX aims to benefit from that. The company is investing heavily in AI -- to the tune of $15 billion in the recent quarter -- but it also reported adjusted EBITDA of $1.1 billion for that segment. This is compared to a loss in the March quarter.

The second element that's brought SpaceX to the forefront is its leadership. Chief Elon Musk is known for his commitment to innovation and ambitious goals -- while some investors consider his style risky, others see him as a visionary. In any case, Musk's presence has prompted many investors to at least watch SpaceX -- even if they aren't buying shares.

While SpaceX's innovation and growth have supported the buy case, the company carries a high level of risk. This is because some of the major goals involve technologies that haven't been fully developed or proven. And this element has weighed on stock performance.

What's happening on Sept. 9

Now, let's consider what's happening on Sept. 9 and what history says may follow. IPO companies define lockup periods for their stocks so that, at the launch, early investors won't flood the market with shares. These individuals, who invested in the company at the very start, don't necessarily aim to exit the story, but they may want to sell a few shares to lock in a profit. To make the situation fair for everyone, companies create a schedule of when these investors may sell a certain amount of stock.

SpaceX has already experienced two of these share-unlocks -- on Aug. 6, which was two trading days after the first earnings report, and on Aug. 20, on the 70th day after the stock's debut. The next unlock is set for Sept. 9.

Here's what recent history shows us. In the week following the first unlock, SpaceX stock climbed 22%, and in the week following the second unlock, the stock added 5%. So, history shows that, so far, the unlock periods haven't weighed on SpaceX. It's important to keep in mind that just because early investors are allowed to sell at a certain moment doesn't mean they'll do so right away.

Does this mean that SpaceX stock will climb after Sept. 9? It's possible. But what's most likely to build wealth for you is a stock's long-term performance, and today SpaceX remains a risky bet -- that means most investors are better off watching from the sidelines for now.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Nvidia. The Motley Fool has a disclosure policy.

Investing legend Warren Buffett handed over the chief executive officer reins of Berkshire Hathaway to Greg Abel at the start of the year. Before that, however, Buffett spent many quarters doing more selling of stocks than buying. Why did net sales exceed purchases for a long period? Buffett hasn't answered the question directly, but a comment he made in a recent shareholder letter offers us clear insight:

"Often, nothing looks compelling; very infrequently we find ourselves knee-deep in opportunities," Buffett wrote in the 2024 letter.

Today, Buffett remains chairman of Berkshire Hathaway, while Abel guides investment decisions. And in the recent quarter, Abel made a big move: Berkshire Hathaway just did the following thing for the first time in 15 quarters. History offers a clue about what might come next, but the evidence piling up suggests it may not repeat itself.

Image source: The Motley Fool.

Market-beating returns for 60 years

So, first, let's talk about why we pay close attention to Buffett's moves. The billionaire led Berkshire Hathaway to market-beating returns for 60 years -- that track record solidified Buffett's reputation as an investing superpower. And Buffett is known for sharing his thoughts and advice on investing, so investors may rely on this as well as his stock selections for inspiration.

Buffett hand-picked Abel as a successor, and the billionaire still participates at Berkshire Hathaway to a certain degree. As a result, investors continue to closely watch the company's moves. That brings me to the latest ones, in the second quarter of this year.

As I mentioned above, though Buffett is a strong fan of equities and has continued to buy them throughout market environments, he was a net seller over the past few years. In fact, Berkshire Hathaway was a net seller of stocks for 14 straight quarters -- this included the first quarter of this year under the leadership of Abel.

But in the second quarter, Abel departed from that trend, and for the first time since 2022, Berkshire Hathaway became a net buyer of stocks, with almost $20 billion in purchases. This included a big boost to the Alphabet position, lifting class A shares by 45% and class C shares by more than 600%. Alphabet class A stock now is Berkshire Hathaway's fourth-biggest holding after longtime favorite Coca-Cola.

What happened after 2022

Now, let's consider what may happen next. History shows us that the last time Berkshire Hathaway was a net buyer of stocks, in the third quarter of 2022, the S&P 500 went on to soar -- and this bull market is ongoing.

^SPX data by YCharts

So, we might say that history suggests the S&P now will do the same and climb over the next few years. But it's important to consider other pieces of evidence, particularly relating to the valuation of stocks then and now, and the economic and geopolitical environment.

When Buffett was a net buyer of stocks in 2022, stocks looked a lot cheaper than they do today, and we can see this through the S&P 500 Shiller CAPE ratio, an inflation-adjusted look at stock price in relation to earnings per share.

S&P 500 Shiller CAPE Ratio data by YCharts

In fact, the Shiller CAPE ratio shows that stocks have reached one of their priciest levels ever. The last time stocks were more expensive was during the dot-com bubble back in 2000.

S&P 500 Shiller CAPE Ratio data by YCharts

Meanwhile, interest rate hikes were underway in 2022 to tame inflation; today, inflation is on the rise amid President Donald Trump's tariffs on imports and the conflict in Iran, and the Federal Reserve hasn't yet made a move on interest rates. That creates a certain level of uncertainty, something investors don't like.

All of this means that stocks are less likely to soar than they were back in 2022 when Buffett was a net buyer. Of course, this doesn't mean the S&P 500 will immediately decline. Stocks may have more fuel in the tank in the coming months and quarters. But overall valuations and economic headwinds suggest that a pullback could be on the horizon -- and this emphasizes the importance of investing in quality stocks and holding on for the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.

Last year, UnitedHealth Group's (NYSE: UNH) struggles with rising medical costs weighed significantly on earnings -- and on stock performance. But the company has since put into place a plan to turn things around, and that plan has been bearing fruit. Though UnitedHealth's challenges haven't disappeared, the company is better navigating the current market, and efforts are paving the way for long-term growth.

Earnings in the recent quarter, which surpassed estimates, confirmed this positive momentum. And investors haven't ignored this important turnaround story. They've piled into UnitedHealth shares, sending the stock to a 21% gain so far this year. Considering this market-beating performance, is the stock still a buy? Let's find out.

Image source: Getty Images.

The rising cost of medical care

So, first a quick look at the headwinds facing UnitedHealth -- and its fellow health insurers. The rising cost of medical care is an issue that probably won't go away, and it hurt UnitedHealth last year, particularly since the company underestimated patients' use of medical services. But wisely, UnitedHealth decided to adapt its operations to better manage these higher costs moving forward. Efforts included dropping certain plans that were too costly, increasing premiums, and investing in artificial intelligence (AI) to gain efficiency.

The idea is that, since it's unlikely medical care costs will drop, UnitedHealth today and into the future will be better prepared to operate in a high-cost environment.

In the quarter, the company's efforts across benefit design and network curation drove better- than-expected results for its Medicare Advantage business. That said, UnitedHealth continues to face high costs across its commercial offerings, a trend that's impacting the entire industry. The company says recovery in commercial margins will be a focus "longer than originally anticipated." This will be a key point for investors to watch.

UnitedHealth increases its outlook

But, overall, UnitedHealth's moves so far have been successful, and that may be seen in the latest earnings figures. The company reported adjusted earnings per share of $6.38, up from $4.08 in the same period last year and surpassing analysts' expectations. Meanwhile, the company increased its full-year adjusted earnings per share outlook to the range of $19.50 to $20. That's up from the prior estimate of $18.25 or greater.

Importantly, the company's medical care ratio came down to 86.7% from 89.4% in the same period a year ago. This ratio measures the percentage of premiums spent on medical care. A lower number is better for the insurer financially, though regulatory limits mean this percentage shouldn't drop too low. Insurers generally aim for 80% to 85%.

It's key to note that UnitedHealth operates two units, the UnitedHealthcare insurance business and the Optum health services business. This, along with the fact that UnitedHealth is the biggest U.S. health insurer, offers the company a solid moat or competitive advantage. It would be difficult for a rival to upset UnitedHealth's market position.

Now, let's consider the stock's performance and whether this player still should be on your buy list. As mentioned, UnitedHealth stock has climbed in the double digits this year as investors tracked the company's progress over the past couple of quarters. This has driven an increase in valuation, with the stock trading at 20x forward earnings estimates, up from a low of around 15x earlier this year. But, this level is still much lower than the peak of more than 35x reached last year.

UnitedHealth may not be dirt cheap, but it has demonstrated over the past year that its plan to address the challenge of higher healthcare costs is working. So, considering the company's efforts and progress so far and the full valuation picture, it remains reasonably priced. All of that means that UnitedHealth, even after recent gains, is a stock to buy and hold onto as this recovery story could deliver more good news over time.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends UnitedHealth Group. The Motley Fool has a disclosure policy.

This year has been a major one for initial public offerings, even producing the biggest IPO on record: the Space Exploration Technologies operation. Including the exercise of an overallotment option, SpaceX raised more than $85 billion and entered the market with a trillion-dollar valuation.

Now, all eyes are focused on the next IPO, one that could be even larger than that of SpaceX. I'm talking about the upcoming Anthropic market debut. The artificial intelligence (AI) lab, maker of the famous AI assistant Claude, confidentially filed a draft registration statement with regulators in June. And news reports suggest an IPO may be right around the corner. Here's what investors need to know.

Image source: Getty Images.

Why IPOs spark excitement

So, first, a quick look at why the launch of companies involved in AI -- from SpaceX to AI chip designer Cerebras Systems -- has sparked excitement and drawn investors' attention. It's important to note that IPOs generally garner attention as they present new investing opportunities. On top of this, the AI market, heading toward a value of $3 trillion in just a few years, according to analysts, represents a massive growth opportunity.

Publicly traded AI leaders such as Nvidia and Amazon have seen revenue skyrocket in recent years, so investors are eager to get in on the next new AI story.

Now, let's consider Anthropic and what you as an investor need to know. The company is the maker of the Claude AI assistant, the popular Claude Code coding tool, and other AI-driven products, and these are in high demand. TechCrunch, citing an Anthropic spokesperson, reported that Claude paid subscriptions have more than doubled in 2026.

In May, Anthropic raised $65 billion in Series H funding, pushing its valuation to $965 billion. At the time, the company said its revenue run rate had surpassed $47 billion.

AI labs such as Anthropic and OpenAI have been key players in the AI story, calling for a ramp-up in AI infrastructure from cloud partners such as Amazon Web Services (AWS). This increase in compute results in higher revenue for them -- more compute allows Anthropic and OpenAI to supercharge the performance of their large language models and serve more customers.

Anthropic's confidential filing

In recent months, investors have been looking to the IPO plans of each company, and Anthropic became the first to file, confidentially, with the Securities and Exchange Commission. In a confidential filing, a company provides financial data to regulators but doesn't yet release these details to the public.

Anthropic hasn't offered an update on its plans, but The Information recently reported that a prospectus would be made public after the Labor Day holiday and that a market debut is planned for late this month or early next month. The publication cited people familiar with the situation.

According to the report, Anthropic expects to surpass the size of SpaceX's IPO. And several publications have said that Anthropic is targeting a valuation of $2 trillion.

The Information also said that Anthropic may allow existing shareholders to sell shares during the IPO. The positive is that this broadens the pool of available shares; the negative is that cash from those sales goes to the respective shareholders, not the company. And if key insiders sell, potential investors may view this as a lack of confidence in the future.

These elements offer us clues about what to expect, but it's important to review Anthropic's prospectus when it becomes available to confirm these and other details. Investors should focus on financial information, including revenue from Claude, gross margin, and the status of existing contracts. Investors should also pay close attention to what the company considers potential risks. This will help you determine whether an investment in this IPO stock is right for you -- an aggressive investor may make a different decision than a cautious investor.

So, right now, if you're interested in possibly participating in the Anthropic IPO, the best thing you can do is stay tuned for the official filing -- which may be just ahead -- and examine it carefully.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.

Nvidia has become a stock market darling for two big reasons. First, the tech giant operates in one of the biggest growth markets around, the artificial intelligence (AI) chip market. And second, Nvidia has secured strong leadership in this market thanks to its early entry and its commitment to innovation. This has created a solid moat, or competitive advantage, that is resulting in lasting demand for Nvidia's products and, therefore, revenue growth investors can count on quarter after quarter.

But Nvidia isn't the only company with a rock-solid moat. In fact, the following three healthcare stocks have competitive walls that tower over those of the AI giant. Let's check them out.

Image source: Getty Images.

1. Moderna

Moderna (NASDAQ: MRNA) is known for its blockbuster coronavirus vaccine, a product that brought in $18 billion in peak annual sales in 2022. But that may have been just the beginning for this biotech company, thanks to its expertise in messenger RNA technology.

Moderna uses its mRNA method across its pipeline to address other respiratory viruses, rare diseases, and oncology. The technology involves putting mRNA to work to teach the body to make specific proteins that will protect against or fight disease. So mRNA may be used in vaccines to prevent illness, like the coronavirus vaccine, as well as in vaccines to fight an already present illness, such as cancer. The company recently announced impressive phase 3 results for its melanoma candidate.

Though Moderna brought its coronavirus vaccine to market in a short period of time, the company had been working on mRNA technology for years, developing a keen expertise. This strength, along with the company's late-stage pipeline, makes it a high-moat stock that could deliver big over the long term.

2. Intuitive Surgical

Intuitive Surgical (NASDAQ: ISRG), selling the flagship Da Vinci system, is the market leader worldwide in robotic surgery. It's such a major player that Medtronic, when launching rival system, Hugo, last year, positioned Hugo as "another choice" for surgeons -- but didn't present it as a solution meant to replace the Da Vinci.

Surgeons generally train on the Da Vinci, and hospitals have invested millions of dollars in these platforms. As a result, they're unlikely to shift to another system. These two simple facts mean it would be difficult for another company to unseat Intuitive Surgical. And that offers investors significant visibility on revenue to come.

On top of this, Intuitive, like Nvidia, has a strong focus on innovation. The company recently released the Da Vinci 5, a product with more than 150 design innovations that result in improved surgeon autonomy and better operating room workflow, among other benefits. All of this should ensure Intuitive Surgical's growth well into the future.

3. Vertex Pharmaceuticals

Vertex Pharmaceuticals (NASDAQ: VRTX) has expanded into various treatment areas in recent years, throughout its pipeline and commercially. For example, it's launched a gene editing treatment for blood disorders and a drug for pain management. And in the pipeline, it's advancing candidates for rare diseases as well as potential drugs for more common diseases such as type 1 diabetes.

But one particular thing constructs a solid moat for Vertex, and that's its long history of expertise in the treatment of cystic fibrosis (CF). The company makes CFTR modulators, a type of drug designed to correct the faulty functioning of a protein made by the CFTR gene. Vertex is the global leader in CF treatment, and this has resulted in a billion-dollar business for the company. This expertise has helped the company grow its annual revenue to $12 billion.

Vertex's research strengths here are likely to result in tomorrow's next CF blockbuster. Meanwhile, the company's solid patent portfolio has ensured its market leadership through at least the late 2030s.

All of this means that Vertex has an extremely significant competitive wall -- one that even towers over that of tech giant Nvidia.

Adria Cimino has positions in Vertex Pharmaceuticals. The Motley Fool has positions in and recommends Intuitive Surgical, Medtronic, Moderna, Nvidia, and Vertex Pharmaceuticals. The Motley Fool recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.

With the S&P 500 delivering a double-digit gain so far this year and sitting near record levels, you may not be thinking about market crashes right now. Or, just the opposite, you might worry that after such gains, the market may be due for a decline -- and that may even turn into a crash. But, regardless of the current market situation, it's always a good idea to prepare for such happenings. That's because the stock market never rises in a straight line forever, and eventually, a crash will take place.

But here's the good news: Crashes have never lasted forever or permanently damaged the investing landscape. They are a part of the investing story, occurring from time to time, and there are ways you can prepare for them in order to minimize the impact on your portfolio. So, if a stock market crash is coming, don't worry -- history says this is the smartest move investors can make.

Image source: Getty Images.

Today's market environment

Before diving in, let's take a look at the current market environment. Stocks have soared as investors cheered outstanding corporate earnings and piled into the artificial intelligence (AI) players that have driven this bull market. AI has fueled the S&P 500 and other major indexes over the past three years on optimism about the technology's potential to transform the way business is done -- and generate gains in efficiency and revenue for companies across industries.

In the most recent quarter, S&P 500 companies delivered a 52% earnings growth rate, the highest since the second quarter of 2021, according to FactSet Insight. And players in the AI space continued to offer the same message they delivered in recent quarters: Demand for AI remains high. This has translated into tremendous growth for those offering AI products and services, such as chip leader Nvidia and cloud giant Amazon.

Amid this excitement, though, economic concerns are brewing. President Donald Trump's tariffs and the conflict in Iran have driven inflation higher, and investors worry that the Federal Reserve may soon increase interest rates to favor price stability. The CME Group FedWatch tool shows a 67% probability that the Fed will lift rates during its September meeting.

Though the corporate earnings picture and AI story remain bright, these economic factors could weigh on appetite for stocks -- and push the S&P 500 lower.

What you can do now

Before you worry about that scenario, or even a potential market crash on the way, let's talk about what you can do as of right now to protect your portfolio. The smartest move investors can make is to continue investing throughout all market environments. This doesn't mean you should buy poor-quality stocks or companies trading at ridiculously high valuations. Instead, what's important to note is that the opportunity to find a great stock for a reasonable price always exists -- in bull markets, bear markets, and particularly during market crashes, as many investors flee the market.

If you sell positions at the start of a crash, you may avoid a short-term loss (at least on paper), but history shows us you could miss out on a major longer-term gain. For example, tech giant Amazon slipped during the coronavirus market crash in March of 2020, but it went on to deliver fantastic returns later in the year and over the long term.

AMZN data by YCharts

The importance of time

It's important to remember that the most significant stock market wins happen over a period of years -- not a few weeks or months. In fact, even investing at what may be seen as the worst possible time, right before a market crash, has resulted in gains over time, according to history.

An investment on Oct. 9, 2007, ahead of the global financial crisis would have resulted in a 109% cumulative return over the following 10 years, and an investment on Feb. 19, 2020, ahead of the coronavirus market crash would have resulted in a 25% increase over the year to follow, Daniel Prince, U.S. head of product at iShares, wrote in a note.

So, selling quality stocks and avoiding the market in general could be a big mistake ahead of or during a market crash. History shows us that the one thing that supports success over time is the decision to remain in the market throughout its various phases and pick up stocks when opportunity arises -- as mentioned, this can happen at any time, and you'll only be able to take advantage of it if you're present.

All of that means that, if a stock market crash is coming, the smartest move you can make is to keep investing and hold on for the long term.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.

Stanley Druckenmiller was an early believer in artificial intelligence (AI) giant Nvidia (NASDAQ:NVDA), building up a significant stake back in 2022. In fact, the AI chip leader was the billionaire's biggest position for a good part of the following year. But in 2024, he sold all his Nvidia shares, saying the valuation had become rich. Druckenmiller didn't make a clean break, however, and instead expressed some regret. He even said he would consider buying Nvidia shares again at a lower valuation.

Since, Nvidia's valuation has declined -- it even reached a low of 17x forward earnings estimates earlier this year -- but so far this hasn't been enough to bring Druckenmiller back to this AI story. Instead, in the second quarter, Druckenmiller opened a new position in an Nvidia challenger that's seen its stock soar more than 100% this year. Let's check out the billionaire's move and consider whether it's one to follow.

Image source: Duquesne Family Office.

Druckenmiller's success over 30 years

First, let's talk about why we're looking to Druckenmiller for investing inspiration. The billionaire ran the hedge fund Duquesne Capital Management for 30 years and, over that period, delivered an average annual return of 30%. Importantly, he didn't post any money-losing years. So, Druckenmiller has proven his investing strengths over time -- and that means we might turn to him for ideas.

Today, the billionaire oversees $5.2 billion at the Duquesne Family Office and invests in several industries, including technology. Though Druckenmiller closed his Nvidia position after clearly winning on that investment, he remains bullish on stocks involved in the AI market. And that leads me to his latest buy.

In the second quarter, Druckenmiller opened a position in Nvidia rival Advanced Micro Devices (NASDAQ:AMD). He bought 72,900 shares, giving the stock a 0.8% weight in his portfolio. Clearly, this isn't Druckenmiller's biggest bet, but it does show his interest in getting in on a chip specialist during this phase of the AI story.

Nvidia is the market leader in graphics processing units (GPUs), the key chip driving crucial AI tasks like the training of models. The company focused on the market early, and that's helped it stay ahead of rivals. AMD, a leader in the central processing unit (CPU) market, has increased its AI offerings in recent years and has seen significant growth.

More growth potential than Nvidia

Since AMD's revenue is considerably lower than that of Nvidia, it may have the potential to deliver more growth in the coming quarters -- and that idea appeals to investors. For example, in the recent quarter, Nvidia's revenue topped $96 billion, while AMD generated $11 billion. Meanwhile, AMD's efforts in the AI space, such as the recent launch of the AMD Helios rackscale system, could offer revenue a major boost. We've seen momentum already, with a doubling of data center revenue in the recent quarter.

It's also important to note that, even though Nvidia is taking big steps in the CPU market, AMD remains a leader in that space. CPUs are the chips present in all computers, and they're emerging as key tools in the powering of AI agents -- agentic AI involves the use of AI to complete various tasks as part of a specific job. AMD's strengths in CPUs position it well to benefit from the upcoming stages of the AI revolution, as AI is applied to real-world situations.

So, should investors follow billionaire Stanley Druckenmiller into this Nvidia challenger? Though successful hedge fund managers have demonstrated their skills over time, their investment priorities, investment horizons, and comfort with risk may differ from ours. This means, even if a top investor is buying a particular stock, it's important to carefully consider the company to see if it's right for you.

In this case, AMD, trading at more than 60x forward earnings estimates, looks expensive -- even though the company's AI future looks bright, most investors may want to wait for a more favorable entry point.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.

Intuitive Surgical (NASDAQ: ISRG) has many qualities that appeal to investors, from a fantastic moat to a strong track record of earnings growth. But in recent months, that hasn't been enough to lift the stock. This robotic surgery leader has seen its stock price slide more than 30% so far this year.

Investors might be focusing on a slowdown in U.S. procedure growth, particularly in surgeries that can be postponed. And though overall growth still is climbing in the double digits, this may prompt investors to think twice before buying the stock.

But analysts, with an overwhelming majority of buy recommendations, aren't scared by the stock's worst stretch in years. Let's consider what they're focused on instead.

Image source: Getty Images.

A similar tough period

First, let's take a look back in time to the stock's previous tough period. The last time Intuitive Surgical found itself in a similar position was in 2022, when the stock sank more than 40% from January through August. At that time, too, investors worried about pressure on procedure growth -- during phases of the pandemic, hospitals focused on treating coronavirus patients, and that resulted in the postponement of many elective surgeries. Meanwhile, as interest rates climbed, investors shied away from stocks that, like Intuitive Surgical, generally trade at premium valuations.

But here's the good news: Intuitive Surgical stock didn't remain in the doldrums. It then went on to gain over the next few years and even reached a record high last year.

Now, let's take a look at Intuitive Surgical's business. The company is the global leader in robotic surgery, with a market share of more than 70%. Intuitive Surgical's flagship Da Vinci robot is used for a wide range of minimally invasive procedures, from hernia repair to gallbladder surgery. Over time, this has helped the company consistently deliver growth in revenue and profit -- and generate strong returns on its investments.

ISRG Revenue (Annual) data by YCharts

What I like most about Intuitive Surgical is the company's fantastic moat, or competitive advantage, and its recurring revenue. I'll explain. Surgeons train on Da Vinci robots, so they are used to using them, and hospitals have invested millions of dollars in Da Vinci systems and want to amortize that investment. For those reasons, hospitals probably won't easily switch to a competitor, and this represents a moat for the company.

Intuitive Surgical's recurring revenue

As for the recurring revenue, this is linked to Intuitive Surgical's sales of instruments and accessories needed for Da Vinci-guided surgeries. So once a hospital invests in a Da Vinci, the spending isn't over -- it continues to buy the necessary tools for procedures, and that actually makes up the lion's share of Intuitive Surgical's revenue. In the recent quarter, for example, instruments and accessories generated $1.7 billion in revenue, while the placement of systems brought in $685 million. This is positive because it shows that, when a hospital invests in a Da Vinci, the revenue opportunity for Intuitive Surgical is just beginning.

Wall Street surely appreciates those two elements I just talked about, and it's part of the reason analysts remain bullish on the stock. But, right now, here's one thing analysts are particularly focused on -- and it's the reason they're not worried about the recent stock performance.

This is the trend we're seeing in systems placements. In the most recent quarter, Intuitive Surgical placed 468 Da Vinci systems, up from the placement of 395 in the same period a year ago. This helped the company grow its installed base to 11,710 systems as of June 30, a 12% gain over the year-earlier period.

This shows that hospitals continue to heavily invest in robotic systems -- and they wouldn't be doing this if they didn't project an increased need for them in the years to come. That bodes well for Intuitive Surgical's growth moving forward, even if it traverses a slow patch from time to time.

All of this explains why Wall Street isn't scared of Intuitive Surgical's recent stock performance -- and it makes Intuitive Surgical an excellent stock to buy and hold.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Surgical. The Motley Fool recommends the following options: long January 2028 $520 calls on Intuitive Surgical and short January 2028 $530 calls on Intuitive Surgical. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ:NVDA) hasn't only delivered exceptional revenue growth in recent years, but the tech giant has also generated enormous profit. For example, in the latest quarter, the company's revenue topped $96 billion, and net income reached $59 billion.

All of this is thanks to a wise bet Nvidia made about a decade ago. The company decided to focus on developing graphics processing units (GPUs) for the high-potential artificial intelligence (AI) industry. These are the workhorses that offer the power needed for key tasks like the training of models. Prior to this, Nvidia's GPUs primarily served the gaming market.

So, quarter after quarter, Nvidia has benefited from the AI boom. Earnings have marched higher as demand for AI infrastructure increased, and this momentum continues. In fact, growth could continue well into the future as AI is applied more frequently to real-world applications -- for this, GPUs and similar chips play a central role.

All of this sounds fantastic. But there may be one cloud in this sunny picture. Nvidia shareholders should brace themselves for one particular thing in the months to come. Let's check out what it means for the long-term picture.

Image source: Getty Images.

Demand for Nvidia's GPUs

First, let's start with the good news. Demand for Nvidia's GPUs continues to roar higher, and on top of that, the company just began production shipments of its latest platform, Vera Rubin. This system represents an exciting turning point for Nvidia as it includes GPUs as well as something new: Nvidia's first stand-alone central processing unit (CPU). CPUs are chips generally found in all computers, and they fuel the actions of AI agents. Agentic AI, involving AI taking steps to address problems on behalf of humans, is seen as the next AI growth driver.

Nvidia aims to be a leader in this space, too, adding to its GPU dominance, and it may be well on the way. The company predicts $20 billion in stand-alone CPU sales this year.

Meanwhile, Nvidia did something it's never done before: It offered guidance for the next fiscal year, citing greater-than-ever visibility. Nvidia predicts revenue growth of 70% for the 2028 fiscal year.

So, where is the cloud in this sunny landscape? Well, Nvidia expects growth to continue, but it may come at a higher price. The company, which has maintained gross margins in the mid-70% range, expects to see lower profit on sales later this year. Nvidia, after delivering a gross margin of 75% in the second quarter, says that gross margin will bottom in the range of 71% to 72% in the fourth quarter. The company predicts the figure will settle at 72% to 73% in the 2028 fiscal year, or the period beginning early next year.

"Extreme pricing conditions"

This is due to "extreme pricing conditions in memory," finance chief Colette Kress said during the company's earnings call last week.

The colossal levels of demand for AI infrastructure -- something that's clearly benefiting Nvidia -- are also driving the memory shortage and memory price increase -- something that's hurting Nvidia and peers.

So, investors should brace themselves for this pattern in the quarters to come. Now, let's consider what it means for the long-term picture. While the memory situation will weigh on profitability on sales, it's important to keep in mind that it's not catastrophic. Gross margin above 70% still is considerably high, and if Nvidia is able to maintain stability around this level, this should be seen as a sign of strength.

As for the long-term, memory chip players are addressing the shortage by adding capacity, and this should boost supply. That doesn't necessarily mean prices will come down -- at least as long as high demand continues. But Nvidia benefits from this demand, and is demonstrating that it can manage higher memory prices by maintaining a high gross margin. Meanwhile, Nvidia may also gain in efficiency as it rolls out new platforms annually.

All of this means that, while any decline in gross margin is disappointing, it's important to put the situation into perspective. Nvidia remains on track to greatly benefit from AI growth in the years to come -- and that makes it a fantastic stock to buy and hold.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Today is a big day for Apple (NASDAQ:AAPL) and its shareholders as Tim Cook hands over the job of chief executive officer to John Ternus. The new chief, most recently Apple's senior vice president of hardware engineering, takes the helm at a company that's transformed the smartphone market -- in fact, the famous iPhone continues to hold the top spot worldwide quarter after quarter.

The popularity of the iPhone and other products like the Mac and iPad has helped the company generate record levels of earnings and even deliver recurring revenue through the offering of services. All of this has led the stock price higher over time.

But, in recent weeks, Apple shares have dipped. Though Apple reported strong revenue in the recent quarter, the company's outlook, cautious amid supply constraints and higher memory chip costs, disappointed investors. Still, growth is far from over for this tech giant, and now, another important moment lies just ahead on Sept. 9. Should you buy the stock before that time? Here's what history says.

Image source: The Motley Fool.

Apple's market dominance

Before diving in, however, let's take a quick look at the Apple story so far. The famous iPhone is far from new, with the first version launched back in 2007. Within a few years, the product became a smashing success and set Apple on track to market domination. As mentioned, the iPhone maintains its position as the best-selling smartphone globally -- in the second quarter, the iPhone 17 took the No. 1 spot, and iPhones held five out of the top 10 positions, according to Counterpoint Research.

Customers also flock to Apple for its range of other products, and these devices have helped the company establish a solid moat; Apple fans love the products so much that they don't often switch. Today iPhone brand loyalty has reached more than 96%, up from 91% five years ago, according to a SellCell survey. This has resulted in solid growth in revenue over the years, with the recent quarterly figure climbing 16% to more than $109 billion.

Still, as mentioned, Apple disappointed investors when it predicted revenue growth of 9% to 11% in the current quarter, falling short of analysts' forecasts of 12% growth. And this weighed on the stock price, leading to a 4.2% decline from the July 30 earnings report through the Aug. 28 trading session.

Apple's new products

But a happening just ahead may put the spotlight on Apple once again. On Sept. 9, the company, with new CEO Ternus at the helm, is set to hold a launch event. Analysts predict the company will unveil new iPhones and even the much-anticipated foldable phone, as well as Apple Watches.

Should you buy the stock prior to this big day? Well, a look at the past five Apple September launches shows that three out of five times, the stock has advanced in the month to follow.

So, by investing prior to the upcoming launch event, you may benefit in the near term if history is right. But does this really mean you should rush to get in on Apple right now? While a near-term gain clearly would be fantastic, short-term performance won't make or break your portfolio.

What's most important is a stock's potential over the long term. And, here, there's reason to be optimistic about Apple. The company has the strength to weather the storm of memory prices and supply constraints -- even if this restricts growth to a certain degree today, it's unlikely to hurt Apple's long-term prospects. Meanwhile, it's key to note that John Ternus, with strengths in building Apple products, could usher in a fresh era of growth in the coming years.

All of this means Apple is a buy, but you don't have to rush to get into the stock before Sept. 9 -- a purchase before or after the launch event could generate fantastic returns over the long run.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

Moderna (NASDAQ:MRNA) shareholders have seen this before: The biotech makes a game-changing advancement, and the stock takes off. The first notable occurrence was during early pandemic days, when the company brought its coronavirus vaccine from the drawing board to commercialization in less than a year. Investors rushed to get in on this innovative company, driving the stock to a 2,000% gain from 2020 through early August of 2021.

And just recently, investors made a similar move. Moderna announced the positive performance of its personalized mRNA cancer vaccine along with Merck's Keytruda in the combo's first late-stage trial. The stock soared 177% in one trading session and ended the month of August with an increase of about 150%.

Investors have now twice recognized the strength of Moderna's mRNA platform in a big way. Still, Moderna stock in the past hasn't kept its gains -- and after the recent surge, some of the good news may be priced in. Considering the full picture, is the stock a buy, a hold, or a sell? Let's find out.

Image source: Getty Images.

Moderna, from early pandemic to today

So, first, we'll consider Moderna's path from early pandemic days to the present time. As mentioned, the biotech soared to stardom with its coronavirus vaccine, a product that brought in more than $18 billion in annual revenue at its peak. Not only was the product a lifesaver, but it also demonstrated the power of Moderna's technology. Moderna uses mRNA to instruct the body to produce certain proteins to help it prevent or fight a particular virus or disease.

But a decline in demand for the coronavirus vaccine in later days of the pandemic weighed on Moderna's earnings and stock performance. The company took action, cutting costs to match the revenue opportunity, and redirecting its focus to other respiratory vaccines, a rare disease pipeline, and its cancer vaccine program.

Meanwhile, Moderna won approval for updated coronavirus vaccines, a respiratory syncytial virus (RSV) vaccine, and, most recently, a flu vaccine. At the same time, the company's pipeline advanced, with the combined Moderna/Merck oncology candidate involved in 10 clinical trials. Of those, four are in phase 3: One involves the treatment for melanoma, while three are in non-small cell lung cancer.

Moderna's gains this year

As investors grew optimistic about this oncology program and the overall pipeline, Moderna stock began to head higher earlier this year. And the recent data confirmed this positive movement. The combination of the mRNA vaccine and Keytruda significantly extended the recurrence-free survival of advanced melanoma patients who had already undergone surgery. This was versus treatment with Keytruda alone, which is currently the standard immunotherapy.

Moderna's treatment stands out as it's personalized, targeting the specific mutations involved in a patient's tumor.

Amid this clearly good news, let's return to our question: Is Moderna a buy? Or has the stock gone too far too fast?

A reason for optimism

Moderna has a solid pipeline, with a variety of programs, and the company has produced excellent late-stage results in melanoma. It's not clear when Moderna and Merck will apply for regulatory approval, but that moment could be just ahead. And though approval isn't guaranteed, we might be reasonably optimistic considering the trial data so far.

That said, it's important to keep in mind that this treatment, if approved, isn't as fast, easy, or inexpensive to roll out as a pill. The production of a personalized vaccine may be costly and logistically difficult. These elements mean it may take time for such a product to generate significant growth.

As in the past, investors cheered as Moderna took early steps in one particular program. It's impossible to predict whether the momentum will continue or, as in the past, Moderna stock may stagnate or even decline. After such a huge gain in August, though, it's likely the stock will pull back to some degree, offering investors an interesting buying opportunity -- I would wait for this moment rather than jumping in at the high.

In any case, I don't expect a potential drop to last forever. This biotech company has proven its technology and is in the process of rolling it out across treatment areas -- a few years down the road, this could produce tremendous growth. That's why it's a great idea to seek a solid entry point and hold onto Moderna stock for the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Merck and Moderna. The Motley Fool has a disclosure policy.

After a lackluster July, the S&P 500 is heading for a gain of nearly 3% for the month of August, and this is right ahead of a key moment: the month of September. Why is September key? Because, historically, it's known as the worst period of the year for the stock market, on average, resulting in declines over time.

The reasons behind this "September Effect" aren't particularly well understood. Some say it's due to investors locking in gains after summer vacation and even gathering up those profits to support the back-to-school period for their kids. Others suggest it may be a self-fulfilling prophesy, as investors believe stocks will fall and rush to sell.

But, it's important to remember that September isn't always a month of declines -- and even if stocks slip at this time, the following months could completely change that negative story. It's impossible to predict with 100% accuracy what's ahead, but historical trends often provide us with clues about what may have a reasonable chance of happening. And today, considering the S&P 500's August gain, history offers us a strikingly clear answer about what might be next for the index. Let's check it out.

Image source: Getty Images.

The August momentum

First, though, let's take a look at the reasons behind the August momentum. A decline in oil prices helped boost investor optimism, as did a wave of positive earnings reports. With 97% of S&P 500 companies reporting second-quarter results, 86% delivered positive earnings per share surprises, while 77% generated positive revenue surprises. That's according to FactSet's Earnings Insight report by earnings analyst John Butters.

Importantly, the "Magnificent Seven" tech stocks delivered outstanding results, and this may have relieved investors' concerns about the future of artificial intelligence (AI) growth. In recent months, some investors shied away from some of these big tech players as they poured billions of dollars into AI -- the concern was that the revenue opportunity wouldn't justify these spending levels.

But in the quarter, tech companies continued to speak of high demand for AI. And the "Magnificent Seven" reported the highest earnings growth rate -- at more than 118% -- since at least the fourth quarter of 2020, Butters wrote. Meanwhile, previous declines left certain players trading at bargain valuation levels, making them no-brainer buys for investors interested in the AI story. For example, AI chip giant Nvidia traded for as low as 21x forward earnings estimates in August.

The biggest S&P 500 stocks

It's important to remember that Nvidia and its fellow "Magnificent Seven" players are among the heaviest weighted stocks in the S&P 500, so they can easily drive the index's performance.

Now, let's consider what the August gain means for the rest of the year. And for that, we can turn to research from Carson Investment Research. There, analysts looked at 11 years from 1945 through 2017. All but one of those years delivered positive August and year-to-date performance. The S&P 500 then went on to deliver an average 1% positive return for the month of September and an average 5.6% return for the last four months of the year.

So, history paints a strikingly clear picture: If the S&P 500 follows this historical pattern, it may be heading for a September gain as well as an increase over the final months of the year.

What does this mean for you as an investor? As I mentioned earlier, predictions based on historical trends aren't always right. But history often repeats itself, so it's valuable to consider them.

Now here's the most important point of all: Regardless of what the S&P 500 does over the period of a month or a few months, there is reason to be optimistic about the index's future. This is because, without fail, it's always gone on to advance over the long run. And this means that any time is the right time to consider quality stocks as well as a fund tracking the S&P 500's performance, add them to your portfolio, and hold on for the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ:NVDA) has steadily delivered one thing in particular to investors quarter after quarter: Mind-blowing earnings growth that's reached record levels well into the billions of dollars. This is thanks to the company's dominance in the high-growth market of artificial intelligence (AI) chips and its expansion into related products and services. In fact, Nvidia has built an AI empire, and in the latest three-month period, this translated into $96 billion in revenue and $59 billion in profit.

In the earliest stages of the AI boom, this growth resulted in stock price gains, with the shares climbing 800% over the past five years. But in recent times, Nvidia stock has faltered here and there. For example, in the first quarter of the year, it slipped 6.4%, and its year-to-date gain of 16% isn't huge for such a high-growth company.

So, it's perfectly logical to wonder where Nvidia stock will be after the company's latest explosive earnings report. History offers us some answers.

Image source: The Motley Fool.

The Nvidia story so far

Before considering performance ahead, though, let's take a look back at Nvidia's AI story. This tech giant has always been an expert in graphics processing units (GPUs) -- but these powerful chips initially were designed for the gaming market. As it became clear that they could serve many other areas, Nvidia developed the parallel computing platform CUDA to make that happen. And about a decade ago, predicting the GPU's potential in the AI market, Nvidia focused on developing these chips for that particular use.

As they say, the rest is history. Nvidia's early entry into this market, along with its commitment to ongoing innovation, has kept it ahead and allowed it to pursue additional opportunities in the space and beyond. For example, last year the company announced a partnership with Nokia for the development of AI-native mobile networks. And Nvidia has brought its technology to hybrid quantum-classical computing.

Some of these moves should generate growth in the future, but earlier decisions have already built an impressive revenue machine.

While Nvidia's stock has climbed over the years, in recent months, it's faced headwinds. Investors have worried about rising competition in the chip market as well as the pace of AI spending, and these concerns have weighed on stock performance. Even explosive earnings reports haven't resulted in major gains in the days to follow. For example, after an 8% increase in the trading session after Nvidia's latest report, the stock slipped the next day.

Nvidia's historical trend

Now, let's consider our question: Where will Nvidia stock be six months after the latest report? History offers Nvidia-watchers and shareholders a clear answer. After the past 12 quarterly earnings reports, Nvidia stock climbed nine times in the six months that followed. And eight of those times, gains have been in the double digits. (This excludes the May 2026 earnings report since six months haven't yet passed.)

So, if history is right, Nvidia could deliver a double-digit increase over the coming six months, which clearly is fantastic news for investors.

Of course, while history may offer us an idea of what's generally happened in the past, it isn't always right. Proof of this is that Nvidia has occasionally fallen over the six months following an earnings report.

But here's why there's reason to be optimistic, no matter what direction the stock takes in the months to come: Nvidia's earnings performance and market leadership, as well as the strength of overall demand in the AI market, suggest that the company is likely to deliver impressive growth well into the future. Meanwhile, trading at only 23x forward earnings estimates, Nvidia stock is very reasonably priced, meaning it may have plenty of room to run.

All of this should translate into fantastic stock performance over the long term -- and if Nvidia follows the historical pattern, we may get a taste of this over the coming six months.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Meta Platforms (NASDAQ:META) is one of the companies leading the artificial intelligence (AI) revolution, but in recent months, investors haven't exactly flocked to this tech leader. The stock has slipped about 13% this year, and a recent lawsuit brought by several states didn't help matters.

But the case, alleging that Meta's apps have been harmful to children, no longer represents an uncertainty for the company or its shareholders. Only days after the opening arguments, Meta agreed to pay $16.7 billion to settle the case. Now, here's my prediction of where the stock will go from here.

Image source: Getty Images.

Meta's social media leadership

Before looking into the future, though, let's consider the Meta story so far. Most of us are familiar with Meta thanks to its social media leadership -- the company owns the world-famous Facebook, Messenger, Instagram, and WhatsApp. About 3.6 billion people use at least one of these every day. And this fact is what's driven advertisers to Meta to promote their products and services, creating a billion-dollar business.

Ads drive revenue at Meta, and this revenue is booming. In the recent quarter, it climbed 28% to $60 billion. All of this has helped the company invest in another area that it sees as a future growth driver, and that's AI.

Meta has rolled out AI features across its apps and offers an AI assistant to users -- the idea here is that this will keep us on the apps longer, and advertisers will pour more and more advertising dollars into Meta to reach us. Meanwhile, Meta aims to use AI to improve ad results, and this is something else that should appeal to advertisers. Finally, Meta's investment in AI could produce additional products and services over time.

This is positive, but Meta has still faced certain headwinds. Some investors have worried that the AI revenue opportunity may not justify current spending levels. In the latest quarter alone, the company's capital expenditures surpassed $31 billion, driven by infrastructure investments.

The federal lawsuit against Meta also may have weighed on some investors' minds as it represented an element of uncertainty -- and a threat to revenue growth. Settling the suit allowed Meta and the states to agree on changes to protect children, such as blocking nighttime usage. But the agreement doesn't order Meta to halt certain features such as targeted ads.

A manageable settlement

Meta faces other unrelated lawsuits, but the settlement of this federal case can still be seen as lowering risk. And the size of the settlement is largely manageable for Meta, a company that generated $200 billion in revenue in the latest full year and that boasts a market value of $1.4 trillion.

Now, let's consider my prediction for the stock. Meta's lackluster stock market performance this year has left the shares trading at 18x forward earnings estimates. This is dirt cheap considering Meta's solid social media moat -- people generally won't switch out of Instagram or WhatsApp since all of their contacts are unlikely to follow -- and ad revenue strength. Meta also offers investors the potential to benefit from AI growth down the road, and this is as the company steadily grows earnings thanks to its social media business.

This makes Meta a fantastic buy right now, particularly for tech investors who have benefited from investments in other AI stocks and are looking to shift into future potential winners. Still, Meta may not take off immediately, as some investors focus on AI spending in general and wait to see whether it translates into revenue growth.

But my prediction is that Meta stock will gradually head higher from these levels over the coming year and into the future -- and that makes it a fantastic stock to buy right now while it's cheap and hold onto for the long term as the AI story develops.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms. The Motley Fool has a disclosure policy.

CrowdStrike (NASDAQ:CRWD) has become an early winner in the artificial intelligence (AI) revolution, and that's delivered a big win to early investors in this cybersecurity giant. The company's innovative platform, Falcon, incorporates AI to identify threats and tackle attacks before they happen. This has translated into explosive revenue growth quarter after quarter, and the company continued marching along this path in the recent period.

In fact, chief George Kurtz called it the "very best quarter in company history." Among other achievements, CrowdStrike delivered record new annual recurring revenue (ARR) and free cash flow. And, importantly, the growth of AI is offering the company a new, significant revenue opportunity.

All of that is positive, but it's also important to keep in mind the stock's explosive performance, something that could mean some of this great news is already priced in. The stock has jumped about 100% over the past year. Is it too late to buy this winning AI stock? Let's find out.

Image source: Getty Images.

CrowdStrike's use of AI

We'll start by taking a look at CrowdStrike's path so far. As mentioned, the company has become a successful user of AI. CrowdStrike's Falcon platform is a lightweight sensor -- meaning it operates in the background and doesn't slow down a computer system's operations -- that looks out for potential danger. The system operates in the cloud and leverages an enterprise's data to detect potential threats and take action.

Falcon offers customers more than 30 modules focused on a range of security specialty areas, from data protection to blocking viruses and securing multi-cloud environments. And the Falcon Flex program allows customers flexibility to manage their changing security needs -- they can shift from one module to another, for example.

All of this has propelled revenue higher. The recent quarter confirmed the company's successes, as new ARR reached a record of $333 million, free cash flow hit a record of $377 million, and Falcon Flex accounts attained an ending ARR of more than $2.2 billion. As mentioned, the company said that this quarter was the best ever -- and expressed significant optimism about what's ahead.

Now, let's consider the newish element that's driving this growth. As Kurtz said during the earnings call, today's AI agent "is both a friend and foe." The AI agent, used increasingly by companies and individuals, carries out various tasks that previously were carried out by humans. This is the actual application of AI to real-world situations, and it's seen as the next big area of AI growth.

New cyberattacks

Though these agents can be extremely helpful, they also could lead to new attacks and threats. And this opens up a whole new area of opportunity for CrowdStrike. The company cites the Mythos moment earlier this year -- when Anthropic's Mythos model showed how AI could exploit software vulnerabilities -- as being a key turning point.

"Ever since Mythos, we have seen growth in our business, not measured by meetings or calls, but measured by ARR, and we don't see the threat landscape subsiding," Kurtz said.

The company said its customers' use of Anthropic's Claude, as well as AI agents in general, is growing in the triple digits -- and this has prompted them to focus more and more on cybersecurity.

All of this suggests that CrowdStrike may be in the early days of another big wave of growth. This is positive, but the stock has soared in recent times, and as a result, it trades for 181x forward earnings estimates -- a level that isn't cheap.

So is it too late to buy this standout cybersecurity player? The answer depends on your investment style. If you're a value investor, you'll find opportunities better suited to your needs elsewhere.

If you're a growth investor, though, you might choose to add a few shares of CrowdStrike to your portfolio even at today's premium price. The recent positive earnings results may be priced in, but the stock still has room to run over the long term. As AI becomes a greater part of daily life, CrowdStrike could see revenue growth explode higher over the long run -- and that could deliver a big win to investors who today choose to buy and hold.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ:NVDA) has been the artificial intelligence (AI) chip leader since the earliest days of this technology boom. This is because the company wisely chose to tailor its graphics processing units (GPUs) to the needs of AI early on -- and it's steadily innovated to remain in the lead.

Still, Nvidia isn't alone in the AI chip market. Other chip designers, such as Advanced Micro Devices and Intel, also participate. And the company even faces competition from some of its own customers, which have started making their own AI chips. A good example is Amazon (NASDAQ:AMZN), a company that has said demand for its in-house chips is so strong that chips may even become a new business for it in the future. Investors have worried that this trend -- particularly from a market giant like Amazon -- could eventually weigh on Nvidia's growth and market share.

But here's some good news: Nvidia may have just eliminated this enormous risk. Let's check out the details.

Image source: Getty Images.

Early leadership in GPUs

First, though, let's catch up quickly on the Nvidia story so far. As mentioned, Nvidia built its leadership in GPUs early, establishing itself as the go-to destination for companies seeking AI compute. Nvidia has expanded well beyond this single chip and today offers a wide range of AI products and services -- it's even developed platforms specifically for the needs of certain industries, from healthcare to automotive.

All of this has helped power the company's earnings to record levels quarter after quarter. And this continued into the latest period, with revenue jumping 106% to $96 billion and profit surging 126% to $59 billion.

Still, the major risk of competition has remained: Fellow chip designers like AMD have seen revenue explode higher, while Amazon has spoken of soaring demand for its in-house chips. Amazon chief Andy Jassy even said in the latest shareholder letter that demand is so high the company may sell racks to third parties down the road. And Jassy emphasized how Amazon is lowering its costs by using its own chips rather than relying exclusively on others like Nvidia.

That said, however, it's important to note that Amazon's chip efforts may not translate into a headwind for Nvidia. And this brings us to the latest good news.

AWS and Nvidia

Amazon Web Services (AWS), Amazon's cloud computing unit, has expanded its partnership with Nvidia, agreeing to buy an additional 2 million GPUs over the next two years. In a CNBC interview, Nvidia chief Jensen Huang said the deal includes the potential purchase of "millions of CPUs" too. These are central processing units, the main chip in most computers, and are seen as a key chip involved in powering agentic AI. Nvidia is new to the stand-alone CPU market but is making a grand entrance with its Rubin platform -- the company predicts $20 billion in stand-alone CPU revenue this year and aims to be a leader in the space.

All of this shows that Amazon, fully confident about the strength of its own chip program, still continues to heavily invest in Nvidia chips. This suggests there is plenty of room for others -- from chip designers to general tech giants -- to make their own chips and generate growth without upsetting Nvidia's leadership or revenue growth opportunity.

Amazon is a particularly good example to consider because of the size of its custom chips business -- this business delivered a $25 billion annual revenue run rate in the latest quarter. While this growth is strong, Nvidia remains a key player in the Amazon chip story, as we can see through this expanded agreement.

What does this mean for you as an investor? Though Nvidia faces competition, this market leader is very likely to hold onto its top position. Amazon's news shows that even amid its own chip successes, it continues to rely on Nvidia's latest innovations. This illustrates the strength of Nvidia's platform -- and offers investors a great reason to buy and hold onto Nvidia stock.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Intel, and Nvidia. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ:NVDA) has delivered incredible earnings growth to investors quarter after quarter since the early days of this artificial intelligence (AI) revolution. The company is the world's leading designer of AI chips, the products that fuel key tasks throughout every stage of AI development and use -- and this has translated into record levels of revenue and profit.

The tech giant hasn't stopped at these graphics processing units (GPUs), however, and has expanded into a broad range of products and services to create an AI empire. This means companies can turn to Nvidia for all of their AI needs.

In the latest quarter, this formula has once again delivered success, with Nvidia roaring past analysts' estimates and speaking of ongoing high demand. On top of this, the company just did something it's never done before. And eight words from Nvidia chief Jensen Huang show us why it's fantastic news for investors. Let's zoom in for a close look.

Image source: Nvidia.

Triple-digit growth

First, though, we'll start with a quick look at Nvidia's latest earnings figures. The company reported a mind-boggling 106% increase in revenue to more than $96 billion, and this is as earnings per share soared 120% to $2.22. Analysts had projected about $92 billion and $2.10, respectively. Nvidia's earnings soared as major cloud service providers, as well as AI labs, start-ups, and other companies flocked to its AI offerings.

Nvidia's strength lies in its full stack, encompassing GPUs, central processing units (CPUs), networking tools, and other products and features. This has made each Nvidia architecture -- from the current Blackwell to the upcoming Vera Rubin -- higher performance than its predecessor. And this focus on innovation, with Nvidia releasing chip updates on an annual basis, has kept Nvidia's growth soaring. With Rubin production shipments underway, investors may expect a new wave of growth ahead.

Now, let's consider the recent move that Nvidia made for the first time ever: In the company's fiscal 2027 second-quarter earnings report this week, it offered a forecast for the next full year. Nvidia expects a 70% increase in annual growth. And this is due to supply constraints; customer demand alone actually suggests revenue could double.

Why is Nvidia forecasting a year ahead of time when it hasn't done so in the past? The following eight words from Huang offer us a clear answer.

"Greater visibility"

"We just have a lot greater visibility now," Huang said during the company's earnings call.

This is due to a couple of factors. AI is now being regularly used, with large language models requiring massive amounts of compute -- and this results in demand for AI chips and systems. The increasing use of AI should support this high demand moving forward. And, as I mentioned earlier, Nvidia's full stack makes it a natural choice for companies operating in the AI space. All of this makes it easier for Nvidia to look further into the future and predict potential revenue levels.

This is fantastic news for investors because it offers us more visibility on what's next in the AI space -- whether you're investing in Nvidia or other AI players. As the AI chip leader and known for its close communication with customers, from companies to countries, Nvidia is well-positioned to offer us this view.

Though this revenue forecast clearly is great news for Nvidia, you still may be wondering whether the stock is a buy today. After all, it's climbed more than 800% over five years, but with a 12% gain for the year through the Aug. 26 market close, recent performance has been lackluster. I see this pause as a valuable buying opportunity -- even if Nvidia doesn't take off immediately, this market leader is well-positioned to deliver incredible growth over the long term. And its forecast for growth next year, as well as Jensen Huang's words, offer us reasons to be confident about that.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) has been one of the biggest winners of the artificial intelligence (AI) boom. The tech giant entered the market early and became the AI chip leader, and then it went on to build an AI empire, selling a broad portfolio of related products and services.

All of this has helped the company's earnings reach record levels -- more than $215 billion in revenue and $120 billion in profit in the latest full year. And the stock has also climbed, surging in the triple-digits over five years. Though Nvidia shares have lost some momentum this year, the company is well-positioned to deliver growth to investors over time. It's important to remember that the AI market is expected to surpass $3 trillion early next decade.

So, with a potential catalyst for stock performance on Aug. 26, you may be wondering if you should buy shares before that date. Let's consider what history has to say.

Image source: Getty Images.

Nvidia in the AI market

Before diving in, let's take a closer look at Nvidia's path in the AI market so far. This tech giant has been in business for more than 30 years, but in its earlier days, it generated most of its revenue from selling its graphics processing units (GPUs) in the video gaming market. The company, recognizing the power of these chips, then designed a parallel computing platform that allowed for broader use. And when Nvidia chief Jensen Huang saw the AI opportunity, he decided to go all in and design GPUs specifically to suit that purpose.

This proved to be a game-changing decision for the company, as we can see through the revenue growth and stock performance in recent years.

NVDA data by YCharts

Why has Nvidia lost momentum this year? For a few reasons. Investors have worried about the levels of tech spending on AI infrastructure and whether the revenue opportunities will be as big as expected. General concerns about rising prices in the U.S. and turmoil in Iran also have prompted investors to become more cautious -- and rotate out of growth stocks, which are sensitive to economic shifts.

Meanwhile, investors who have chosen to stick with AI stocks in many cases have turned to players that hadn't climbed as much as Nvidia in the earliest stages of the AI boom. For example, memory and storage players such as Micron Technology and Western Digital saw their stock prices advance about 150% from the start of 2023 through the first half of last year, while Nvidia delivered a gain of more than 900%. This year, those two AI stocks have each jumped more than 200%, while Nvidia has delivered an increase of 11%.

Commitment to innovation

But, as I mentioned above, the AI growth story remains solid, and Nvidia's commitment to innovation should keep earnings marching higher. And speaking of earnings, let's now talk about the event on Aug. 26. This is Nvidia's fiscal 2027 second-quarter earnings report.

Should you buy the stock ahead of that event? History shows us the following about Nvidia's stock performance in the five trading days after its earnings reports. After the past 13 quarterly reports, the stock has fallen eight times during the five days that follow. Two of the declines were in the double-digits, and the others were in the single-digits.

So, history tells us that if you buy Nvidia stock ahead of its Aug. 26 report, you may not benefit from a post-earnings gain. Of course, it's important to remember that history isn't always right, but it offers us a general idea of what has commonly happened over time.

Does this mean you should avoid Nvidia stock? Not necessarily. Nvidia remains an excellent buy due to its well-established leadership in AI chips, its expansion across other products and services, and its long-term prospects in the AI market. And right now, trading at 23x forward earnings estimates, it's particularly cheap. This means that you shouldn't rush into Nvidia stock with the expectation of a quick gain after Aug. 26. Instead, it's a better idea to pick up the shares with the idea of focusing on long-term performance -- and there, you might score a major win.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology, Nvidia, and Western Digital. The Motley Fool has a disclosure policy.

All eyes have been on Space Exploration Technologies (NASDAQ: SPCX) over the past few months -- from the moment the company announced that it would go public at a trillion-dollar valuation to the stock's early and most recent trading. It's been a rollercoaster ride. SpaceX jumped more than 60% from its offer price of $135 to a high on June 16, then in recent days stumbled, even falling well below $135.

Investors have been enthusiastic about SpaceX's big goals and progress to get there, but at the same time, they've worried about the company's capital expenditures, which last year exceeded revenue and drove SpaceX to a net loss. We'll get a close look at the latest here when SpaceX reports earnings on Aug. 4. But Aug. 6 actually may be an even bigger day for the stock. In fact, my prediction is that it may be a decisive day for SpaceX. Let's find out why.

Image source: Getty Images.

SpaceX's growth businesses

So, first, let's take a closer look at SpaceX to understand why the general investment community has been so interested in this particular stock. SpaceX operates in three growth areas that are particularly exciting: rocket launches, satellite-based internet services, and artificial intelligence (AI). These businesses each have the potential to change the way many things are done -- and generate tremendous growth for SpaceX and its shareholders.

SpaceX aims to drastically cut the costs of rocket launches and use its reusable rockets to further its businesses -- for example, these SpaceX rockets may transport equipment the AI unit needs to establish data centers in space (that's one of SpaceX's goals). All of this results in great efficiency for the company. SpaceX also has seen its internet service grow in leaps and bounds, with subscribers climbing from 2.3 million three years ago to more than 10 million this year.

But, as I mentioned earlier, to support the technology needed for these high-growth businesses, SpaceX must invest heavily. And so far, that's weighed on earnings. Investors are eagerly awaiting the Aug. 4 earnings report to monitor the spending situation and the pace of revenue growth. The report could trigger movement in the stock, of course, depending on whether investors are pleased or disappointed with SpaceX's progress.

Early SpaceX investors

My prediction, though, is that Aug. 6 actually will be the decisive day for the company, and here's why. It may offer us a clue about early SpaceX investors' thoughts. This is because, as of this day, the second full trading day after the company's earnings report, early SpaceX shareholders may sell as much as 20% of their holdings. This is as the first lockup date expires.

Why do IPO companies set up lockup periods? They're meant to favor stability. Even if an early investor truly believes in a company, that investor still might be tempted to sell a few shares on IPO day to lock in a profit. If every early investor did so, that could create downward pressure on the stock. So companies establish dates that allow these longtime investors to sell farther down the road.

In this case, SpaceX used a tiered approach, with several expiration dates. The first, as mentioned, happens on Aug. 6.

A warning sign?

Does this mean that a flurry of selling on Aug. 6 should serve as a warning sign for investors? Not necessarily. Some investors, those who have backed SpaceX for quite some time, may decide to sell a few shares to benefit from their gains so far. They may be interested in reallocating the funds into a new growth opportunity, for example, or further diversifying their portfolios. So the movement isn't necessarily bad news for SpaceX.

Still, it's important to monitor the direction of the stock on Aug. 6 and the days to follow. A significant level of downward pressure could suggest that shareholders -- early as well as new -- are focusing more on SpaceX's risks and that may hurt the stock's performance in the weeks to come. That said, if the stock doesn't fall much around this lockup expiry, we may see this as a sign of confidence among early investors, as it shows they aim to hold onto every SpaceX share.

In any case, my prediction is that Aug. 6 will be decisive for SpaceX, setting the tone for the stock in the weeks to follow.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) delivered spectacular gains for investors in the early stages of the artificial intelligence (AI) revolution. The company got into the market early, tailored its chips to suit AI, and became a market leader. Importantly, this translated into double- and triple-digit revenue growth, and the stock climbed more than 300% over three years.

Some investors have worried that, after such a performance, the company's better days may be in the rearview mirror. But that isn't necessarily the case. In fact, right now, Nvidia represents a once-in-a-decade opportunity for growth investors: This is as the company works to dominate the $200 billion central processing unit (CPU) market. Let's zoom in for a close look.

Image source: Nvidia.

Nvidia's early growth

It's true that it was "easier" for Nvidia to post such tremendous earnings gains and stock performance in the earlier days of the AI story because the starting point was much lower. The following chart illustrates this.

NVDA data by YCharts

But this doesn't mean the company will no longer deliver impressive growth. AI is in the early days of its rollout across real-world problems, and Nvidia's chips power this use of AI -- so demand for them should remain high, particularly considering Nvidia's focus on innovation. Nvidia updates its chips annually to ensure they remain the fastest and generate the highest levels of efficiency for customers.

The company dominates the AI chip market with its graphics processing units (GPUs), the chips that fuel major tasks like the training and inference of models. And now Nvidia is tackling a new market, one that's worth $200 billion. This represents a once-in-a-decade opportunity for the company and for investors -- it offers you a fresh occasion to get in on Nvidia stock ahead of something big.

The CPU market

As mentioned above, this is the CPU space. CPUs are the standard chips that power computers, and as it turns out, they're the key chip involved in agentic AI. The use of AI agents -- the actual process of agents tackling problems on behalf of humans and taking action -- is seen as the next growth phase of AI. CPUs are needed to guide agents through their processes.

Nvidia is new to this space, but it's taking the market by storm. The company is launching its first stand-alone CPU this fall as part of its Vera Rubin platform and says it's on track for $20 billion in CPU sales this year. That's a lot of strength right out of the gate, offering us reason to be optimistic for the quarters to come. Nvidia also says it's on track to dominate in this market -- so the company may soon be the leader of the GPU and CPU markets.

This suggests that Nvidia stock could once again become a major winner for investors as this new growth opportunity takes shape.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Micron Technology (NASDAQ: MU) has been one of the biggest artificial intelligence (AI) winners in recent times -- from an earnings and stock performance perspective. The company has seen revenue skyrocket amid demand for its memory solutions, and the stock has advanced 1,300% over the past three years. In the first half of this year, it climbed 300% and now trades at more than $900.

My prediction is Micron will reach $1,400 as early as next year -- here's the math.

Image source: Micron Technology.

A double-digit gain

If Micron climbs to $1,400, from today's level, that represents a gain of 44%, which isn't unusual for this stock. That also would put Micron at $1.5 trillion in market value. Using analysts' average revenue estimate for the current year of $129 billion, Micron would trade at a price-to-sales ratio of about 12. This is completely in line with the company's current P/S ratio.

MU PS Ratio data by YCharts

So, the math works out, supporting the idea that Micron could reach this level. Importantly, the company's product offerings, earnings performance so far, and prospects are also pushing the stock in this direction. Micron is a leader in the memory and storage space, and these are key needs of AI customers. AI requires compute for calculations, but this goes hand in hand with memory and storage -- and as agentic AI is increasingly put to use, demand for Micron's products could see further growth. Agentic AI involves applying AI to real-world problems, with the AI taking a series of actions. This is seen as the next growth area in the AI market.

High levels of profitability

All of this has helped revenue take off in recent quarters, and the latest period offers us a great example. Revenue soared 345% to more than $41 billion, and this was accomplished at a high level of profitability on sales. Micron reported gross margin that exceeded 84% -- even topping chip giant Nvidia, which has steadily generated gross margins of more than 70%.

The current memory chip shortage, which Micron expects to continue past 2027, has pushed customers to rush to memory providers such as Micron to get their orders in -- and Micron has even established strategic customer agreements (SCAs) that offer great visibility on revenue to come. The company has completed 16 SCAs, with firm commitments for purchases over a period of years. Current SCAs will bring in $22 billion in financial commitments, according to Micron, and this may be just the beginning as the company aims to make these deals a central part of its business.

All of this supports my prediction that Micron stock will maintain its momentum and reach $1,400 by next year.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology and Nvidia. The Motley Fool has a disclosure policy.

The "Magnificent Seven" tech stocks led the S&P 500 higher in recent years amid excitement about their involvement in the high-growth field of artificial intelligence (AI). But over the past several months, many of these players have lost some momentum -- and this has brought down their valuations.

For the strongest of companies, I see this as a temporary move as the long-term AI story remains intact. And that means right now is an excellent time to go bargain hunting and pick up shares of my two favorite discount "Magnificent Seven" stocks: Nvidia (NASDAQ: NVDA) and Microsoft (NASDAQ: MSFT).

Image source: The Motley Fool.

1. Nvidia

Nvidia dominates the AI chip market, selling the graphics processing units (GPUs) that power crucial AI tasks. This has propelled the company to record revenue levels and double- and triple-digit growth in recent years. In the latest full year, for example, revenue climbed 65% to $215 billion.

The tech giant also has maintained high profitability on sales -- gross margin has exceeded 70% quarter after quarter over the past couple of years.

Meanwhile, Nvidia's commitment to innovation should keep it ahead of rivals. Nvidia has pledged to launch chip or system updates on an annual basis, and the next one is just ahead. The company is on track to ship the Vera Rubin system later this year. At the same time, it's important to note that companies across the AI market have steadily spoken of strong demand, so the overall environment looks bright.

All of this means Nvidia is a smart buy today at 22x forward earnings estimates.

2. Microsoft

Microsoft stock has struggled in recent times as investors worried that advancements in AI could replace software. But I don't think this will happen, at least not to a great extent. While AI may replace certain software, it's unlikely to upset platforms that are profoundly integrated into companies' operations -- like Microsoft's offerings.

It's also important to note that Microsoft has incorporated AI into its software suite -- you may be familiar with Copilot -- so as AI's capabilities advance, Microsoft's software also should benefit.

At the same time, Microsoft's cloud business offers its customers a variety of AI products and services, and this is driving tremendous growth. In the recent quarter, the AI business reached annual recurring revenue of $37 billion. So AI has been a big opportunity for Microsoft, and this is likely to continue as AI is more often applied to real-world problems.

Today, Microsoft is trading at 20x forward earnings estimates, making it the second-cheapest "Magnificent Seven" stock after Meta Platforms. At this level, it's a no-brainer discount buy.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Space Exploration Technologies (NASDAQ: SPCX) has many investors dreaming of fantastic gains -- with their investments even potentially turning them into millionaires. Why such excitement? SpaceX has set out game-changing goals such as developing data centers in orbit and colonizing Mars, and if the company achieves them, the awards could be significant. And at the driver's seat sits founder Elon Musk, known for his ambitious nature and focus on innovation.

This package has stirred up excitement in the investment community and led to retail and professional investors rushing to get in on the stock. The IPO, the world's biggest as it raised more than $85 billion, was oversubscribed, and investors didn't hesitate to hit the buy button in the first few days of trading, too. SpaceX stock soared 67% from its IPO price to a peak of $225 on June 16.

In recent days, though, investors have grown more hesitant, and the stock has fallen below its IPO price. Could $10,000 invested in SpaceX, now trading at a low, make you a millionaire? Let's find out.

Image source: Getty Images.

SpaceX's accomplishments so far

First, let's talk about the SpaceX business. The company operates three units: space, connectivity, and artificial intelligence (AI). The space business aims to reduce the cost of rocket launches through the use of reusable technology, and it has made significant progress in this area. For example, in 2010, it had already lowered the costs of launches by 85%, according to NASA. SpaceX's next step in reaching its space goals is to launch its fully reusable rocket, Starship, with payloads this year.

In connectivity, SpaceX runs Starlink, a satellite-based internet service. Here, it's grown users from 2.3 million three years ago to 10 million today. As for AI, SpaceX has recently signed a deal to provide compute to Anthropic -- this will result in monthly payments of $1.25 billion to SpaceX through May 2029.

All of this is very positive, but it's important to note that SpaceX must continue to invest enormous amounts of cash to potentially reach its goals. For example, last year the company's capital spending totaled $20 billion, surpassing its revenue of $18 billion and driving it to a $4.9 billion loss. Investors may have focused on the company's big goals prior to the IPO and during the early days of trading, but now and as SpaceX reports earnings in the coming quarters, they may consider these numbers more closely. And if they do, this could continue to weigh on stock performance.

A trillion-dollar company

Now, let's consider our question: Could $10,000 invested in SpaceX today make you a millionaire? This would be very unlikely as the stock would have to advance 10,000%, bringing it to more than $12,000 per share. And considering SpaceX already is a trillion-dollar company, such gains would bring it to nearly impossible levels.

By comparison, stocks that have made enormous gains started at much lower prices and market value levels. An example is Nvidia.

NVDA data by YCharts

SpaceX, however, right out of the gate, was already a trillion-dollar company, making it more difficult to imagine the stock propelling an investor to the millionaire mark.

All of this means it's unlikely that SpaceX, alone, will make you a millionaire, unless you invest an enormous amount in the stock -- a move that would be highly risky. But could SpaceX still boost your portfolio? It's possible, but it's important to remember that the stock comes with a fair share of risk right now -- the company is involved in a heavy phase of spending, and its successes depend on the advancement of certain technologies. If you're OK with that, you might consider buying a few shares of SpaceX on the dip, and potentially adding to the position if the company's earnings and general updates are positive.

But for most investors, it's a better idea to keep SpaceX on your watch list for now -- and to potentially create a million-dollar portfolio, focus on diversifying across a number of quality stocks.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

Space Exploration Technologies (NASDAQ: SPCX) has drawn a great amount of excitement in recent times. The company, better known as SpaceX, completed the world's biggest initial public offering last month -- and saw its stock soar 27% in the first days of trading.

In recent times, SpaceX stock has pulled back, even falling below its IPO price of $135. But even at this level, I think the stock is too expensive considering the risk involved -- that's why I'm still not buying. Let's check out the details.

Image source: Getty Images.

A smart mix of businesses

It's true that SpaceX offers a smart mix of growth businesses -- rocket launches, connectivity, and artificial intelligence (AI) -- and these businesses can work together to deliver efficiency. For example, SpaceX can use its rockets to deliver materials to space for the satellite-based internet service and the AI business. This offers SpaceX great autonomy and keeps costs down.

The company has also made progress on goals such as bringing down the costs of rocket launches, and last year it completed more orbital launches than any other player. The connectivity business has seen its subscribers quadruple over three years, and this growth is key since this unit drives revenue growth.

All of that is positive, and SpaceX, at $119 at the July 20 market close, is considerably lower than it was a few weeks ago. But I'm still not buying because the stock is expensive given the amount of risk involved. Prior to the IPO, Morningstar said its fair value for SpaceX was $63, which seems reasonable; today, the SpaceX price remains far from that level.

Upcoming earnings reports

I also think that before diving in, it's important to take a look at an earnings report or two to monitor the company's spending trends and the level of revenue that's being generated. So far, we may look at the financial picture over the past three years, as provided in the prospectus. But since SpaceX's capital expenditures are increasing, I'd like to see fresh earnings data.

This is particularly key for a company like SpaceX, which has many goals linked to technologies that are still in development. For example, as SpaceX increases capital spending, is its revenue climbing at a fast pace? Last year, capex of $20 billion exceeded revenue, which was $18 billion. I'd like to see revenue step ahead in the coming quarters.

At this point, SpaceX remains an interesting business that's made progress in key areas. The company could have a very bright future several years down the road, so I understand that some investors aim to get in early. But in my opinion, risk remains high, and visibility remains limited -- so even though SpaceX stock has declined, I'm still not buying.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks have soared over the past few years amid enthusiasm about artificial intelligence (AI) and its ability to transform the way many things are done. As investors rushed to get in on AI stocks, major benchmarks have climbed. The S&P 500 has advanced 78% over the past three calendar years, and the Dow Jones Industrial Average recently surpassed the level of 53,000 for the first time ever.

Of course, there has been some hesitation in the market as investors considered the ongoing turmoil in Iran and rising inflation in the U.S. and questioned whether the high levels of spending on the AI build-out would yield rewards. But, in general, stocks have continued to march higher.

Against this backdrop, Jamie Dimon, chief executive officer at JPMorgan Chase, this week sent shockwaves through Wall Street with a warning. And history is very clear about what happens next.

Image source: JPMorgan Chase & Co.

Investors focus on AI stocks

So, first, a bit more detail regarding today's market environment. As mentioned, AI stocks continue to be a focus, with investors rotating in particular into companies offering the memory and storage needed to accomplish key AI tasks. For example, for an AI agent to do its job of taking action on problems on behalf of humans, it needs logic chips for compute power, but it also requires memory, and for this, companies have turned to names like Micron Technology and Sandisk. Revenue has soared at these players and so has stock performance, with the shares advancing more than 200% and 400%, respectively, this year.

And other key AI players such as Nvidia, leader in the logic chip space, and Alphabet, a cloud computing giant, have seen their stocks rise in recent years -- they've climbed in the triple-digits over the past three.

To keep this market advancing, tech giants are spending billions of dollars on the infrastructure build-out. Alphabet, Microsoft, Meta Platforms, and Amazon aim to invest nearly $700 billion this year alone.

Though certain AI and tech stocks have seen a pullback in recent times, the general direction continues to be upward.

Jamie Dimon's words about the market today

Now, let's consider Jamie Dimon's warning to Wall Street, delivered in an interview this week with CNBC.

Dimon, who has in the past highlighted economic risks, says that investors are underestimating headwinds such as the turmoil in Iran and Ukraine and increased military spending amid government deficits.

In the CNBC interview, Dimon said he wouldn't be a general buyer of stocks at today's valuation levels. As for AI spending, though he says it may pay off, he added: "Will it pay off the way you expect and the timetable you expect? Definitely not."

The S&P 500 Shiller CAPE ratio illustrates Dimon's comment on valuation. This inflation-adjusted measure of stock prices in relation to earnings per share has reached a level it's only hit once before -- during the dot-com boom.

S&P 500 Shiller CAPE Ratio data by YCharts

This shows that stocks, overall, are historically expensive right now. Now, let's consider what history says about what happens next. Every time the Shiller CAPE ratio has reached a peak, the S&P 500 has followed up with a decline. In some cases, the drop was deep and long-lasting, such as after the dot-com bubble burst; in other cases, it was more measured.

S&P 500 Shiller CAPE Ratio data by YCharts

In any case, history is clear about what happens when valuations reach extremely high levels: The S&P 500 goes on to decline.

What should investors do now?

Now, let's consider what this means for you as an investor. It's impossible to predict exactly when such a pullback will come or how long it will last, but history also shows us that such downturns are never permanent. The S&P 500 and quality stocks across industries always have recovered and delivered gains over the long term.

So, the best thing you can do right now to protect your portfolio and set yourself up for a long-term win is to consider Jamie Dimon's words -- and pay close attention to valuation. You still may pick up bargains -- they exist in any market environment, and you might even find them in the AI space -- and aim to hold onto stocks for a number of years to truly benefit from their growth.

Dimon's words could send shockwaves through the market, and history might be right about possible declines ahead. But that doesn't necessarily spell disaster for investors. If you favor strong companies and long-term investing, you may set yourself up to score a significant investing win over time.

JPMorgan Chase is an advertising partner of Motley Fool Money. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, JPMorgan Chase, Meta Platforms, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) has held the position as the world's biggest company since about a year ago, when it became the first to reach $4 trillion in market value. It soared past former leaders Apple (NASDAQ: AAPL) and Microsoft. But in recent days, Apple, which hasn't climbed as much as its peers during the artificial intelligence (AI) boom, has been making a comeback.

And on July 17, Apple even slipped ahead of Nvidia to become -- at least for part of the trading session -- the world's biggest company. By the end of the day, though, Nvidia returned to the lead with a value of $4.9 trillion. That's compared to $4.89 trillion for Apple.

As these tech giants vie for the position as the world's biggest company, which is the better buy now? Let's find out.

Image source: Getty Images.

The case for Nvidia

Nvidia stock has soared more than 300% over the past three years amid excitement about its position in the AI market. The company is the No. 1 designer of graphic processing units (GPUs), the chips used to power AI development and use. This strength, along with Nvidia's full portfolio of related products and services, has generated double- and triple-digit earnings growth in recent years.

For example, in the recent quarter, Nvidia's revenue surged 85% to more than $81 billion, and this was at a high level of profitability on sales, as we can see through the company's gross margin -- that figure has exceeded 70% quarter after quarter.

Nvidia focuses on innovation, pledging to update its GPUs on an annual basis, and this has helped it stay ahead. The company has also steadily expanded its reach in order to make it the key place to go for anything AI. In the latest quarter, Nvidia announced the upcoming release of its first stand-alone central processing unit (CPU), a move that opens the door to a $200 billion market.

Investors have piled into Nvidia's stock in recent years, understanding that an investment in this company should put them on track to benefit from the AI revolution.

The case for Apple

Apple shares have advanced -- but not as much as those of Nvidia. Over the past three years, Apple has climbed about 70%. The company has been slower to invest in and apply AI than many of its peers -- for example, it only began rolling out AI features across its devices in the fall of 2024, and the rollout continues. So, investors aiming to get in on potential AI leaders turned away from Apple and chose companies that were investing more aggressively in the space.

This trend, however, hasn't hurt Apple's earnings growth. In fact, the company has proven itself to be a player investors can count on for progress in this area. Apple has a fantastic moat, or competitive advantage, and this is its brand -- customers love the iPhone and won't easily switch to another. In the first quarter, the iPhone 17 was the world's top-selling smartphone, according to Counterpoint Research.

Apple also is benefiting from its sales of services, with services revenue reaching records quarter after quarter. After building up more than 2.5 billion active devices over the years, Apple now can count on these devices for recurrent revenue. When customers sign up for digital entertainment or storage, for example, this represents a regular stream of income for the company.

Today, investors may be turning to Apple as they recognize these strengths and as they seek an alternative to companies heavily exposed to AI.

The better buy?

Nvidia and Apple have proven their earnings strength and leadership over time. So either makes a solid long-term investment. But if you could only choose one to buy right now, which one should you go for?

Nvidia clearly beats Apple when it comes to valuation, as we can see in the chart below.

NVDA PE Ratio (Forward) data by YCharts

At these levels, the chip giant looks dirt cheap, particularly considering the AI empire it's built and its long-term prospects in the field. It's important to note that even if AI stocks slump temporarily, the AI story remains strong, with the technology already put to use in many areas.

So now is a fantastic moment to get in on Nvidia at these levels. That said, cautious investors who aim to avoid any AI turbulence still may prefer picking up Apple shares, as even at today's level, the stock has room to run.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Cathie Wood is known for ignoring short-term obstacles and instead focusing on a company's long-term picture. That has allowed her to get in on some of the world's most exciting and innovative companies at fantastic prices. The chief executive officer of Ark Invest doesn't wait for everyone else to get excited about a stock and pile in; she's known to buy during low periods, when other investors are hesitant, and the particular stock is in the doldrums.

With this in mind, it's no surprise that, as many artificial intelligence (AI) and technology stocks fell in recent days, Wood has been on a buying spree. She recognizes the potential of certain players a few years down the road, so she views today's declines as a key buying opportunity. Wood has picked up shares of a number of stocks over the past few weeks, and two names in particular have shown up more than once in her list of purchases. In fact, she just bought more of the following two discounted stocks on July 17. They've each fallen more than 30% over the past month.

Let's check out the two potential long-term winners that Wood is aggressively buying right now.

Image source: Getty Images.

1. Space Exploration Technologies

Space Exploration Technologies (NASDAQ: SPCX) has been a longtime favorite of Wood. Through the Ark Venture Fund, she invested in the company well before its historic initial public offering. Wood then bought shares of SpaceX in its early days of trading, following the June 12 IPO, and has picked up shares periodically ever since. In her latest move, she bought shares for her flagship Ark Innovation fund, and the Ark Autonomous Technology and Robotics, Ark Next Generation Internet, and Ark Space and Defense Innovation funds.

SpaceX is the top holding in the Ark Space fund and among the top holdings in Ark Innovation and the autonomous technology and robotics fund.

Wood may view SpaceX as a bargain right now. The stock on July 17 closed at $123.99, lower than its IPO price of $135. Though SpaceX climbed in its initial days of trading, the stock has tumbled in more recent times amid general concerns about tech companies' enormous investments in AI -- and some investors also may worry that SpaceX's capital spending in its AI unit may make it difficult for the company to become profitable any time soon.

SpaceX could have a very bright future if it's able to succeed in the development of certain technologies and reach big goals, such as operating data centers in space. But the company comes with a significant amount of risk right now -- so this Cathie Wood favorite is best left to the most aggressive of investors.

2. CoreWeave

Cathie Wood added shares of CoreWeave (NASDAQ: CRWV) to Ark Innovation and Ark Next Generation Internet on July 17. It's the 16th biggest position in the internet fund and the 20th biggest position in Ark Innovation. Wood has bought shares of this tech player on other occasions in recent weeks, too, so she clearly sees it as a deal to get in on now.

CoreWeave offers something that's in great need at the moment: access to compute for AI workloads. The cloud provider specializes in these types of workloads, helping it stand out from cloud giants like Amazon or Microsoft, which offer a broader range of services well beyond AI.

CoreWeave allows customers to rent access to its enormous fleet of Nvidia graphics processing units (GPUs), offering them the advantage of flexibility, speed, and cost savings -- instead of building their own data centers, customers can turn to CoreWeave for exactly what they need, when they need it. CoreWeave works closely with Nvidia, which is also a CoreWeave shareholder, and has been among the first to make Nvidia's platforms generally available.

Like SpaceX, CoreWeave isn't yet profitable and carries some risk, but for aggressive investors, this Cathie Wood stock pick may represent an interesting buying opportunity.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

In the first wave of the artificial intelligence (AI) boom, everyone was talking about Nvidia, the world's biggest AI chip designer, and cloud companies such as Amazon and Microsoft. And those companies continue to be key AI players.

But in recent times, investors have recognized a new group of AI companies, and they have been leading the pack when it comes to stock performance. I'm talking about memory and storage companies, and one of the leaders is Micron Technology (NASDAQ: MU).

Micron has seen its stock skyrocket over the past few years thanks to the crucial role it plays in the AI story. If you'd invested $10,000 in Micron around the time of its initial public offering, how much would you have now? Let's find out.

Image source: Getty Images.

Earnings explode higher

First, it's important to note that Micron didn't launch its IPO just a few years ago. The company has been around for almost 50 years, and it completed its IPO in 1984. Micron specializes in the memory and storage needed in devices from personal computers and servers to smartphones. Over the years, the company progressively grew earnings, but they just recently exploded higher -- and that has been thanks to AI demand.

MU Revenue (Annual) data by YCharts

Customers have rushed to Micron and peers for the memory needs of AI workloads, and demand has been so high that it's led to tight supply. In fact, Micron predicts this difficult supply situation will continue past the 2027 calendar year.

Not only is demand high, but ramping up production of memory chips isn't something that happens overnight. The need for skilled workers, permitting requirements, and other factors have contributed to the memory shortage -- and this concerns all memory chip companies, not just Micron.

All of this has kept earnings marching higher, and the stock price has followed as investors took notice of Micron's tremendous growth.

Now, let's consider the value of your investment if you'd bought $10,000 in Micron shares on IPO day. Today, your investment would be worth more than $8 million -- so Micron has been a millionaire-maker stock.

MU data by YCharts

Favor long-term investing

It's important to note, however, that such a big investment in one stock is risky -- you should always favor investing broadly across many stocks and holding on over time. But this example does show the value of holding onto a stock over the long term. If you had sold Micron shares after only a couple of years, you might have sold at a loss. By holding on to the stock for at least a decade, though, you clearly won. If you bought on IPO day and sold 10 years later, your investment would have been worth more than $46,000. That may seem like nothing compared to today's multi-million-dollar return, but it still is a significant gain.

MU data by YCharts

Of course, you can't count on every stock to deliver such returns, even over many decades. But if you choose quality stocks and hold on for at least 10 years, you're likely to set yourself up for success.

Now, you might be wondering about Micron's performance in the years to come. Is the growth over, or does this stock have more room to run? It's unlikely Micron will replicate the immense gain we've seen in recent years, but that doesn't mean the stock's potential is over. Micron's business is going strong, and the combination of the memory chip shortage along with the major needs of AI players should power earnings growth in the quarters to come.

Chips generally have been a cyclical business, with demand soaring at a particular point, then falling as supply exceeds the needs of the times. This results in the stocks climbing, then going on to stagnate or stumble. Considering the strength of the AI story so far, though, it's possible that Micron and peers may see cycles that are less extreme -- it's too early to say for sure.

But it's very possible that this stock that's made millionaires, even if it takes a pause at a certain moment, will continue to advance over the long run.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Moderna (NASDAQ: MRNA) soared onto the scene in early pandemic days with its messenger RNA technology and delivered a coronavirus vaccine in a matter of months. As the vaccine brought in blockbuster revenue, Moderna's stock price roared higher. In fact, from the start of 2020 through early August 2021, it climbed more than 2,000%.

In recent years, as demand for the coronavirus vaccine declined, the biotech company also saw its profits shrink and even turn into losses. And though the pipeline remained robust, investors had difficulty seeing Moderna as more than a coronavirus vaccine player. All of this led to declines in the stock price, with it sliding more than 80% from its peak.

But Moderna has made significant progress advancing pipeline programs and cost-cutting efforts, and this year, investors have been sitting up and taking notice. The stock has skyrocketed, climbing 109%. Jim Cramer of CNBC's Mad Money calls it "finally investable again." Is Moderna a no-brainer buy on its recent pullback? Let's find out.

Image source: Getty Images.

Moderna's disappointments

As mentioned, Moderna struggled in recent years as it took time to transition from a coronavirus vaccine company to a player that investors could see as a multi-product company across treatment areas. Moderna faced its share of disappointments along the path, too, with its respiratory syncytial virus (RSV) vaccine delivering sales that fell short of expectations during its first season on the market and its cytomegalovirus (CMV) candidate failing in late-stage trials.

These sorts of setbacks aren't uncommon for biotech and pharma companies, but following the decline in coronavirus vaccine sales, they added to Moderna's difficulties. But the biotech company progressed in its efforts to realign costs with its opportunities and advance promising programs.

In the latest quarterly update, Moderna reiterated its goal of generating as much as 10% revenue growth this year. And in the quarter, the company delivered a 26% reduction in adjusted cash costs.

Moderna currently has three approved products in the U.S. -- two coronavirus vaccines and its RSV vaccine -- and it may be on the way to launching a fourth. Regulators currently are reviewing the company's flu vaccine candidate, mRNA-1010, and a decision is expected on or before Aug. 5. The company also recently won approval in Europe for its combined coronavirus/flu vaccine -- the world's first.

Future growth drivers

Moderna's late-stage candidates and commercialized medicine focus areas are infectious disease vaccines, rare diseases, and oncology. And here, late-stage candidates may drive significant growth in the coming years. For example, intismeran autogene, a personalized cancer therapy, is being studied in several phase 3 trials, and the company's propionic acidemia study is fully enrolled, with data expected later this year. This study may support a regulatory submission.

"Moderna's got a plethora of thoughtful, new products and clear roadmap to profitability for the first time in such a long time," said CNBC's Jim Cramer.

Meanwhile, Moderna stock, though it's soared more than 100% this year, has declined 24% from a peak on July 6. Is the stock a no-brainer buy after this pullback? Moderna is a buy, but investors shouldn't rush to get in on the stock immediately. At today's level, it's reasonable to pick up the shares, but I wouldn't expect them to soar overnight to an out-of-reach price.

Your decision may depend on your investing strategy. Cautious investors might wait a bit longer as Moderna's late-stage candidates progress and then consider picking up a few shares. Aggressive investors, however, may aim to start building a position today, on the dip, and potentially add to this position over time.

Even if Moderna's performance in the second half of the year isn't as spectacular as it was in the first half, that's OK -- the company clearly has reached a key transition point on its path to becoming a multi-product player addressing numerous treatment areas. And that makes it a fantastic stock to buy now or in the coming quarters and hold onto for the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Moderna. The Motley Fool has a disclosure policy.

Eli Lilly (NYSE: LLY) stock has soared in recent years. Part of the reason may be due to the company's broad portfolio of drugs across treatment areas, from neuroscience to cancer and dermatology. But the biggest driver of growth in earnings and stock performance has been the company's position in the weight loss drug market.

Lilly's weight loss portfolio has brought in blockbuster revenue, and thanks to the company's innovations and market demand, this is likely to continue. Analysts predict the weight loss drug market will reach nearly $100 billion by the end of the decade.

All of this has helped Lilly stock reach beyond $1,000. At this level, is a stock split finally on the table? Let's find out.

Image source: Getty Images.

Why launch a stock split?

So, first of all, why would Eli Lilly want to launch a stock split? Companies generally execute such an operation after the stock price has soared to levels that may make it difficult for some investors to access. This could be several hundred dollars, but a key threshold often is $1,000. The level has even been known to represent a psychological barrier for some investors, as they see the stock as expensive even if its valuation looks reasonable. As for investors with a limited budget, they may consider fractional shares, but these aren't offered by every brokerage.

All of this means certain investors may be left out when a stock approaches or surpasses $1,000. A stock split offers companies an easy solution to the problem. By distributing more shares to current shareholders, the company maintains its market value, but each individual share is worth less. The value of each share is determined by the ratio of the split. So, for example, a 10-for-1 stock split allows a company trading at $1,000 per share to lower its stock price to $100 -- by giving shareholders nine additional shares for every one they already own.

Lilly has completed four stock splits in the past, so we could consider that the company is amenable to such an operation. Each of Lilly's operations was a 2-for-1 stock split. But, it's important to note that the most recent of its stock splits happened almost 30 years ago, back in 1997. Since that time, Lilly's leadership has changed -- more than once -- and it's very possible that strategy is quite different. So we can't say Lilly will launch a split since it's done so before.

A wise strategic move

Still, a stock split could be a wise strategic move for the pharma company right now. Such an operation would do the job of making the stock more accessible for some, it could also attract investors who don't like the $1,000+ price tag, and it would deliver an important message: that management is confident about Lilly's future and thinks the stock could soar once again from a new, lower price.

It's important to note that a stock split doesn't represent a catalyst for stock performance. So if Lilly announces such a move, this isn't a reason for the stock to climb. But an operation could be favorable over time simply because it may broaden the investor base.

Could a stock split finally be on the table with the stock trading above the level of $1,000 right now? Lilly is set to report quarterly earnings on Aug. 5, and I wouldn't be surprised to see the company announce a stock split. The stock has advanced nearly 35% from the end of April through July 17, and at its highest, it surpassed $1,200.

At the same time, Lilly has reached an exciting moment in its story as a weight loss drug leader. The company recently launched Foundayo, an oral weight loss drug. And Lilly's extra-powerful weight loss candidate, retatrutide, delivered strong results in a phase 3 trial. The combination of these exciting happenings in Lilly's weight loss portfolio and the potential of a stock split announcement makes Lilly a stock to watch in the coming weeks.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Eli Lilly. The Motley Fool has a disclosure policy.

Joining the Nasdaq-100 represents a big milestone, as it includes the biggest non-financial companies on the Nasdaq. The idea is, once a company joins, it may see its share price advance as managers of funds tracking this index buy shares -- since their funds must mimic the index's performance, they have to make these additions.

The Nasdaq-100 rebalances annually to remove certain members and add new ones, and it also may add members at other points in the year. And this brings me to the reason why the Nasdaq-100 has drawn attention in recent times. The index adjusted its admission rules to allow companies in sooner after their market launches than ever before -- and that resulted in Space Exploration Technologies (NASDAQ: SPCX) joining the Nasdaq-100 earlier this month.

So now, with SpaceX newly in the index, investors may be wondering: What happens to stocks after joining the benchmark? History has a clear answer.

Image source: Getty Images.

An Elon Musk-led company

So, first, a note about SpaceX. The company, a giant in rocket launches, satellite-based connectivity, and artificial intelligence (AI), has drawn great attention from investors due to this dynamic mix of businesses. And some investors also like the idea of being involved in a business led by Elon Musk. Also at the helm of electric vehicle giant Tesla, he's known for his commitment to innovation.

SpaceX's IPO, the world's largest, was massively oversubscribed, and the stock rose right out of the gate, gaining 67% from the IPO price of $135 to a peak of $225 on June 16. And the company's trillion-dollar valuation helped it land a spot on the Nasdaq-100 on July 7, about 15 days after its launch as part of the index's new "fast track" rules. Prior to this, a company had to wait at least three months for inclusion.

So far, the Nasdaq-100 addition hasn't brought SpaceX lasting gains. The stock has declined from its peak, and as of the July 17 market close, SpaceX traded at $123.99, significantly below its IPO price.

New additions to the Nasdaq-100

For some clues about what may happen next, let's turn to history. We'll consider some of the new additions to the index over the past three years and their performances in the two months following their entrance.

As we can see, six out of 10 stocks advanced during this time period. But in the case of Seagate Technology and Western Digital, we can't attribute the movement to entrance in the index: Both companies are involved in the booming AI memory and storage businesses, and stocks in the industry have soared this year.

So history offers us a clear answer: While a stock may see a bit of upward momentum around the time of its addition to the index, it's generally limited in size and duration. In some cases, it's hardly even noticeable.

SpaceX has echoed this, advancing slightly right after the addition. But then the stock plummeted in the days to follow.

SPCX data by YCharts

Look to earnings

What does this mean for you as an investor? A stock's entry into a particular index isn't a reason to add that player to your portfolio. It's great that a company is acknowledged as a giant of the times, but this doesn't necessarily make it a fantastic investment. Instead, investors should look to the company's earnings track record, or if the company isn't yet profitable, consider its path to profitability: Does it have a clear roadmap and goals that are attainable? And it's important to consider your own investment style too.

For example, SpaceX isn't yet profitable, and some of its biggest goals rely on technology that hasn't yet been proven -- if the company reaches its goals, it may be a smashing success, but along the way, the stock carries a significant amount of risk. So, while SpaceX may be appropriate for a very aggressive investor, it's not the best choice for a cautious investor.

History offers us a clear message: Nasdaq-100 membership, while exciting, isn't the key to stock performance. All of this means it's a better idea to turn our attention to the company's -- whether it's SpaceX or another -- next earnings reports and progress toward goals.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alnylam Pharmaceuticals, Axon Enterprise, DoorDash, MongoDB, Palantir Technologies, and Western Digital. The Motley Fool recommends Roper Technologies. The Motley Fool has a disclosure policy.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) is the owner of something most of us use on a daily basis: Google Search. And that has helped pave the way to success for this technology giant. Google Search has been the leading search engine worldwide for years, and as a result, advertisers pay for billions of dollars in advertising quarter after quarter -- ads across the Google platform actually make up the lion's share of the company's revenue.

On top of this, Alphabet also has scored a win in another huge market, and that's cloud computing. As one of the leading players, Google Cloud has generated explosive growth in recent times, particularly due to demand for AI products and services. The stock has climbed 10% this year, though it's been under pressure along with other AI stocks over the past couple of weeks.

Considering the full picture, will Alphabet soar after a potential catalyst on July 22? Let's turn to history for an answer.

Image source: Getty Images.

Alphabet's impressive track record

Alphabet has appealed to a broad range of investors in recent years, thanks to its strong market position in the search business and its growth in cloud. The company has delivered impressive earnings growth over time, and it's easy to imagine this continuing well into the future. In the latest quarter, Alphabet's total revenue soared 22% to more than $109 billion, and Google Services and Google Cloud revenue each climbed in the double-digits.

In fact, AI demand is driving tremendous growth at Google Cloud -- backlog there almost doubled from a quarter ago to more than $460 billion in the latest period. That offers us reason to be optimistic about revenue growth moving forward.

Though Alphabet is heavily investing in the AI build-out, this growth in backlog, general comments from peers about strong AI demand, and the company's history of benefiting from its investments -- as we can see in the chart below -- offer us additional reasons to like Alphabet.

GOOG Return on Invested Capital data by YCharts

In recent days, though, Alphabet and other AI stocks have stumbled amid concerns about the high levels of tech investing in the build-out -- and whether the revenue opportunities justify it. It's impossible to predict exactly what will happen in the future, but so far, the long-term AI story remains intact. AI has already started to address real-world problems and help companies reduce their costs and become more efficient and innovative. And we're in the early days of this use of AI, so a great deal of growth may happen over the coming years.

A catalyst ahead

Now, let's consider the potential catalyst on July 22. Alphabet is set to report second-quarter earnings after the market closes.

Will the stock soar afterward? A look at history shows us that Alphabet stock advanced in the five trading days following four of the past five quarterly reports.

So, history suggests that Alphabet, with a strong track record of climbing after recent earnings reports, would do the same once again. Meanwhile, the current valuation, with the stock trading at 24x forward earnings estimates, is reasonable -- that's another element that may encourage investors to buy the stock.

That said, it's important to remember two things. First, history isn't always right. It's possible that Alphabet will stray from the recent trend -- even if its earnings report is positive. Second, as I mentioned earlier, AI stocks have come under pressure in recent days, and this could continue.

What does this mean for investors? Alphabet's long-term story remains very bright, thanks to its well-established search business as well as its cloud unit. The company is winning in AI too, and this offers growth potential -- even if AI stocks face headwinds in the near term, quality AI players still have bright long-term prospects.

So, Alphabet shareholders may cheer if the stock soars after the earnings report -- but if it doesn't, they shouldn't worry. This tech giant is well-positioned to generate significant earnings growth and share price performance over the long run.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet. The Motley Fool has a disclosure policy.

Johnson & Johnson (NYSE: JNJ) has been a top-performing stock this year. Investors, in many cases rotating out of riskier assets, have looked for companies with a strong track record of earnings growth, solid competitive positions, and a revenue stream they can count on -- and J&J fits the bill.

As a healthcare player, J&J sells pharmaceuticals and medical devices that ensure a certain level of revenue, as patients need their procedures no matter what direction the stock market takes. Over time, the company's in-house research and acquisitions have built a market-leading portfolio that has kept earnings climbing. Investors, concerned about geopolitical uncertainties and risks to the artificial intelligence (AI) growth story, turned to J&J in the first half, sending the stock to a 22% gain.

Last week, J&J delivered a blowout earnings report and increased full-year forecasts. But is it too late to buy this healthcare giant? Let's find out.

Image source: Getty Images.

A household name

You might know J&J best for consumer products that you regularly use, from Band-Aid brand bandages to Tylenol. They've made J&J a household name. But the company actually spun off its consumer health business, which includes these products, as Kenvue a few years ago. This was in an effort to boost growth, with the idea of dedicating all of its resources to the higher-growth areas of pharmaceuticals and medtech.

The Kenvue spinoff came at a key moment, as J&J prepared to lose exclusivity of its blockbuster immunology drug Stelara. At its peak in 2024, Stelara brought in more than $10 billion. But the impending entry of rivals meant that Stelara sales would drop drastically.

J&J's move was a wise one, and the latest quarter illustrates this. Solid performance from immunology drug Tremfya and leading multiple myeloma drug Darzalex compensated for Stelara declines and drove more than 6% growth to $25 billion in total revenue -- keeping J&J on track to reach its goal of $100 billion in annual revenue. Darzalex revenue jumped 18% to more than $4.2 billion in the quarter, while Tremfya soared 72% to $2 billion.

A recent headwind

J&J faced one headwind in particular in the quarter. The medtech division saw some weakness -- in an interview with CNBC, chief financial officer Joseph Wolk said sales of Abiomed heart pumps slipped after the release of a study questioning the use of Impella pumps during some high-risk procedures. Wolk said J&J plans to release data in the first half of next year that should alleviate concerns. It's important to remember that the company has 28 products or platforms that bring in revenue of at least $1 billion, offering it the fuel needed for ongoing growth.

J&J increased its full-year sales guidance to $101.1 billion at the midpoint from the previous estimate of $100.8. And it boosted adjusted earnings per share guidance to $11.68 at the midpoint from $11.55.

Should you buy J&J?

Now, let's return to our question: Is it too late to buy shares of this healthcare giant after its strong run so far this year?

Today, J&J isn't dirt cheap. In fact, it's trading close to its highest in relation to forward earnings estimates.

JNJ PE Ratio (Forward) data by YCharts

It's possible that, given this valuation level, the stock may dip in the weeks or months to come, offering investors a better buying opportunity. Value investors, for example, probably should wait before jumping to get in on J&J stock at this level.

That said, it's important to note that J&J offers investors many strengths, from its broad portfolio of blockbuster products to leadership in key treatment areas such as multiple myeloma and immunology, through the two top drugs mentioned above. J&J is also a Dividend King, having increased its dividend payments for more than 50 consecutive years. So, investors focused on dividend growth may find it worthwhile to buy shares of J&J even at today's valuation -- it's high, but not outrageous.

All of this means your investment style and priorities should guide your decision. The best news of all is that this top pharma stock likely has room to run over the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool recommends Johnson & Johnson and Kenvue. The Motley Fool has a disclosure policy.

Artificial intelligence (AI) stocks have been on fire in recent years, leading the S&P 500 higher in this bull market. Investors rushed to get in on these players early in their growth stories, and this move paid off: Companies such as Nvidia, Palantir Technologies, and Alphabet have seen revenue climb thanks to their AI businesses, and their stock prices have followed.

But, over the past few months, investors have thought twice before picking up AI stocks -- even as messages from the biggest players remain positive. The latest example unfolded last week, as Taiwan Semiconductor Manufacturing Co. (NYSE: TSM) and ASML (NASDAQ: ASML) reported earnings that beat estimates and spoke of soaring demand. Yet their shares, as well as shares of other AI players, fell.

Why are AI stocks declining? And should we buy on the dip or stay away? Let's find out.

Image source: Getty Images.

From the early AI boom to now

First, a quick look at the general AI story. In the earliest stages of this boom, AI customers focused on training models, and this resulted in growth for chip designers and manufacturers and other infrastructure players. These companies, such as TSMC, Nvidia, and ASML, generated significant earnings growth, making them early winners of the AI revolution.

Training remains an ongoing task in AI, but it's now joined by others, such as the actual application of AI to problems and the expansion and development of AI across various fields, such as telecom and robotics. And this means a broader range of companies -- and investors -- could benefit. Analysts forecast that the AI market will reach beyond $3 trillion by early next decade, suggesting this could continue to be a major growth space for quite some time.

Now, let's consider what's unfolded in recent times and this week. Though the AI story looks promising, general uncertainties such as conflict in Iran and higher prices in the U.S. have weighed on investor appetite for stocks seen as "risky" due to their reliance on a growth environment. This has prompted investors to rotate, at least partially, into "safer" companies -- such as pharmaceutical players that maintain a certain steadiness in sales due to the essential nature of their products.

On top of this, the enormous spending on the AI build-out has worried some investors -- the concern is that the revenue opportunity may disappoint. Tech giants have said they aim to spend almost $700 billion this year on AI infrastructure.

The messages of TSMC and ASML

Still, the message from AI players remains bright. As mentioned, last week, TSMC and ASML each reported earnings that surpassed estimates. TSMC spoke of strong demand from its customers -- chip designers -- as well as their customers, cloud service providers. The company even announced an additional $100 billion investment in Arizona to build out operations there. ASML, the maker of extreme ultraviolet lithography machines for the production of advanced semiconductors, lifted its annual guidance for the second time this year amid "extremely strong" order momentum.

In spite of these positive reports, TSMC, ASML, and the general AI sector saw their shares fall.

Why such a reaction? A few factors come into play. The geopolitical and economic backdrop remains uncertain as turmoil in Iran continues. And as companies continue to pour investment into AI, investors are still questioning whether such levels are necessary -- even amid high demand. This is also happening at a time when AI stocks have already climbed in the double, triple, and quadruple digits in recent years, and investors understand that stocks don't advance in one straight line upward forever. Meanwhile, overall valuations have increased, suggesting a major pullback may be ahead.

What should you, as an investor, do in such an environment? As always, investors should focus on each stock individually. While some AI stocks may be overvalued and high risk, others today may trade at bargain levels and have fantastic long-term prospects. It's important to remember that, even if AI stocks fall, this doesn't mean the AI story is over. The technology has proven its strengths, and we're in the early days of actually applying it in the real world.

What this means is now is the time to bargain-hunt for quality tech stocks with solid AI prospects, add them to a well-diversified portfolio, and hold on for the long term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML, Alphabet, Nvidia, Palantir Technologies, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) has become one of the key winners of this artificial intelligence (AI) revolution -- this is thanks to the company's early entry into the market with the fastest chips around and its focus on innovation. Nvidia makes graphics processing units (GPUs), the chips that power essential AI tasks like the training and inference of models. All of this has led to enormous levels of earnings growth for the company and a stock price that's soared more than 300% over three years.

Considering Nvidia's leading position in this high-growth market, you may expect it to be one of the most expensive AI stocks out there -- even after recent declines in the sector. But the company is actually among the cheapest. Has Nvidia become a value stock? Let's find out.

Image source: Nvidia.

Nvidia's 30-year story

First, let's catch up on the Nvidia story so far. This tech giant has been around for more than 30 years, and in its earlier days, it primarily served the video game industry with its powerful GPUs. But Nvidia later broadened the use of these chips and, in more recent years, recognized their potential in the field of AI. The company made this technology the focus, and it's clearly won that bet.

Nvidia's revenue and profit have soared in the double- and triple-digits, reaching record levels. In the latest quarter, the chip giant reported sales of more than $81 billion and net income of $58 billion. And Nvidia has maintained a gross margin of more than 70% quarter after quarter.

The company hasn't just sold chips, though, and instead has built out its presence to include complete systems and related products and services. And Nvidia has even developed platforms for specific industries, such as healthcare and automotive, so that they can easily apply AI to their needs. So Nvidia isn't just a chip designer but instead the creator of an AI empire.

Nvidia's valuation vs peers

Considering all of this, even during the recent AI stock pullback, you might expect Nvidia to remain pricier than its peers. But this isn't the case. Here's a look at Nvidia's price in relation to forward earnings estimates, along with the valuations of two major peers, Advanced Micro Devices and Broadcom.

NVDA PE Ratio (Forward) data by YCharts

As we can see, Nvidia trades at a significant discount. A look at Nvidia's valuation in relation to its fellow "Magnificent Seven" players paints a similar picture. Nvidia is among the cheapest.

NVDA PE Ratio (Forward) data by YCharts

At these levels, could Nvidia even be considered a value stock? As of January of this year, value stocks and growth stocks had forward price-to-earnings ratios of more than 17 and 29, respectively, according to Siblis Research. This is based on the Russell 1000 growth and value indexes. Nvidia, at 23, finds itself between the two.

In such a situation, Nvidia could appeal to both growth and value investors. The company has a long-established track record of growth and a solid competitive position, and considering this, it looks undervalued. This makes it a nice fit for the value investing style. Nvidia's dominance in AI and the idea that the AI boom may still be in its early stages suggest that significant growth opportunities lie ahead -- and from today's price level, Nvidia stock could skyrocket on future good news. This makes the stock a good choice for growth investors.

Only very cautious investors may hesitate to buy Nvidia stock as the tech industry does involve risk -- and in recent times, worries about massive AI spending levels have weighed on these players. If this continues, AI stocks could traverse a difficult period. And even though long-term prospects remain bright, Nvidia and peers may not be the best choices for cautious investors.

For most other investors, though, Nvidia today offers value and growth, making it an excellent stock to buy and hold as the AI story continues to develop over the long haul.

Adria Cimino has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Broadcom, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.

This has been a big year for initial public offerings so far, with operations oversubscribed and companies raising billions of dollars. Investors may have appreciated the fresh opportunity to broaden their portfolios into new-to-market players -- particularly in the tech space.

Artificial intelligence (AI) stocks have fueled stock market gains in recent years. And though investors continue to buy shares of market giants like Nvidia and Amazon, these IPOs offered them the chance to rotate into new names that could potentially offer growth in the quarters and years to come.

Wall Street expects one of the market's recent IPO stocks to jump more than 40% over the next 12 months. Let's check out this company and examine whether it's a buy.

Image source: Getty Images.

The year's biggest IPOs

This particular company, as of May, completed the year's biggest IPO, raising more than $5.5 billion, and represents a new challenger to AI chip leader Nvidia. (Space Exploration Technologies then launched the world's biggest IPO ever in June.)

The player I'm talking about is Cerebras Systems (NASDAQ: CBRS), designer of a giant chip that it says may surpass the speed of today's top graphics processing units (GPUs). Analysts are clearly optimistic about Cerebras' technology as the average share price forecast calls for a 47% gain from today's level -- as of July 15 trading -- over the coming 12 months.

Cerebras' secret to speed is the size of its chip, allowing the company to pack on massive amounts of compute and memory bandwidth. The chip is 58 times the size of an Nvidia B200 GPU, and has more than 2,000 times the memory bandwidth of an Nvidia package, meaning two GPUs working together. Cerebras' chip, called a wafer-scale engine (WSE), has completed inference up to 15 times faster than today's leading GPUs, the company says.

Today, customers may access Cerebras through its own cloud or partner clouds such as Amazon Web Services. And revenue growth shows that customers are turning to Cerebras -- revenue climbed 92% in the latest quarter to more than $193 million.

Though Nvidia dominates the AI chip market, current demand for compute is so high that there's room for many players to generate growth. And if AI is indeed applied more and more frequently to real-world problems, this broad growth opportunity should continue. AI requires significant compute throughout its phases of development and use, from training through the actual use of AI agents to consider problems and apply solutions.

A key weakness

All of that is great news for a newcomer like Cerebras. It's important to note, however, that the company's key weakness so far is its reliance on a small group of customers.

"A substantial portion of our revenue has been, and is expected to continue to be, driven by a limited number of customers," the company wrote in its prospectus. This represents risk as any drop in demand from one could significantly hurt Cerebras' prospects.

Considering the full picture, is Cerebras, a stock Wall Street expects will gain in the double-digits, a buy right now? This depends on your relationship with risk.

If you're a cautious investor, Cerebras isn't the right choice for you today. It involves the risk I just mentioned, and on top of this, the company isn't yet profitable. This is normal at the current stage of growth and development, but it is still an element that makes the stock one that cautious investors should avoid. A cautious investor interested in an AI chip stock may favor a well-established giant such as Nvidia or Advanced Micro Devices, companies that have delivered earnings growth over time.

However, aggressive investors who are looking to diversify into new AI stocks may consider picking up a few shares of Cerebras. This company is in the early days of its growth story -- Wall Street expects gains to happen over the coming year, but even better, the stock may have what it takes to offer growth over the long term.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, and Nvidia. The Motley Fool has a disclosure policy.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) stock has climbed in the triple digits over the past three years as the company benefited from two things -- the strength of its long-established businesses and an extra boost from the artificial intelligence (AI) boom. Even people who don't recognize the name "Alphabet" may actually be big users of the company's flagship product, Google Search.

The search engine is the world's most popular, with more than 90% market share. And the advertising across the Google platform makes it the company's biggest revenue driver. On top of this, Alphabet also generates significant revenue from its Google Cloud business, and AI has helped this unit's growth truly take off in recent quarters.

Considering these points, should you buy Alphabet before a potential catalyst on July 22? Let's find out.

Image source: Getty Images.

Alphabet's biggest revenue source

Before we talk about this upcoming event, though, let's catch up on the Alphabet story so far. As mentioned, advertising represents the company's biggest revenue source. For example, in the latest quarter, Google advertising, at more than $77 billion, accounted for 70% of total revenue. And this ad revenue climbed 15% from the year-earlier period.

Advertisers rush to the Google platform because they know they will easily find us, their target audience, there. And now, thanks to Alphabet's work in AI, Google Search is getting better, which is driving increased usage, and that should prompt advertisers to keep coming back and even spend more. This use of AI in search pushed queries to a record level in the recent quarter.

Alphabet has developed its own large language model, Gemini -- it's the AI driving Google Search, it serves as an AI assistant to Google users, and Gemini also serves Google Cloud customers.

Gemini has recently made significant progress in market share. While OpenAI's ChatGPT still is the world's No. 1 AI assistant, its market share fell below 50% recently for the first time, TechCrunch reported, citing Sensor Tower's State of AI Report for 2026. Gemini is the second most-used AI assistant after ChatGPT -- they hold 27.7% and 46.4% market share, respectively.

Backlog almost doubles

Meanwhile, Alphabet's cloud business has experienced enormous growth. In the first quarter, revenue soared more than 60% to $20 billion, and backlog almost doubled from the previous quarter to more than $400 billion. Though Google Cloud has seen revenue climb in recent years, the AI wave has offered the business an extra lift -- and considering the general sustained demand that Alphabet and others in the space are seeing, this is likely to continue. In the quarter, Alphabet said the biggest driver of cloud revenue was AI solutions.

Now, let's consider what is on the agenda for July 22. Alphabet is scheduled to report second-quarter earnings after the closing bell. The message we've heard from others in the AI space in the previous quarter and in recent days offers us reason to be optimistic about the company's report. For example, ASML, a chip equipment maker, this week increased its annual sales forecast for a second time this year amid high AI chip demand.

A look at valuation

It's also important to note that, while Alphabet isn't the cheapest of its fellow tech stocks, it still trades at a very reasonable level -- at 25x forward earnings estimates. This offers investors a solid entry point, and this level may also prompt investors to get in on the stock, particularly after a strong earnings report.

Meanwhile, Alphabet is a great choice for both cautious and aggressive investors as it offers something to please both of these groups. Alphabet built a strong business prior to the AI boom, excelling in search and cloud computing, so its successes aren't tied to the future of AI. But AI offers the company an extra growth opportunity over time.

All of this makes Alphabet a buy -- but you don't have to rush to get in on the stock prior to the earnings report. This is because short-term shifts in stock price won't have much of an impact on your returns if you hold on for the long term -- and long-term investing is the best way to go. This means you can take your time and buy Alphabet shares before or after July 22 -- and potentially set yourself up for a long-term win.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends ASML and Alphabet. The Motley Fool has a disclosure policy.

Warren Buffett is not only an expert when it comes to picking the right stocks, but he's also quite skilled at observing financial markets and preparing for what's on the horizon. This means that Buffett often invests differently from others and doesn't go along with the crowd. For example, during the days of the dot-com bubble, Buffett spoke of excessive investor exuberance and the dangers of paying any price for a popular stock. And at times when stocks have slumped, the investing legend has been a buyer as others have fled.

Buffett turned over the chief executive officer role at Berkshire Hathaway to Greg Abel at the start of the year. But the billionaire hasn't completely retired from the world of investing. He remains chairman of the holding company and also has continued to actively share his views about investing and financial markets.

In recent times, Buffett has said "gambling" is going on in the market. Let's check out what history says might happen next.

Image source: The Motley Fool.

Today's market environment

First, though, let's take a closer look at today's market environment and Buffett's general investment strategy. The S&P 500 has skyrocketed in recent years amid excitement surrounding artificial intelligence (AI) stocks. Many companies developing AI products and services, from chip designers to cloud service providers, have seen revenue and their stock prices soar. But in recent times, investors have grown concerned about the enormous levels of spending involved in the AI build-out -- and that's periodically weighed on the performance of AI stocks. Meanwhile, general uncertainties, such as turmoil in Iran, have also put growth stocks under pressure.

As mentioned, Buffett doesn't follow the crowd. He actually prefers buying shares of a company that isn't necessarily on everyone's radar screen or isn't the popular player of the moment. Buffett will only buy shares for a reasonable price -- and when he believes in the company's long-term prospects. In the past, he's said that his ideal holding period is "forever." That may be an exaggeration, but it isn't completely false: Buffett has held onto some of his favorites, such as Coca-Cola, for decades.

Buffett doesn't suffer from the "fear of missing out," something that plagues certain investors, particularly during times of euphoria. These investors rush to get in on a particular popular sector or stock, often ignoring valuations and long-term prospects. For example, Buffett hasn't invested in many AI or tech players -- instead, knowing that you don't have to participate in every investing theme or trend to score a win over time, he focuses on industries he knows well.

Buffett beats the market

All of this has helped the billionaire generate market-beating returns for Berkshire Hathaway over the past 60 years. So we can clearly say that Buffett has demonstrated that his techniques work.

But Buffett doesn't keep all of the wisdom to himself. He has readily shared his thoughts about the market throughout his investing career, and he's continued to do so even in retirement. During Berkshire Hathaway's latest meeting of shareholders in May, Buffett spoke with CNBC and said speculation, rather than long-term investing, was more and more apparent in the market.

"We've never had people in a more gambling mood than now," he told CNBC.

What history says

Now, let's consider what may happen next, according to history, and to do so, it's important to look at valuation levels. The stock market has reached one of its priciest levels ever. In fact, the S&P 500 Shiller CAPE ratio, an inflation-adjusted view of stock price in relation to earnings, recently reached a level that it's only surpassed once before in history -- that was during the dot-com bubble.

S&P 500 Shiller CAPE Ratio data by YCharts

And every time the Shiller CAPE ratio has reached a peak, even one much lower than today's levels, the stock market has gone on to decline.

S&P 500 Shiller CAPE Ratio data by YCharts

So, history suggests that, with companies trading at peak valuations, a decline in stocks could be right around the corner.

What does this mean for you as an investor? Let's refer back to Buffett. This doesn't suggest you should stop investing. The billionaire has continued to invest throughout market environments. Instead, it means you should favor the Buffett approach, and instead of rushing into certain popular stocks at high valuations, search for quality stocks that are trading at reasonable levels. These could be in hot growth areas like AI or in industries that haven't drawn as much attention in recent times. And, by holding on for the long term as Buffett has always done, you may score a significant win -- regardless of what direction the stock market takes next in the short term.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool has a disclosure policy.

When you want to know what's on the horizon for Nvidia (NASDAQ: NVDA), it's a great idea to look to Taiwan Semiconductor Manufacturing Co. (NYSE: TSM). These companies work hand-in-hand, and TSMC, as the world's biggest chip manufacturer, has a particularly broad view of the chip market.

TSMC just reported quarterly earnings, and both revenue and profit blew past estimates. The company has been on a roll, with earnings soaring quarter after quarter amid the artificial intelligence (AI) boom. Companies have rushed to TSMC to manufacture their chips to keep up with soaring demand.

And in this latest report, TSMC delivered two pieces of news that offer Nvidia shareholders a reason to cheer.

Image source: Getty Images.

Making the chips of many

As mentioned, TSMC dominates the chip manufacturing space, producing the chips of market leaders from Nvidia to Advanced Micro Devices. It's important to remember that these TSMC customers design their chips, but they don't have manufacturing capabilities, so instead turn to the expert, TSMC, for that. TSMC benefits from the successes of many market giants, so it's not too surprising that the manufacturer has seen earnings explode higher in recent years.

In the second quarter, TSMC's revenue soared 33% to more than $40 billion, and earnings per share jumped 77% to $4.31. And the company forecasts third-quarter revenue in the range of $44.6 billion to $45.8 billion.

Now, let's consider the two pieces of news that are positive for Nvidia shareholders. TSMC says it will increase its manufacturing investment in Arizona by $100 billion -- this brings its total investment in manufacturing there to $265 billion.

This includes advanced packaging fabs -- TSMC has done some manufacturing for Nvidia in the U.S., but the chips have been sent to Taiwan for the advanced packaging steps, since the expertise has traditionally been there. The idea of a ramp-up in advanced packaging capabilities in the U.S. is excellent news, as it could save customers such as Nvidia time and money.

AI chip demand

The second piece of good news has to do with TSMC's comments on the demand situation. Due to the company's work with so many chip designers, it remains in close contact with them and their customers. All of this offers TSMC a broad and accurate view of what's happening in the market and potentially what's to come.

TSMC chief executive officer C.C. Wei said that signals from customers and their customers, mainly cloud players, are "very strong."

This is key because it shows that chip players aren't just launching manufacturing for potential demand but instead for the needs of customers flocking to cloud service providers for compute. It's also important to note that cloud companies communicate with their customers and have visibility regarding their customers' future needs. All of this suggests the demand that Wei speaks of could be long-lasting.

Nvidia's growth

Nvidia, as a market leader that's seen its earnings and stock price skyrocket, has faced concerns that its fastest-growth days may be behind it. Investors have worried that the high levels of spending by tech companies on AI infrastructure may drop off at some point -- and that AI-driven revenue may disappoint. If this actually happens, it would be terrible news for Nvidia.

But so far, and now freshly supported by TSMC, the AI growth story remains strong. This means that Nvidia looks like an incredibly dirt cheap buy at today's valuation. As investors worried about the company's growth potential, they rotated out of the stock, and that has left it trading at 23x forward earnings estimates. Meanwhile, general market uncertainties have also pushed investors to sell some of their AI winners -- and we could imagine Nvidia among this bunch -- and rotate into other sectors.

Considering Nvidia's bargain price right now and TSMC's fantastic news, the stock is one to buy and hold onto as this AI story continues.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.

All eyes have been on Space Exploration Technologies (NASDAQ: SPCX) since its explosive initial public offering. The technology and industrial giant may have stirred up so much excitement due to its exciting mix of businesses, the leadership of the ambitious Elon Musk, and the sheer size of the operation. SpaceX raised more than $85 billion after the exercise of an overallotment option to complete the biggest IPO ever.

And the company launched with a market value of more than $2 trillion -- the other trillion-dollar stocks, such as Nvidia and Apple, took years to reach such a valuation.

SpaceX climbed nearly 20% in its first day of trading and continued to advance over the next few days -- but since that point, the stock has stumbled. And just this week, it fell below its IPO price of $135. What happens next? History offers an answer that's crystal clear.

Image source: Getty Images.

Cutting costs of rocket launches

First, though, let's explore the SpaceX story so far. The company was founded by Elon Musk, also known as the chief executive officer of Tesla, back in 2002, and since then has aimed to drastically cut the costs of rocket launches. SpaceX has been successful so far -- using its reusable rocket technologies, it already reduced costs by 85% in 2010, according to NASA. This year, the company aims to launch its fully reusable rocket Starship with payloads, further advancing toward this goal.

In addition to the rocket launch business, SpaceX also operates a connectivity arm called Starlink and an artificial intelligence (AI) unit. Starlink is the main revenue driver so far, bringing in revenue of $11.4 billion last year on total revenue of $18 billion as it grew its subscriber base. The AI unit has major goals, such as developing data centers in space, but so far, it's been a drag on earnings -- this is because it requires enormous investment. Last year, capital spending for the AI business reached $12 billion, driving SpaceX to a net loss.

Musk is committed to innovation, and that's something many investors like, and SpaceX aims to be a game changer in its three businesses. That's positive and is attracting growth investors. But it's important to keep in mind that certain goals require the development of complex technology -- and if the technology fails, SpaceX won't reach those goals. Meanwhile, the need to heavily invest could stand in the way of profitability for some time. So investing in SpaceX today involves a certain degree of risk.

Some of these elements could have weighed on investors' minds in recent days -- and as a result, weighed on SpaceX's stock performance too.

A look at past IPOs

Now, let's consider what history has to say about what happens next. A look at 10 of the biggest IPOs, including names such as Rivian Automotive and Coupang, shows that eight posted declines in the three months following their launches. And five of them delivered declines in the double-digits. The average drop over the first three months was 13%.

If SpaceX follows that pattern and posts the average decline, the stock may finish its first three months of trading at around $139, a few dollars above the IPO price.

Of course, it's impossible to predict the exact path of a stock price. And it's important to note that the company's upcoming earnings report could come into play and offer the stock direction. But if history is right, SpaceX could stagnate around current price levels -- since it's already declined more than 13% since the IPO -- over the coming two months.

What does this mean for you as an investor? Should you buy SpaceX now that it's fallen to its IPO level? I don't think this will be the first and only opportunity to get in on SpaceX stock on the dip, and generally, it's a better idea to take a look at another earnings report or even two to monitor the company's progress before buying. Though very aggressive investors may consider adding a few shares of SpaceX to their portfolios now, most investors should hold on for a future buying opportunity.

Adria Cimino has positions in Tesla. The Motley Fool has positions in and recommends Apple, Nvidia, and Tesla. The Motley Fool recommends Coupang. The Motley Fool has a disclosure policy.

Space Exploration Technologies (NASDAQ: SPCX) was one of the most sought-after stocks on the planet last month. SpaceX launched the world's biggest initial public offering -- an operation that was largely oversubscribed -- and went on to see high demand in its first days of trading. From its offer price of $135 to its peak of $225 on June 16, it rose more than 65%. And after the exercise of an overallotment option, SpaceX raised a whopping $85 billion.

The tech giants known as the "Magnificent Seven" also have experienced glory days, but over a longer period. These companies led the S&P 500's gains during the past three years amid the artificial intelligence (AI) boom. Each of these players has seen their shares advance in the double- or triple-digits over that time.

So now, you may be wondering whether you should invest in SpaceX or the members of the "Magnificent Seven." Let's check out which is a better option.

Image source: Getty Images.

The case for SpaceX

SpaceX soared right out of the gate as investors got excited about the company's growth businesses of rocket launches, connectivity, and AI. And some investors also liked that this is a company led by Elon Musk, known for his focus on game-changing innovations.

The company has made progress in a variety of areas in recent years. For example, it's greatly brought down the cost of rocket launches thanks to its work on reusable rockets. And SpaceX has seen the popularity of its Starlink internet service surge, with subscribers rising from 2.3 million to 10 million over just three years. All of this helped SpaceX deliver $18 billion in revenue last year, for a 33% gain.

The company has big goals, such as the development of data centers in space, and investors know that if SpaceX reaches certain milestones, earnings and stock performance could skyrocket. All of this helped propel the stock price higher during SpaceX's first days of trading, but in recent days, the stock has pulled back. In fact, SpaceX is trading lower than its debut price of $150, and some may consider this a buying opportunity.

The case for the "Magnificent Seven"

The "Magnificent Seven" stocks are as follows: Amazon (NASDAQ: AMZN), Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), and Tesla (NASDAQ: TSLA).

These players are leaders in a wide range of tech specialties, from e-commerce to chips and software, and they are all involved to some degree in the high-growth industry of AI. These companies have delivered earnings growth over time, and their earnings prospects are generally bright.

So, "Magnificent Seven" companies are on track to deliver growth from their core businesses, and on top of this, they are well-positioned to benefit from AI over time. Nvidia is the only one of the bunch that depends more heavily on AI, with more than 90% of revenue coming from its data center business. But it's important to note that Nvidia is broadening the use of AI across industries, which also expands its revenue opportunities.

Though Tesla continues to trade at a high valuation and Apple has seen its valuation climb over the past year, the other five tech giants trade for less than 29x forward earnings estimates and look very interesting at these levels.

GOOG PE Ratio (Forward) data by YCharts

SpaceX or the "Magnificent Seven"?

So, should you put your money into SpaceX or diversify across the "Magnificent Seven"? Even though SpaceX stock has declined in recent times, it still looks pricey considering the risk that comes along with this investment. Many of SpaceX's goals involve the development of technology that hasn't yet been fully proven -- and to develop technology and advance its programs, SpaceX must heavily invest. Last year, capital expenditures drove the company to a net loss of $4.9 billion.

Meanwhile, an investment spread across the "Magnificent Seven" -- and here I would go for the five cheapest according to valuation, as shown in the chart above -- could be great for three reasons. First, these particular stocks are trading at bargain levels. Second, they are proven winners with a long track record of growth, and they are well placed to benefit from AI now and into the future. Finally, by spreading your money across several stocks, you offer your portfolio diversification.

All of this makes the "Magnificent Seven" a better buy than SpaceX right now -- for safety and growth.

Adria Cimino has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.

Investors have focused closely on artificial intelligence (AI) stocks for the past few years. That's because these players have driven the performance of the S&P 500, extending this three-year-plus bull market. AI stocks have skyrocketed because investors see AI as the next game-changing technology, one that could transform how companies operate and send their earnings soaring.

Some have already delivered results, such as players that sell logic or memory chips, and companies that offer cloud services. They have been the early winners of the AI story. And investors have also bought shares of a wide range of companies that may benefit from AI down the road.

But in recent times, investors have become more hesitant about AI investing, with concerns about growth ahead. Against this backdrop, it's a good idea to look to technology companies for some clues.

International Business Machines Corp. (NYSE: IBM) shocked the market this week with a warning about its second-quarter profit. Let's consider what this warning tells us about the AI market right now and what it means for investors.

Image source: Getty Images.

The AI story so far

So first, a quick note on the AI story so far. In the early stages of the boom, customers rushed to get in on logic chips such as graphics processing units (GPUs) for the training of large language models. This helped boost the earnings of market leader Nvidia, as well as rivals including Advanced Micro Devices and Broadcom.

And cloud players, such as Amazon's Amazon Web Services, have also gained as they offer customers access to chips and other AI products and services.

But as the AI story evolves, other companies also will see significant growth opportunities, and the latest to explode higher have been those offering memory and storage. As AI is applied to real-world problems through AI agents, the need for these elements is greatly increasing. Meanwhile, the huge demand for memory has produced tight supply and rising prices -- all of this has resulted in a surge in revenue and stock performance for companies such as SK Hynix, Micron Technology, and Sandisk.

IBM's message

Now, let's consider the message from IBM. The technology giant, with businesses in hardware, software, and consulting, released preliminary second-quarter earnings -- and they missed expectations. IBM reported adjusted earnings per share of $2.93 and revenue of $17.2 billion. That's compared to analysts' estimates for $3.01 in EPS and revenue of $17.8 billion, CNBC reported, citing FactSet.

The reason? Customers favored spending on memory, servers, and storage amid tight supply and ahead of price increases, IBM said. As a result, IBM was unable to close a number of large deals according to the expected timeline, and this weighed on earnings.

What does this tell us about the AI market right now? First, it's important to note that this doesn't necessarily signal a long-term problem for companies such as IBM. This situation may be temporary, and customers' capital spending is likely to shift back to IBM and others in the space as memory supply and prices stabilize, or potentially even earlier.

A broad range of products and services

So this tells us that the AI market may benefit certain players at specific moments -- for example, today, the big winners are memory companies. But over time, a broad range of AI and general tech products and services is needed -- so trends like the one we're seeing now may not drastically change the outlook for a company such as IBM or others that might find themselves in a similar situation.

It will be important to see how long such periods last and how companies affected manage the headwinds and adjust their strategies. Though some investors may worry about the future of software as AI's uses multiply, giants like IBM or Microsoft may show resilience. These companies operate a wide range of businesses and have integrated AI into their software and processes -- so they may benefit from AI advancements.

What does all of this mean for investors? It's important to remember that there will be moments when GPU companies will benefit the most or memory players will stand out -- performance may ebb and flow.

But investors shouldn't rush to unload their current AI stocks and hop on the latest trend. Instead, it's a great idea to monitor how the market evolves and invest in a variety of potential AI winners, as together, over time, their products and services should deliver growth -- and that could help you score a long-term win in the AI market.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Broadcom, International Business Machines, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) and Cerebras Systems (NASDAQ: CBRS) both offer something in great need right now: the high-powered compute to fuel artificial intelligence (AI) workloads. Nvidia is the better-known of the two, having been in the chip space for more than 30 years, and today dominates the AI chip market. Cerebras is an exciting new player with a very powerful chip.

Both of these companies could make an interesting investment, and they have seen their shares decline from highs in recent times. This presents a potential buying opportunity. But which is the better discount AI buy right now? Let's find out.

Image source: Getty Images.

The case for Nvidia

Nvidia hardly needs an introduction these days. The company has made headlines since the start of the AI boom as its comments set the tone for what happens next in this market. Nvidia designs the world's most sought-after graphics processing units (GPUs), the key chips needed to power essential tasks like the training and inference of models.

The company was first to enter this market and has made innovation a focus -- that's helped it stay ahead of rivals. In fact, Nvidia updates its GPUs on an annual basis, and the next update is right around the corner. The company aims to ship its Vera Rubin platform later this year, and it will offer an important new product: the stand-alone central processing unit (CPU).

This opens up a new $200 billion market to Nvidia, and the company plans on conquering it. In its latest earnings report, it predicted $20 billion in stand-alone CPU sales this year and said it was on track to dominate this market.

Meanwhile, Nvidia has proven its strength over time, and in recent years has delivered quarter after quarter of double- or triple-digit earnings gains. And earnings have reached record levels amid this AI boom. All of this is likely to continue, considering the sustained level of demand and the idea that AI is in its early days of real-world use.

The case for Cerebras

Cerebras may not be a household name like Nvidia, but the company's technology might quickly put it on the radar screens of many investors. This player has designed a giant chip, its wafer-scale engine (WSE), that it says delivers speeds faster than today's GPUs. How has Cerebras accomplished this? By making the WSE 58 times larger than Nvidia's B200 chip.

Cerebras says that this size allows it to offer massive compute and memory bandwidth, and this results in tremendous speed. The company says that in inference, or the thinking AI goes through to solve a problem, it's delivered answers 15 times faster than today's top-selling GPUs. This has translated into growth for Cerebras, with first-quarter revenue soaring 92% to $193 million. And the company recently signed key deals with OpenAI for compute and with Amazon's cloud unit to make its WSE systems more broadly available. So this could be a major transition point for Cerebras, as more potential customers discover its chips and give them a try.

It's important to note that, considering the high level of demand for compute, Cerebras doesn't have to unseat Nvidia in order to be highly successful and deliver strong growth. Analysts predict the AI market will reach beyond $3 trillion in the early part of the next decade, and this should create a strong revenue opportunity for many chip players.

This young company, founded in 2015, went public in May, raising $5.5 billion in the biggest IPO of 2025 -- until Space Exploration Technologies launched its operation in June, for the largest IPO ever.

The market leader or the young challenger?

Cerebras isn't yet profitable, which isn't surprising at this stage of its growth story, but this adds to risk. The stock has slid 30% from its first day of trading, offering an interesting buying opportunity for aggressive investors.

But for most investors, I consider Nvidia the best discount AI buy today. The AI giant is trading at 23x forward earnings estimates, which looks like a steal considering all of the company's strengths.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.

Space Exploration Technologies (NASDAQ: SPCX) splashed onto the scene just a few weeks ago when it completed the world's biggest initial public offering, raising more than $85 billion after the exercise of an overallotment option. Of course, SpaceX wasn't new to investors -- the company had been making headlines for years, particularly for its rocket launches for NASA. But this was the first time investors, from retail to professional, could easily invest in the company.

Demand was high during the IPO -- it was greatly oversubscribed -- and during the first days of trading. The stock soared 50% from its $150 debut price to a peak of $225 on June 16. In recent days, though, SpaceX has lost the positive momentum. In fact, the stock has slipped below its debut price.

If you had invested $10,000 in SpaceX's early days of trading, how much would this investment be worth in a year? History offers us a very clear answer.

Image source: Getty Images.

Exciting growth businesses

First, though, let's take a quick look at the SpaceX story. The company has attracted investors thanks to its exciting growth businesses and its ambitious leader, Elon Musk. SpaceX operates in rocket launches, satellite-based internet, and artificial intelligence (AI), areas that each could drive significant revenue gains if they reach certain goals. And speaking of goals, many are ambitious, but if the company can accomplish them, they could be game changers. For example, SpaceX aims to develop data centers in space, and its most ambitious goal may be to colonize Mars.

What's interesting about this mix of businesses is that they fit together nicely, with accomplishments of one driving gains in another. SpaceX's work to make reusable rockets and drive down the costs of launches will help it launch equipment more cheaply and quickly into space for its other businesses.

Elon Musk is the chief executive officer behind these ambitions, and while some investors aren't fans of his strategies, others are -- and they generally rush to bet on Musk. The popularity of the SpaceX IPO is proof of this.

$18 billion in revenue

SpaceX has made progress in various areas -- it aims to launch its fully reusable rocket, Starship, with payloads later this year -- and is delivering growth. Revenue last year climbed more than 30% to $18 billion. But SpaceX needs to invest heavily to support the development of its technology, and this pushed the company to a $4.9 billion loss. This may continue, considering the complexity of the technology involved in the company's businesses.

Now, let's consider the potential value of a $10,000 investment in SpaceX after the stock's first full year of trading. A look at some of the biggest IPOs, from Meta Platforms to Uber Technologies, shows that eight out of 10 fell in their first 12 months on the stock market. Seven of them delivered double-digit declines, and the average drop was 12%.

We might consider SpaceX's performance as falling into the average, and here's why: On its first day of trading, it climbed nearly 20%. According to a study by Jay Ritter of the University of Florida, the average first-day return of more than 6,000 IPOs between 1990 and 2025 was just over 21%.

So if we also apply the average drop seen in our look at 10 major IPOs to SpaceX, we come up with the following: History shows us that your $10,000 investment in SpaceX would be worth $8,800 after 12 months.

Major IPOs in general haven't delivered gains after their first year on the market, and the greatly popular SpaceX could follow unless it breaks with this historical trend, which, of course, is possible. Still, all of this means that investors shouldn't necessarily rush to get in on IPO stocks, as there may be better entry points down the road.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms and Uber Technologies. The Motley Fool has a disclosure policy.

Warren Buffett has done a fantastic job over six decades of selecting winning stocks -- during that time period, this skill helped Berkshire Hathaway outperform the S&P 500. Buffett doesn't buy a stock to get in on short-term momentum but instead commits to players for a number of years. And this long-term strategy clearly has worked.

Buffett retired from his chief executive officer position at the end of the year, though he remains active at Berkshire Hathaway as chairman. And during his last year leading investment decisions, he made a noteworthy move. Buffett made a surprising stock pick, as he chose a player that operates in an industry where he's not heavily present: technology.

And in the first quarter of this year, Buffett's successor, Greg Abel, reinforced the bet on this recent Buffett selection by increasing the position by 200%. Is this stock, which recently entered the Dow Jones Industrial Average, still a buy? Let's find out.

Image source: The Motley Fool.

Warren Buffett investing

First, a quick word on Buffett's investing philosophy in order to fully understand the reasoning behind this recent purchase. Since Buffett aims to invest for the long term, he's particularly keen on buying shares of quality companies -- he's not interested in quickly buying and selling a mediocre but popular stock to make a fast profit. The billionaire favors companies with a significant moat, or competitive advantage, and aims to get in on these players at reasonable valuation levels.

All of this explains Buffett's decision to buy Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL). You may come into contact with this company on a daily basis through a very routine habit: searching for something on the internet. Alphabet is the owner of Google Search, which has steadily held more than 90% of the search market for years. Google is such a leader that it's even entered our vocabulary, as when asked a question, we might reply "Google it.

It's proven very difficult for other search players to even get close to Alphabet's search market share, showing that this company has a fantastic moat. And Alphabet's revenue happens to be very strongly linked to this moat. Most of the tech giant's revenue comes from advertising across its Google platform.

Recent buying opportunities

Meanwhile, Alphabet stock has offered investors such as Buffett buying opportunities over the past year. Buffett initially bought the shares in the third quarter of last year, and the chart below suggests he got in on the stock for less than 20x forward earnings estimates -- a steal considering the company's long track record of growth and market leadership.

GOOG PE Ratio (Forward) data by YCharts

Abel, who increased the holding by about 200% and opened a position in Alphabet class C shares, bought during the first quarter of this year -- the purchase was at a higher valuation, but still a bargain level.

GOOG PE Ratio (Forward) data by YCharts

Now, let's consider whether this tech giant is still a buy. The stock today trades at a pricier level, at 24x forward earnings estimates, but remains reasonable.

AI is driving growth

Alphabet's search business is going strong, and on top of this, the company's Google Cloud and strengths in artificial intelligence (AI) are supercharging growth. Google Cloud offers AI products and services, including its Gemini large language model, to customers. And Alphabet also applies Gemini to its own businesses, including Google Search.

In the latest quarter, the company said AI drove queries to a record high. This is key because the more people favor Google Search, the more advertisers will spend there. In the quarter, Google Cloud saw revenue climb more than 60%, and backlog almost doubled from the previous quarter to about $460 billion.

Buffett and Abel clearly like Alphabet for its solid moat and were happy to get in on this stock for a low price. Now, the good news for investors is that Alphabet's valuation remains reasonable, and the growth story is a strong long-term one. And this means it isn't too late to get in on this recent Warren Buffett buy.

Adria Cimino has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Berkshire Hathaway. The Motley Fool has a disclosure policy.

In recent years, when investors looked for major growth potential, they turned to artificial intelligence (AI) stocks. These players have driven gains in the S&P 500 as AI has been viewed as the next game-changing technology. With the ability to make companies more efficient and innovative, AI could supercharge earnings growth.

And some players, such as chip designer Nvidia (NASDAQ: NVDA) and cloud computing giant Amazon, have already generated significant revenue growth as they've been playing key roles in the early stages of the AI boom. A look at funds invested in a broad range of AI players further illustrates this point. The Dan Ives Wedbush AI Revolution ETF has jumped nearly 50% from its launch a year ago, and the iShares Semiconductor ETF has soared more than 200% over the past three years.

But, in recent times, the path of AI stocks hasn't been as surefooted as it was in the past. The general geopolitical and economic environment has made investors more cautious. And investors have questioned the level of spending by tech companies on AI -- and whether it will all be worthwhile.

All of this has weighed on AI stocks periodically since late last year. And over the past few weeks, this downward trend has returned. So now investors may be wondering whether AI stocks, after declines, are a falling knife -- or a once-in-a-decade buying opportunity. Let's find out.

Image source: Getty Images.

Early phases of AI

As mentioned, AI stocks drove market gains in recent years amid excitement about the technology's potential and as initial chapters of the boom unfolded. Companies trained AI models, a step requiring massive compute, and began applying AI to real-world problems -- though we remain early in the AI use story.

Technology leaders have been spending billions as part of the AI infrastructure build-out, with plans to invest nearly $700 billion this year alone. This is as demand for capacity to run AI workloads explodes higher. And technology companies' earnings reports have reflected this high demand, with AI revenue climbing.

Though this demand story remains positive, investors have still worried about the possibility of the revenue opportunity falling short -- particularly considering this enormous investment in infrastructure. Meanwhile, ongoing turmoil in Iran and worries about rising inflation in the U.S. have also preoccupied investors.

I'll again use the Ives and iShares ETFs as examples to illustrate the movement of AI stocks. The Ives ETF has slipped 10% since June 1, and the iShares Semiconductor ETF has dropped 15% since a peak on June 22. This is as of the July 13 market close.

What may lie ahead

Now, let's return to our question: Are AI stocks a falling knife that you should avoid -- or could this be a once-in-a-decade buying opportunity? It's impossible to predict whether recent declines will continue or if AI stocks will quickly rebound and soar. But the full AI story is in its early stages, as companies and individuals are just beginning to regularly use AI and apply it to their needs. And certain industries, such as robotics and pharmaceuticals, may heavily rely on AI in the years to come to make significant advancements.

Much of the activity we've seen so far in AI is the actual development of the technology and the training of models -- but the use cases should drive a major and long-lasting wave of growth for many companies. The infrastructure winners that already have delivered earnings growth in the earlier stages of the boom are likely to continue to generate growth as their products are needed on an ongoing basis. On top of this, the AI winners may multiply as companies that use the technology gain in efficiency, lower costs, and become more innovative.

All of this means that, even if AI stocks experience a period of declines, the quality players are well-positioned to go on and climb over the long term. So, right now, with stocks like Nvidia trading at 22x forward earnings estimates and tech powerhouse Microsoft trading at only 20x estimates, it's a great time to go bargain hunting. This may be a once-in-a-decade opportunity.

Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Microsoft, Nvidia, and iShares Trust-iShares Semiconductor ETF. The Motley Fool has a disclosure policy.