The S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) have added 13% and 14%, respectively, this year. The driving force behind those gains has been strong corporate earnings growth, particularly among technology companies.

However, the Federal Open Market Committee recently published the minutes from its July meeting, and they included a warning for investors: The S&P 500's equity risk premium is near its lowest level since the dot-com bubble, which means Treasury bonds are more attractive on a relative basis than they have been for decades.

History says that could sink the stock market.

Image source: Getty Images.

The Federal Reserve warns that the stock market's equity risk premium is near historic lows

Equity risk premiums measure the extra return investors anticipate for purchasing stocks rather than risk-free assets, such as U.S. Treasury bonds. The Federal Reserve calculates the S&P 500's equity risk premium by subtracting the real 10-year Treasury yield from the index's forward earnings yield.

To elaborate, the real 10-year Treasury yield is the nominal yield minus the forecast inflation rate, so it measures the expected increase in purchasing power. And the forward earnings yield is the inverse of the forward price-to-earnings ratio, so it measures forecast earnings (as a percentage) per dollar invested.

Minutes from the Federal Open Market Committee's (FOMC) July meeting state:

The staff judged that asset valuation pressures were elevated. Equity valuations remained high despite some moderation from year-end, supported by AI enthusiasm and strong corporate profits. The equity premium was at a level that has only been lower in recent history during the dot-com bubble.

What does that mean? The Federal Reserve is warning investors that stocks are expensive when compared to real 10-year Treasury yields. Specifically, the excess return investors can expect from owning stocks rather than risk-free Treasury bonds is lower today than it has been since the dot-com bubble.

Additionally, the S&P 500 has maintained an equity risk premium below 2.5% for five straight months. That last happened in May 2002, and the S&P 500 declined 16% over the subsequent year.

Several Federal Reserve officials wanted to raise interest rates at the July meeting

In July, the Personal Consumption Expenditure (PCE) price index, the Fed's preferred inflation gauge, increased 3.7% from the previous year. Inflation now hovers at levels last seen in early 2023, and the FOMC attributed that to three things: President Donald Trump's tariffs, elevated energy prices tied to the Iran war, and demand for artificial intelligence.

The FOMC held interest rates steady at the July meeting even though PCE inflation has now topped the Fed's 2% target for 65 months. However, three officials voted for a quarter-point rate hike, up from zero in June, which itself was a change from April, when one FOMC member actually voted for a quarter-point rate cut.

An increasingly hawkish Fed, coupled with stubborn inflation, has the market convinced that rate hikes are inevitable. CME Group's FedWatch tool, which calculates the probability of future interest rates using pricing data from futures contracts, shows the most likely outcome is a quarter-point hike in September 2026 followed by another quarter-point hike in January 2027.

If the Fed raises rates, it will be the first hike in a new tightening cycle. The stock market has often suffered corrections under those circumstances. In the last 30 years, the S&P 500 and Nasdaq Composite have fallen by an average of 10% and 12%, respectively, at some point during the three-month period following the first rate hike in a new tightening cycle.

However, there is a silver lining for patient investors. The stock market has eventually recouped its losses from every past correction, which means every single one has been a buying opportunity.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group. The Motley Fool has a disclosure policy.

Year to date, the broad-based S&P 500 (SNPINDEX:^GSPC) has advanced 13%, and the technology-heavy Nasdaq Composite (NASDAQINDEX:^IXIC) has added 14%. But the next stock market downturn is only a matter of time.

In the near term, elevated oil prices tied to the Iran conflict, potential interest rate hikes, soaring bond yields, and midterm elections are sources of uncertainty that could drag stocks lower (or even cause a market crash). But history says investors will profit from the next correction if they make one simple move.

Here are the important details.

Image source: Getty Images.

Why the stock market is vulnerable to a downturn

The U.S. stock market is vulnerable to a drawdown (perhaps even a crash) for several reasons. First, President Trump's tariffs and high energy prices tied to the Iran war have caused inflation to accelerate. At the same time, the Federal Reserve has become increasingly hawkish. Three FOMC members voted for rate hikes at the July meeting, up from zero at the June meeting.

So what? If the Fed raises interest rates, it would mark the first rate hike in a new tightening cycle, and the major stock market indexes have frequently suffered corrections under those conditions. In the last 30 years, following the first hike in a cycle, the S&P 500 and Nasdaq Composite declined by an average of 11% and 14%, respectively, at some point during the next year.

Second, a combination of factors -- expectations for higher interest rates, an abundance of corporate bonds issued by artificial intelligence companies, and concerns about national debt -- have led investors to sell Treasury bonds, driving yields higher. The 30-year Treasury bond has paid more than 5% for 44 straight trading sessions, the longest stint since 2007.

So what? Treasury bonds look increasingly attractive relative to equities as payouts increase, and the longer yields remain elevated, the more likely investors are to move money from stocks to bonds. The last time 30-year Treasury bonds yielded over 5% for 44 straight trading sessions, the S&P 500 and Nasdaq Composite fell 17% and 14%, respectively, over the next year.

Third, the president's party tends to lose congressional seats during midterm elections, which creates policy uncertainty that weighs on the stock market. Since 1950, the S&P 500 has declined by an average of 18% at some point during midterm election years, and those loses typically materialized in the third quarter, according to Carson Investment Research.

History says investors who buy the dip during a stock market correction will profit

The S&P 500 suffered six market corrections in the last decade, and two of them eventually became bear markets. However, following the index's first close in correction territory (i.e., the day it first closed 10% below its high), the S&P 500 returned an average of 18% over the next year and it added 40% over the next two years.

Similarly, the Nasdaq Composite suffered nine market corrections in the last decade, and four of them eventually became bear markets. However, following the index's first close in correction territory, the Nasdaq returned an average of 21% over the next year and it added 39% over the next two years.

The one thing investors should not do is attempt to time the market by selling stocks with the intention of buying them back at some point in the future. Legendary fund manager Peter Lynch once warned, "Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in corrections themselves."

Here's the big picture: Stock market declines are inevitable, but the S&P 500 and Nasdaq Composite have eventually recouped their losses from every past drawdown. In that sense, every past decline has been a good opportunity for investors to buy shares of index funds that track the S&P 500 or Nasdaq. Anyone who followed that advice in the past turned a profit, and there is no reason to expect a different outcome in the future.

Trevor Jennewine 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.

Billionaire Peter Thiel, co-founder of Palantir Technologies, runs the investment company Thiel Macro. The company sold its entire portfolio in Q3 2025 and did not buy stocks again until Q2 2026, when it added eight new positions. The largest was Amazon (NASDAQ: AMZN), an artificial intelligence stock up 560% in the past decade.

Interestingly, Thiel does not own a position in Nvidia. In fact, Amazon is the only technology company in his portfolio. The other seven stocks come from the energy sector, likely because he believes the massive power requirements of AI data centers will become a bottleneck.

Regardless, investors should take a closer look at Amazon. Here are the important details.

Image source: Getty Images.

Amazon is using AI to unlock new revenue streams and improve efficiency

The investment thesis for Amazon is simple. The company enjoys a strong competitive presence in retail e-commerce, digital advertising, and cloud computing, three markets where annual sales growth is projected to be 12% to 16% through the end of the decade. Think of that range as a baseline forecast for Amazon's earnings growth during the same period.

However, Amazon's earnings could grow more quickly as investments in artificial intelligence unlock new revenue streams and improve productivity. Within retail, Amazon is the largest operator of industrial mobile robots, and the company is leaning on AI to make its fleet faster and more efficient. For instance, workers can engage the latest Proteus robots in natural language.

"We see a long runway for further efficiency improvements in fulfillment and shipping costs, in particular with robotics," writes Morgan Stanley analyst Brian Nowak. He thinks fulfillment and shipping costs consume 36% of retail revenue, so margins could improve substantially if Amazon successfully automates a good chunk of that work.

Elsewhere, Amazon Web Services (AWS), as the leading provider of cloud infrastructure and platform services, is well-positioned to capitalize on AI demand simply because it has a large customer base. Those customers may find it easier to adopt AI tools within AWS, where their data already resides, rather than migrate to a new cloud platform.

However, Amazon's cloud computing revenue could grow faster than the industry average as it monetizes proprietary AI agents and Trainium chips, custom silicon built specifically for training and inference workloads. Morgan Stanley estimates AWS could generate $1 trillion in revenue in 2035, implying 21% annual growth over the next nine-plus years.

Amazon is spending heavily on AI infrastructure, but those investments are paying off

Amazon reported sensational financial results in the second quarter, beating estimates on the top and bottom lines. Revenue rose 20% to $201 billion, the fifth straight acceleration, and operating income (which excludes unrealized gains from its stake in Anthropic) rose 43% to $28 billion.

Amazon's financial results in the cloud computing segment were particularly noteworthy because they offer concrete proof that the company is earning reasonable returns on investments in AI infrastructure. In the second quarter, AWS revenue increased 37%, the fastest growth in 18 quarters.

Admittedly, some investors are still anxious about Amazon's projected $220 billion in capital expenditure (capex) spending this year, up from $128 billion last year. But strong results in the AWS segment, including triple-digit sales growth from AI workloads, should allay some of those concerns.

Additionally, CEO Andy Jassy provided encouraging insight on the earnings call. "As we get a few years out and the revenue growth outpaces the incremental capex growth, which will happen at some point, the resulting revenue, free cash flow, and return on invested capital is very compelling."

Most Wall Street analysts think Amazon stock is undervalued

Wall Street estimates Amazon's earnings will increase at 21% annually over the next three years. That makes the current valuation of 21 times earnings look cheap. Those numbers give a price-to-earnings-to-growth (PEG) ratio of 1, which is even more compelling than the average PEG ratio of 1.5 in the second quarter when Peter Thiel bought the stock.

Indeed, Wall Street thinks Amazon is undervalued today. Among 70 analysts, the stock has a median 12-month target price of $330 per share. That implies 32% upside from its current share price of $255. Patient investors with a five-year time horizon should feel comfortable buying a small position right now.

Trevor Jennewine has positions in Amazon, Nvidia, and Palantir Technologies. The Motley Fool has positions in and recommends Amazon, Nvidia, and Palantir Technologies. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) on Aug. 26 reported strong financial results for the second quarter of fiscal 2027, which ended in July. Revenue increased 106% and adjusted earnings increased 120%, driven by robust demand for artificial intelligence (AI) infrastructure.

Wall Street had been looking for 87% revenue growth and 108% adjusted earnings growth, meaning Nvidia once again beat estimates on the top and bottom lines. History says this will happen next.

Image source: Getty Images.

History says Nvidia stock could drop 7% by late September

Nvidia has consistently reported strong financial results since the artificial intelligence boom began in 2023. In fact, the company has now beaten consensus earnings estimates in 15 consecutive quarters, but investors have gradually become desensitized to sensational numbers.

For instance, the stock advanced 29% and 38% over the month following earnings beats in Q4 2023 (ended January 2023) and Q1 2024 (ended April 2023), respectively. But the stock actually fell by an average of 4% during the month following each of the last eight quarterly earnings beats.

What does that imply about the future? Nvidia stock closed at $210 per share ahead of the latest earnings report on Aug. 26. The price has since increased 4% to $217 per share. But if its performance matches the historical average, it will decline about 7% to $202 per share (i.e., 4% below the pre-earnings price) by late September.

Of course, that historical pattern is superficial, and past performance is never a guarantee of future results. How Nvidia stock actually performs in the coming month depends entirely on investor sentiment.

Nvidia stock looks more attractive today than it has since the AI boom started

The investment thesis for Nvidia has not changed. The company not only dominates the AI accelerator market, but also enjoys a strong competitive position in networking and central processing units (CPUs). That full-stack strategy, coupled with an unrivaled ecosystem of software tools, has made Nvidia the industry standard in AI infrastructure.

Nvidia trades at 27 times earnings, nearly the lowest valuation since the AI boom began in 2023. That multiple looks particularly cheap because Wall Street expects the company's earnings to grow at 50% annually over the next three years. Those numbers give a price-to-earnings-to-growth (PEG) ratio of 0.54, and stocks trading below 1 are typically considered undervalued.

Why is Nvidia stock so cheap? Some, if not many, investors question the sustainability of the AI capex (capital expenditure) boom. Central to the bear thesis is anxiety about circular financing deals. Nvidia has invested billions of dollars in AI companies like OpenAI, CoreWeave, and Space Exploration Technologies, which have turned around and used that cash to purchase Nvidia chips.

Bears also argue that hyperscalers are depreciating Nvidia chips too slowly. Several experts (including famous investor Michael Burry) estimate the useful life of Nvidia silicon at two to three years, but hyperscalers have been depreciating the chips over four to six years. If they are overestimating, those companies have artificially inflated their earnings in recent quarters.

On that point, bulls have a rebuttal. Recent evidence suggests hyperscalers may have actually underestimated the useful life of AI chips. Neocloud CoreWeave recently signed a contract to rent Nvidia A100 GPUs (which were introduced in 2020) through 2029, implying that the useful life of Nvidia silicon may be closer to nine years.

Wall Street analysts think Nvidia stock is undervalued

Circular financing deals certainly raise yellow flags, but they are not necessarily a problem if Nvidia is merely bridging the gap between supply and demand. In other words, so long as end-user demand for AI materializes across the consumer and enterprise spaces, it makes sense for Nvidia to help AI companies overcome capital constraints.

And investors have reason to believe that demand is materializing. Strategists at JPMorgan Chase argue that consumers are adopting AI faster than any other modern technology, including computers, the internet, social media, and smartphones. Additionally, about one in four U.S. firms have deployed AI, making it one of the fastest-growing enterprise technologies in history.

In that context, Nvidia looks like a compelling long-term investment at its current valuation. And Wall Street agrees. Among 69 analysts, Nvidia has a median 12-month target price of $318 per share. That implies 46% upside from its current share price of $217. Investors with a five-year time horizon should feel comfortable buying a small position today.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends JPMorgan Chase and Nvidia. The Motley Fool has a disclosure policy.

The S&P 500 (SNPINDEX: ^GSPC), widely considered the best barometer for the entire U.S. stock market, has added 12% year to date. That puts the benchmark index on course for its fourth consecutive year of double-digit gains.

But there may be trouble on the horizon. September has historically been the single worst month of the year for the U.S. stock market, with the S&P 500 delivering negative returns 53% of the time in the last 15 years. However, the probability of September losses is elevated this year because the stock market tends to decline sharply ahead of midterm elections.

Image source: Getty Images.

September has historically been the worst month of the year for the S&P 500

In the last five years, the S&P 500 has fallen by an average of 2.7% in September, making it the worst month of the year for the stock market. That pattern holds over longer periods. In the last 15 years, the S&P 500 has declined by an average of 1.3% in September, but it has typically gained ground in every other month.

Some Wall Street strategists attribute that phenomenon, called the September Effect, to simple psychology. Investors anticipate losses in the market, so they sell stocks to avoid that outcome. But the decision to sell inevitably brings about the very losses they feared in the first place.

Another explanation is seasonality. Investors may rebalance their portfolios as they return from summer vacation; parents might sell stocks to cover school tuition; and mutual funds (many of which have fiscal years ending in September) frequently sell losing positions to harvest tax losses. All those behaviors could put downward pressure on the stock market.

Midterm elections create policy uncertainty that often drives steep losses in the stock market

Midterm election years have historically been the weakest of the four-year presidential cycle for the stock market. They are particularly well-known for their intra-year volatility. Between 1950 and 2022, the S&P 500 (and the precursor index) declined by an average of 18% at some point during midterm election years, per Carson Investment Research.

In most cases, those losses showed up later in the year, typically during the third or fourth quarter. In fact, between 1950 and 2022, the S&P 500's low point during midterm election years has occurred more often in October than any other month, and the drawdown has usually started in September.

Of course, there is no guarantee history will repeat itself this year. But the stock market tends to decline ahead of midterm elections because the president's party generally loses seats in Congress, which creates policy uncertainty. Some investors navigate the situation by selling stocks. And Donald Trump's presidency has been defined by uncertainty.

Fortunately, there is some good news: Since 1950, after the S&P 500 has hit bottom during a midterm year, the index has never been lower a year later. In fact, the S&P 500 has gained an average of 32% over the 12 months following its low point during midterm years.

What does that mean? Year to date, the S&P 500's lowest point was 6,344 on March 30. If the index's performance matches the historical average, it will advance 32% to 8,374 by March 30, 2027. That implies 9% upside from its current level of 7,659 over the next seven months.

Here's the big picture: Investors have reason to think this month will be challenging. Not only has September historically been the worst month of the year for the stock market, but the upcoming midterm elections also represent an additional source of volatility. Collectively, those headwinds could lead to steep losses.

However, the S&P 500 has always recouped past losses, and the index has delivered especially strong returns once midterm election results are finalized and policy uncertainty dissipates. So investors should treat any substantial declines this month as opportunities to buy an S&P 500 index fund or quality stocks.

Trevor Jennewine 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.

Palantir Technologies (NASDAQ: PLTR) rewarded shareholders with triple-digit returns in each year from 2023 to 2025, with total gains topping 2,600% during that three-year period. But the stock has traded sideways in 2026 despite encouraging financial results, primarily because investors are less confident in richly valued software names.

Wall Street thinks Palantir is modestly undervalued. Among 36 analysts, the median 12-month target price is $205 per share. That implies 10% upside from its current share price of $185.

But I think Palantir is headed to $222 per share, implying 20% upside. Here's my logic.

Image source: The Motley Fool.

Palantir analytics platforms are the connective tissue that links data to decisions

Palantir designs data integration and analytics platforms for customers in the public and private sectors. The company also provides an adjunct Artificial Intelligence Platform (AIP) that serves as an orchestration tool for large language models (LLMs). In other words, AIP is an agnostic tool that lets customers employ the LLMs of their choosing to process data and automate workflows.

Palantir's products are unique because they revolve around a decision-making framework called an ontology. Whereas traditional analytics tools focus on dashboards and reports that help users make sense of information, Palantir links data to operational systems to support decision-making within the platform.

An example: Traditional analytics tools might tell a retailer that a popular product is likely to sell out before the next shipment arrives. Palantir would take that insight one step further by helping the retailer evaluate potential solutions and execute a response, such as sourcing a similar product or increasing order frequency.

"The core ontology function and value proposition is that Palantir not only organizes and displays data, but it also creates prioritized, ranked data that can be quickly understood and interacted with, ultimately automating real-world efficiency gains," writes Morningstar analyst Mark Giarelli.

Palantir has reported accelerating revenue growth in 12 consecutive quarters

Palantir reported tremendous financial results in the second quarter, beating estimates on the top and bottom lines. Revenue rose 93% to $1.9 billion, marking the 12th consecutive acceleration, and non-GAAP (generally accepted accounting principles) net income increased 215% to $0.41 per diluted share. The company also achieved a phenomenal Rule of 40 score of 155%.

Investors have good reason to think that momentum can continue. During a recent CNBC interview, CEO Alex Karp said Palantir was a "business unlike any other." He also said the company was "poised to grow with these margins and this revenue growth for another 18 months."

Why Palantir stock could climb to $222 in the next year

Palantir stock has traded sideways this year partly because investors worry that generative AI tools from Anthropic and OpenAI could displace its products. But agnostic platforms like Palantir will only become more important as LLMs proliferate. As an agnostic orchestration layer, Palantir lets clients swap and mix models without rewriting applications or disrupting enterprise workflows.

Palantir stock currently trades at 154 times adjusted earnings. Wall Street estimates earnings will increase 62% to $1.94 per share over the next year, but the company beat the consensus estimate by an average of 14% over the last six quarters. If that trend continues, adjusted earnings will total $2.22 per diluted share over the next four quarters.

In that scenario, Palantir stock could reach $222 per share even if its valuation drops to 100 times adjusted earnings. Admittedly, that is still a very rich valuation, but it's plausible for a company whose earnings are growing as quickly as Palantir's. I think patient investors with a time horizon of at least five years should consider buying a small position today.

Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

The S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC) added 13% and 14%, respectively, through the first eight months of 2026. That puts both indexes on track for a fourth consecutive year of double-digit gains. But the bull market may be in jeopardy.

Investors recently got bad news about President Trump's economy. Inflation is not cooling as quickly as experts anticipated, raising the odds of interest rate hikes. That is consequential for two reasons. First, new rate-hike cycles have often coincided with stock market corrections. Second, the stock market is already very expensive by historical standards.

Here's what investors should know.

Image source: Official White House Photo.

Sticky inflation could force the Federal Reserve to raise interest rates

The Personal Consumption Expenditure (PCE) price index is the Federal Reserve's preferred inflation gauge. The Consumer Price Index (CPI) is based on consumer surveys about out-of-pocket spending, but the PCE price index is based on business surveys that include out-of-pocket spending as well as third-party expenditures made on behalf of consumers.

PCE inflation measured 2.9% in January 2026, but it has accelerated over the year. The primary reason for the acceleration is the Iran war, which has pushed up energy prices by disrupting a key shipping route for global oil supplies. However, President Trump's tariffs have also contributed meaningfully to inflation, according to research from several Federal Reserve banks.

PCE inflation measured 3.7% in July. That is bad news for a few reasons. It marks the 65th straight month in which PCE inflation has exceeded the Federal Reserve's 2% target. It was slightly above the consensus estimate, which called for PCE inflation of 3.6%. And the July reading was unchanged from the June reading, suggesting sticky inflation.

Here's the big picture: PCE inflation has been above target for over five years, and it could remain so for some time due to the Iran war and tariffs. The longer PCE inflation remains high, the more likely it becomes that elevated energy prices will bleed into other areas of the economy, such as transportation and manufacturing.

July inflation data increased the odds that the Federal Reserve will raise interest rates this year, according to CME Group's FedWatch tool. In fact, futures traders are now betting on two quarter-point rate hikes in the remaining months of 2026, one in September and another in December.

So what? New rate-hike cycles have generally been bad news for the stock market. Since 1987, following the first rate hike in a cycle, the S&P 500 and Nasdaq Composite have declined by 10% and 14%, respectively, at some point during the next year. In other words, the indexes have usually fallen into correction territory under those circumstances.

The stock market sounds an alarm last witnessed during the dot-com crash

The S&P 500 recorded a cyclically adjusted price-to-earnings (CAPE) ratio of 40.6 in July, the highest level since September 2000, a pivotal turning point when losses associated with the dot-com bust began to spread across the broader stock market. The S&P 500 and Nasdaq Composite ultimately plummeted 49% and 78%, respectively, during the dot-com crash.

The chart below shows the average return in the S&P 500 over different time periods after recording a monthly CAPE ratio above 40. The chart also shows the average return in the Nasdaq Composite under the same circumstances.

Data source: Robert Shiller, YCharts. The chart shows how the S&P 500 and Nasdaq Composite performed during the one-, two-, and three-year periods following incidents in which the S&P 500's monthly CAPE ratio topped 40.

The chart above suggests that the stock market could decline sharply in the next few years. In fact, if the S&P 500 and Nasdaq Composite perform in line with their historical averages, the indexes will drop 30% and 51%, respectively, by August 2029.

Of course, past results are never a guarantee of future returns, and the data in the chart is based on a small sample size. Since the S&P 500 was created in 1957, there have been only 25 months when the index had a CAPE multiple above 40. Put differently, the S&P 500 has been this expensive only 3% of the time in the past.

Nevertheless, investors would be unwise to ignore historical data entirely, especially when the Federal Reserve is expected to raise interest rates twice in the remaining months of the year. Now more than ever, investors should focus on buying stocks that not only have durable competitive moats but also trade at reasonable prices.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group. The Motley Fool has a disclosure policy.

Space Exploration Technologies (NASDAQ: SPCX) went public on June 12 at $135 per share. At that price, the company had a market value of $1.77 trillion, making SpaceX the largest IPO stock in history.

SpaceX peaked at $202 per share in mid-June, but the stock has since declined about 30% to $140 per share due to concerns about heavy spending and lock-up expirations. History says this will happen next.

Image source: The Motley Fool.

History says SpaceX's stock will drop further by June 2027

IPO stocks often pop during their first few days on the market. More than 9,000 companies have listed shares on U.S. exchanges since 1980, and the average stock gained 19% on day one, according to Jay Ritter, a finance professor at the University of Florida.

SpaceX fit that historical pattern perfectly. The stock closed at $161 per share on its first day of trading, precisely 19% above its IPO price of $135 per share. But the stock is currently 30% below its high due to market concerns about heavy spending on artificial intelligence infrastructure and upcoming lock-up expirations.

Unfortunately, history says SpaceX stock could decline further in the coming months. Large IPO stocks have generally performed poorly during their first year on the public market:

• Among the 10 largest U.S. IPO stocks by market value since 2006, the average stock fell 34% from its IPO price at some point during the first year. If SpaceX matches that historical pattern, the stock will drop to $89 per share before June 2027. That implies 36% downside from its current share price of $140.
• Among the 10 largest U.S. IPO stocks by market value since 2006, the average stock traded 12% below its IPO price after its first year on the market. If SpaceX matches that historical pattern, the stock will trade at $119 per share by June 2027. That implies a 15% downside from its current share price.

Here's the big picture: Statistically speaking, SpaceX stock is likely to decline further in the coming months. But historical data is never a guarantee of future returns. Whether SpaceX stock moves higher or lower depends primarily on the company's financial results and investor sentiment.

SpaceX's free cash flow was -$25 billion through the first half of 2026

SpaceX is a vertically integrated business with operations across three segments: space, connectivity, and AI. The company has an important economic moat in reusable rockets, which have substantially reduced the cost to launch payloads into orbit. That competitive edge helped SpaceX build Starlink, the largest satellite internet service in the world.

SpaceX delivered encouraging top-line results in the second quarter. Revenue increased 92% to $7.8 billion, a sharp acceleration from 15% revenue growth in the first quarter. The primary reason for that acceleration was especially strong momentum in the AI segment, where sales more than tripled.

However, SpaceX also recorded a negative free cash flow of $25 billion during the first half of 2026. At that pace, the company will burn through the $100 billion in cash and equivalents on its balance sheet in two years. But cash burn could accelerate as it ramps up AI capital expenditures (capex).

SpaceX must also contend with upcoming lock-up expirations. The float (shares available for public trading) increases as lock-ups expire, and insiders may be eager to sell shares. In total, SpaceX's float will increase from 1.8 billion today to 5.2 billion by early December. That could translate into significant selling pressure.

Wall Street says SpaceX stock is deeply undervalued

SpaceX trades at 90 times sales. That makes it more expensive than every stock in the S&P 500 (SNPINDEX: ^GSPC). For context, the most richly valued stock in the index is Palantir Technologies at 73 times sales. That means SpaceX is currently 23% more expensive than the most richly valued stock in the S&P 500.

Yet Wall Street thinks SpaceX is undervalued. Among 40 analysts who follow the company, the stock has a median 12-month target price of $217 per share, according to The Wall Street Journal. That implies 55% upside from its current share price.

I think patient investors should consider buying a very small position today.

Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

The U.S. stock market has delivered impressive returns in 2026 despite economic uncertainty surrounding persistent inflation and elevated energy prices tied to the Iran conflict. Year to date, the broad-based S&P 500 (SNPINDEX: ^GSPC) has added 13%.

Strong corporate financial results have been the driving force behind the stock market's double-digit gains. In fact, the current earnings represent the strongest fundamental environment outside of a post-recession recovery in more than 50 years, according to Wolfe Research.

Nevertheless, the S&P 500 recently flashed a warning last seen during the dot-com crash, and it hints at big losses during the next two or three years. Here is what investors need to know.

Image source: Getty Images.

The stock market is flashing a warning last witnessed during the dot-com crash

In 1988, economist Robert Shiller introduced the cyclically adjusted price-to-earnings (CAPE) ratio as a means of evaluating entire stock market indexes. Whereas the traditional price-to-earnings ratio can be distorted by cyclical changes in earnings, the CAPE ratio eliminates that noise by averaging inflation-adjusted earnings from the past decade.

The S&P 500 recorded an average CAPE ratio of 40.6 in July, the third consecutive monthly reading above 40. Not only is that well above the 20-year average of 28, but the last three months mark the first time since the dot-com crash that the S&P 500's monthly CAPE ratio has topped 40.

Unfortunately, the index's rich valuation hints at a substantial drawdown in the stock market. The chart below shows the S&P 500's best, worst, and average returns over different time periods after recording a monthly CAPE ratio above 40.

Data source: Robert Shiller, YCharts.

The chart above shows two particularly important things. First, the S&P 500 has never generated a positive three-year return following a monthly CAPE reading above 40. Second, if the S&P 500's future returns match the historical average, the index will drop 30% by August 2029.

Of course, past performance does not guarantee future results. While the CAPE ratio did predict the dot-com crash, the internet boom was different from the artificial intelligence (AI) boom. The internet did not reach mainstream adoption for more than a decade, but AI has achieved mainstream adoption in under five years.

In fact, AI has become one of the "fastest-adopted technologies in history, with nearly one in four American firms deploying it at scale," according to Justin Bieman, global investment strategist at JPMorgan Chase. That means AI could become a material source of corporate profits more quickly than the internet.

So what? The CAPE ratio is a backward-looking metric, meaning it does not account for the possibility that earnings growth will accelerate. Earnings growth failed to keep up with stock price appreciation during the dot-com bubble, which ultimately led to a market crash. But if earnings keep up with stock prices during the AI boom, the S&P 500 may continue moving higher while its CAPE ratio drops to something more reasonable.

Wall Street analysts expect the S&P 500 to increase 18% in the next year

S&P 500 companies reported exceptionally strong financial results in the first quarter of 2026. At the index level, revenue increased 11.4% (the fastest growth since Q2 2022), and earnings increased 28.6% (the fastest growth since Q4 2021), according to FactSet Research.

Wall Street expects similar results in the coming quarters. For the full year, the consensus estimate says revenue will grow 11% (the fastest pace since 2022), and earnings will grow 27% (the fastest pace since 2021). At the sector level, analysts anticipate the strongest earnings momentum across the technology (50%), communication services (54%), and energy (77%) sectors.

In turn, Wall Street analysts anticipate substantial upside in the S&P 500 over the next year. The median forecast puts the S&P 500 at 9,106 in August 2027. That implies 19% upside from its current level of 7,722. With that in mind, investors should be cautiously optimistic about where the stock market is headed in the near term.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems and JPMorgan Chase. The Motley Fool has a disclosure policy.

The U.S. stock market has rocketed higher in 2026 amid impressive corporate financial results, especially from artificial intelligence infrastructure companies in the technology sector. The S&P 500 (SNPINDEX: ^GSPC) and the Nasdaq Composite (NASDAQINDEX: ^IXIC) have advanced 12% and 13%, respectively, year to date.

However, stock market investors recently got worrisome news from Treasury Secretary Scott Bessent. In response to elevated yields, he announced a more robust bond buyback program that could contribute to inflation, potentially pushing the Federal Reserve toward interest rate increases. And new rate-increase cycles have often led to market corrections in the past.

Here are the important details.

U.S. Treasury Secretary Scott Bessent delivers remarks at a press briefing. Image source: Official White House Photo.

Treasury Secretary Scott Bessent doubled the cash available for bond buybacks per weekly operation

Several factors have recently driven Treasury bond yields higher at the long end of the yield curve, meaning bonds with maturities ranging from 10 years to 30 years. In fact, the yield on the 30-year Treasury was 5.31% when the market closed on Aug. 17, the highest level since June 2007. Three factors contributing to soaring yields are as follows:

• First, Treasury bond issuance is expected to increase in the future because the U.S. government will need more cash to cover persistent deficit spending and interest payments on outstanding debt. Investors concerned by that possibility have been selling Treasury bonds.
• Second, Treasury bond demand has decreased because of a recent increase in corporate bond issuance. More companies have turned to debt markets to fund investments in artificial intelligence infrastructure. Diminished demand means Treasury bonds are fetching lower prices than they otherwise would have.
• Third, inflation has run hotter than the Federal Reserve's target for more than five years, but Chair Kevin Warsh has promised to restore price stability. That hints at interest rate increases, and investors expecting higher rates on Treasury bonds in the future are selling Treasury bonds today.

The U.S. Treasury Department routinely buys back older government bonds from investors before they reach maturity. Initially, the department said it would purchase up to $2 billion in bonds per weekly operation from Sept. 9 through Nov. 4. However, Bessent last week raised that total to "at least $4 billion per operation."

Bessent's decision could push the Federal Reserve toward interest rate increases

Bessent wants to buy back more Treasury bonds because he thinks yields are higher than current economic conditions warrant. "All we're trying to do is get people to focus on the fundamentals and not trade the headlines during a quiet period in a thin market," he told CNBC.

However, bond buybacks (which aim to reduce yields by raising prices) are a superficial fix. They treat the symptoms, not the cause. In other words, buybacks may lower yields, but the impact will probably be temporary because they don't address the factors that contributed to higher yields in the first place, including elevated inflation, abundant corporate bonds, and national debt.

In addition, if the U.S. Treasury Department's buyback program successfully lowers yields at the long end of the curve, it may reduce borrowing costs and loosen financial conditions, potentially contributing to inflation. That's because long-dated Treasury bonds are a benchmark for other long-term debt; when Treasury yields drop, other long-term debt usually becomes less expensive.

Here's the bottom line: Warsh, who has on several occasions vowed to deliver price stability, must now navigate another potentially inflationary policy. The market anticipates a quarter-point interest rate increase in December, and Bessent's decision to expand the Treasury Department's buyback program makes that increase a little more likely.

That's bad news for stock market investors. The Federal Reserve has initiated four rate-increase cycles since 1999, and the S&P 500 and Nasdaq Composite have generally dropped into market correction territory afterward. In fact, following the first increase in the past four cycles, the S&P 500 and Nasdaq fell by an average of 10% and 15%, respectively, at some point in the next three months.

Trevor Jennewine 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.

The best age to claim Social Security benefits depends on personal circumstances. That said, studies have consistently shown that most retirees with normal life expectancies will maximize lifetime spending power by claiming benefits at age 70.

Yet few people wait that long. Last year, over 90% of newly awarded workers began receiving Social Security benefits before age 70. In fact, almost 25% of newly awarded retirees started Social Security as soon as possible (age 62), meaning they locked in for life the smallest possible benefit based on their personal earnings history.

Some workers naturally come to regret claiming Social Security early. Fortunately, a little-known rule allows undoing claiming decisions in certain situations.

Image source: Getty Images.

Claim age is a critical factor in calculating Social Security benefits

Social Security benefits are based on lifetime earnings and the age at which benefits are claimed. A formula is applied to the inflation-adjusted earnings from a worker's 35 highest-paid years of employment to determine their primary insurance amount (PIA). The PIA is the benefit they will receive if they start Social Security at full retirement age (FRA).

However, some workers choose to start earlier, while others choose to start later. So the PIA is adjusted based on the claim's age. Workers who claim Social Security before FRA get a smaller benefit, meaning less than 100% of the PIA. Workers who claim Social Security after FRA get a larger benefit, meaning more than 100% of the PIA.

There are two limits to those rules. Eligibility for retirement benefits begins at age 62, so no one can claim earlier. Similarly, delayed retirement credits stop accruing after age 70, which means it never makes sense to claim later.

The table explains the relationship between birth year and FRA. It also shows the Social Security benefit a retired worker will receive (as a percentage of PIA) if they claim at ages 62 and 70. In other words, it shows the smallest and largest payouts for people in each age group.

Data source: The Social Security Administration. Percentages have been rounded to the nearest one-tenth of a percent.

As shown, retirees born in 1960 or later will receive only 70% of their PIA at age 62 but 124% of their PIA at age 70. Put differently, retired workers in that age cohort can increase their benefit by 77% (i.e., 124 divided by 70) by simply claiming Social Security at age 70 rather than age 62.

Naturally, some people who start receiving benefits before age 70 come to regret the decision. Fortunately, a little-known Social Security rule lets workers undo their claiming decision in certain situations.

Social Security's little-known do-over can help some retirees increase their benefits

In certain cases, retirees who regret claiming Social Security early can cancel or withdraw their application by completing Form SSA-521, provided they meet the following criteria:

• Claiming decisions can only be undone once.
• Claiming decisions can only be undone within 12 months of approval.

There are other stipulations as well. Retired workers who cancel or withdraw their benefit applications must repay every cent they have received from Social Security. That includes any spousal benefits collected on the retired worker's earnings record. It also includes any money automatically withheld from benefit checks to cover Medicare premiums.

Social Security's do-over option completely erases the decision to claim benefits. That means it wipes away any benefit reduction incurred for claiming before FRA and instead lets retirees earn delayed retirement credits that increase their payout by two-thirds of 1% each month (8% per year) if they claim after FRA.

In the most extreme scenario, retired workers who reverse a claiming decision could increase their benefit payments by 77% by delaying Social Security until age 70 rather than claiming at age 62.

The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) has been a cornerstone of the artificial intelligence (AI) trade since OpenAI introduced ChatGPT in late 2022. Shares have advanced more than 1,300% since January 2023, and most Wall Street analysts still view the stock as undervalued.

Nvidia recently announced a strategic partnership with six of the world's largest financial institutions to secure more than $500 billion in financing for potential customers. That capital will unlock demand by helping smaller enterprises and AI labs purchase Nvidia systems.

Here are the important details.

Image source: The Motley Fool.

Nvidia taps a new $500 billion opportunity with a novel financing platform

Nvidia recently partnered with six financial institutions -- Apollo Global, BlackRock, Blackstone, Brookfield, Goldman Sachs, and KKR -- to create new financing platforms designed to mobilize more than $500 billion in capital for artificial intelligence infrastructure. Nvidia itself may backstop up to $125 billion, or 25% of deals.

Nvidia hardware generally comes with a hefty price tag, which can make it prohibitively expensive for smaller enterprises and AI labs. These financing platforms aim to remove that obstacle by providing prospective customers with an alternative path to purchasing AI infrastructure. In doing so, they will extend Nvidia's addressable market.

"We are helping create a new class of productive, investable infrastructure: AI factories," CEO Jensen Huang commented in the press release. "These financing platforms will help customers access scarce compute at scale and build the AI factories that will power every industry and country in the age of AI."

The market may be underestimating the useful life of Nvidia chips

Nvidia systems are the industry standard in artificial intelligence infrastructure. With a full-stack approach that spans integrated hardware and software, the company can optimize data centers for performance and power efficiency in ways that most competitors cannot.

Jensen Huang says Nvidia systems cost less per token, generate more revenue, and have longer lifespans than alternative solutions. Indeed, there is evidence that Nvidia systems are proving much more durable than the market initially assumed. Neocloud CoreWeave recently signed a contract to rent Nvidia A100 GPUs (introduced in 2020) through 2029.

Analyst Kyle Reidhead recently explained the situation during an interview with Schwab Network: "What we are realizing is that the GPUs are used first for training on frontier models for about two or three years, then you get another three years on inference, and another three, four, or five years on niche training and niche work for enterprises."

So what? Michael Burry, best known for shorting subprime mortgages ahead of the financial crisis in 2008, currently has short positions in Nvidia and other AI companies. His rationale centers on this idea: The useful life for server equipment is about two to three years, but hyperscalers are depreciating the hardware over five years, which overstates the return on their investments in AI infrastructure.

However, recent commentary from CoreWeave suggests the useful life of Nvidia GPUs is much longer than five years, meaning hyperscalers may actually be understating the return on investment in AI infrastructure. And if the useful life of Nvidia chips is longer than previously anticipated by the market, it could strengthen the company's pricing power, as customers would theoretically be willing to pay more for a longer-lived product.

Wall Street analysts think Nvidia stock is deeply undervalued

Looking ahead, Wall Street estimates Nvidia's earnings will increase at 44% annually over the next three years. That makes the current valuation of 32 times earnings look downright cheap. Indeed, most Wall Street analysts believe the stock is undervalued.

As of Aug. 24, Nvidia has a median 12-month target price of $300 per share, according to The Wall Street Journal. That represents the consensus estimate among 67 analysts, and it implies 44% upside from the current share price of $208. Patient investors should consider buying a small position in Nvidia today.

Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends BlackRock, Blackstone, Brookfield Asset Management, Goldman Sachs Group, KKR, and Nvidia. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) will announce second-quarter financial results at 5:00 p.m. ET on Aug. 26, and the entire stock market could rise or fall on the news. That's partly because Nvidia accounts for 8% of the S&P 500 (SNPINDEX: ^GSPC), but also because investors see the chipmaker as a barometer of the artificial intelligence boom.

Wall Street is predominantly bullish ahead of the report. The consensus earnings estimate has been revised higher in the past month, and most analysts consider Nvidia deeply undervalued. The stock has a median 12-month target price of $300 per share. That implies 44% upside from the current share price of $208.

Here's what investors should know.

Image source: Getty Images.

Wall Street expects strong financial results from Nvidia

Nvidia reported encouraging first-quarter financial results. Revenue increased 85% to $81.6 billion, driven by relentless demand for data center compute and networking products, and non-GAAP net income increased 140% to $1.87 per diluted share. Management also provided strong guidance implying 95% revenue growth in the second quarter.

However, Wall Street has bigger expectations. The consensus estimate currently says Nvidia's revenue will increase 97% to $92.1 billion and non-GAAP net income will increase 99% to $2.09 per diluted share. The stock will not necessarily rise if the company beats expectations, but it could drop sharply (alongside the broader stock market) if its financial results fall short of what analysts anticipate.

Nvidia dominates the AI infrastructure market

Nvidia dominates the artificial intelligence infrastructure market. Its graphics processing units (GPUs) are the most popular type of artificial intelligence accelerator, with 80% to 90% market share. Nvidia is also the largest networking business in the world, and the company is on pace to be the largest central processing unit (CPU) supplier this year.

To further quantify Nvidia's dominance, consider these facts:

• George Lee at Goldman Sachs estimates Nvidia accounts for 75% of data center capital expenditures (capex) related to artificial intelligence compute. He also expects AI compute capex to hit $1 trillion in 2030. If Nvidia maintains its market share, that revenue stream could hit $750 billion by the end of the decade, implying 34% annual growth.
• Meera Pandit at JPMorgan Chase estimates that 26% of hyperscaler capex goes directly to Nvidia's bottom line. She expects total capex spending (i.e., compute, power, and property) from the five largest hyperscalers to reach $1.1 trillion in 2027. So, those five companies could account for $260 million in net income next year if Nvidia maintains its market share.

Wall Street analysts generally expect Nvidia to maintain its dominance in AI infrastructure despite intensifying competition. The company's ability to optimize across the AI hardware stack enables it to optimize systems for performance and power efficiency in ways competitors cannot.

Nvidia not only develops the fastest training systems but also has the lowest inference costs, CFO Colette Kress recently told analysts. She also noted that the company has consistently achieved top results at the MLPerf benchmarks, a series of objective tests regarded as the industry standard in measuring AI systems across training and inference workloads.

Nvidia systems not only offer the best performance of any AI infrastructure on the market, but they are also the most economic and financeable solution, Kress explained. "The right economic metric is not the purchase price of the GPU. It is the lifetime cost of an AI factory producing intelligence." No matter how that's measured, Nvidia excels.

Beyond superior hardware, Nvidia's CUDA software is the industry standard in AI development, powering about 90% of enterprise AI applications. No other company has a comparable ecosystem of code libraries, and even if they did, moving those applications to alternative data center accelerators like Alphabet's Tensor Processing Units (TPUs) would be expensive and time-consuming.

With that in mind, Wall Street expects Nvidia's adjusted earnings to grow at 58% annually through the fiscal year ending in January 2028. That makes the current valuation of 37 times earnings look downright cheap. Patient investors should feel comfortable buying a small position in Nvidia stock today, but I would hold some money in reserve to capitalize on any pullback following the company's financial report this week.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Goldman Sachs Group, JPMorgan Chase, and Nvidia. The Motley Fool has a disclosure policy.

Warren Buffett is undoubtedly one of the most influential figures in modern finance. Under his leadership, Berkshire Hathaway evolved from a small textile manufacturer into one of the largest conglomerates in the world. Buffett's patient, value-oriented investments were essential to that transformation.

One way to quantify his success is to examine Berkshire's returns when he led the company. Between 1965 and 2025, the stock gained almost 20% annually, crushing the S&P 500 (SNPINDEX: ^GSPC), which added about 11% annually during the same period.

Last December, after six decades at the helm, Buffett retired and handed the CEO position at Berkshire to Greg Abel. Despite stepping back from the media spotlight, Buffett did pass a warning to investors during a recent CNBC interview, and it could haunt Wall Street for years.

Image source: Getty Images.

Warren Buffett says investors are treating the stock market like a casino

Warren Buffett, now 95 years old, sat down for an interview with CNBC in May. He talked about everything from nuclear weapons and geopolitical risk to artificial intelligence (AI) and the macroeconomic environment. But a few comments stood out.

While discussing the market's increasingly speculative behavior, Buffett said, "We've never had people in a more gambling mood than now." He also warned that some investors were treating the stock market like a casino, making irresponsible bets that have left an awful lot of valuations looking "very silly."

Buffett has issued similar warnings before, so investors may be tempted to brush aside his most recent comments. Unfortunately, a respected stock market indicator just sounded an alarm that lends credence to Buffett's casino analogy, and it hints at trouble for Wall Street in the years ahead.

The S&P 500's CAPE ratio is extremely high by historical standards

In 1988, Nobel Prize-winning economist Robert Shiller and his colleague John Campbell introduced the cyclically adjusted price-to-earnings (CAPE) ratio. The metric was designed to determine whether entire stock market indexes were overvalued, and it correctly predicted the dot-com crash around the turn of the century.

Unlike traditional price-to-earnings multiples, which are based on earnings from the last four quarters, CAPE multiples are based on average inflation-adjusted earnings from the last 10 years, which eliminates cyclical noise and smooths the effects of economic cycles.

The S&P 500 recorded a monthly CAPE ratio of 40.6 in July, the highest reading since the dot-com crash in September 2000. In fact, there have been only 30 instances since the index was created in 1957 when the S&P 500's monthly CAPE ratio was at least 40, which means the stock market has been this expensive only 3% of the time.

Unfortunately, such rich valuations have historically been a harbinger of significant losses. The chart below shows the S&P 500's best, worst, and average returns over different periods after a CAPE reading above 40.

Data source: Robert Shiller, YCharts.

There are two important takeaways in the chart. First, the S&P 500 has never delivered a positive three-year return following a monthly CAPE reading above 40. Second, if the S&P 500's future returns match the historical average, the index will drop 30% over the next three years.

Here's the big picture: Warren Buffett recently warned investors that the stock market has become increasingly casino-like, with speculative bets pushing some valuations to silly levels. That warning could haunt Wall Street for years because the CAPE ratio, a valuation metric that correctly predicted the dot-com crash, is flashing a warning today.

Of course, past performance is no guarantee of future results. And the internet boom did not drive the same type of earnings momentum we have seen lately from the AI boom. S&P 500 companies are forecast to report 50% earnings growth in the second quarter, the strongest pace on record outside of post-recession recoveries.

The CAPE ratio is a backward-looking valuation metric, meaning it does not account for the possibility of a sustained increase in future earnings growth. But if S&P 500 companies maintain their momentum, the index could continue to rise while the CAPE drops to a more reasonable level. In that scenario, the stock market could avoid a steep sell-off.

Trevor Jennewine 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.

Social Security is a major source of retirement income for millions of Americans, but the amount it provides can vary significantly depending on when benefits start. Some people claim benefits as soon as they are eligible, at age 62, and others wait until age 70 to receive a larger monthly payment.

Unfortunately, nearly half of U.S. workers have little to no idea how much income they should expect from Social Security in retirement, according to the National Institute on Retirement Security. And without some idea of future benefits, planning for retirement can be difficult.

The best way to estimate your future benefit is to check your "my Social Security" account, a free service from the Social Security Administration. But looking at the average benefit at different ages can provide a useful benchmark for comparison.

Image source: Getty Images.

Here's the average Social Security benefit for retired workers at ages 62 to 70

The Social Security Administration (SSA) periodically publishes anonymized benefit data to promote public understanding. The data in the chart below comes from a biannual report that was last updated in December 2025. It shows the average monthly Social Security benefit for retirees between ages 62 and 70.

Source: Social Security Administration. Note: Benefit payment amounts have been rounded to the nearest dollar.

As shown above, the average benefit for retired workers becomes progressively larger between ages 62 and 70. That is primarily due to differences in when workers claim Social Security. While eligibility begins at age 62, those who wait until age 70 are entitled to their maximum monthly payout based on their personal earnings history.

A step-by-step guide to how your Social Security benefit is calculated

The Social Security Administration (SSA) considers two major variables when calculating the benefit amount for retired workers: lifetime earnings and claim age. The steps below summarize the process:

1. The SSA indexes a worker's earnings to account for changes in general wage levels that occurred during their years of employment. This ensures that future benefits account for any increase in the standard of living that occurred during a worker's career.
2. The SSA applies a formula to the indexed earnings from the 35 highest-paid years of a worker's career to determine their primary insurance amount (PIA). The PIA is the benefit a person will receive if they start Social Security at full retirement age (FRA).
3. The SSA adjusts a worker's PIA based on claim age. Those who claim earlier than FRA are hit with a permanent reduction, meaning they get less than 100% of their PIA. Those who claim later than FRA earn delayed retirement credits, which increase the payout to more than 100% of the PIA.

The chart below shows the benefit (as a percentage of PIA) a retired worker will receive if they claim Social Security at ages 62 and 70, respectively. In other words, it quantifies the impact of early and delayed retirement on benefit payments.

Data source: The Social Security Administration.

The chart above makes it clear that Social Security is heavily dependent on the age at which a worker claims benefits. For example, someone born in 1960 or later can increase their Social Security payments by 77% (i.e., 124% divided by 70%) if they simply claim benefits at age 70 rather than age 62.

The Motley Fool has a disclosure policy.

The U.S. stock market has posted solid returns this year despite battling economic uncertainty created by President Donald Trump's policies. Year to date, the broad-based S&P 500 (SNPINDEX: ^GSPC) index has advanced 12% and the technology-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) index has added 13%.

Despite strong corporate earnings in the first and second quarters, surveys conducted by the American Association of Individual Investors indicate that bearish sentiment has increased significantly since January. In particular, investors are anxious about inflation, government debt levels, and heavy spending on artificial intelligence.

The bond market, fueled by those concerns, just flashed a warning sign last seen about two decades ago. The 30-year Treasury bond yielded 5.31% when the market closed on Aug. 17, the most since June 2007. Last time 30-year Treasuries paid that much, the S&P 500 and Nasdaq Composite dropped into correction territory during the next year.

Here's what investors should know.

Image source: Getty Images.

Treasury yields are rising due to concerns about corporate bond supply, inflation, and national debt

Treasury bonds are debt securities issued by the U.S government. They pay interest semiannually until maturity, at which point the bondholder recoups the principal. Bond prices and yields move in opposite directions, and both figures are driven by market supply and demand.

In recent weeks, Treasury bonds have come under selling pressure (causing prices to drop and yields to rise) because investors are concerned about several things:

• Hyperscalers and neoclouds are funding investments in artificial intelligence infrastructure by issuing debt. The increase in corporate bond supply (especially from companies with strong cash flows) has reduced demand for Treasury bonds.
• Investors anticipate two quarter-point interest rate hikes from the Federal Reserve in the next year because inflation has remained above target for more than five years. The expectation that Treasury bonds will pay higher yields in the future is reducing demand today.
• U.S. national debt recently hit $40 trillion. The federal government will have to sell more bonds in the future, not only to cover annual deficits, but also to pay off older bonds. So investors want higher interest rates as compensation for lending to a government that is deeply indebted.

Collectively, those headwinds have driven Treasury bond prices lower (and yields higher), and similar moves in the past have been bad news for the stock market. Not only do higher interest rates suppress consumer spending and business investments, but they also make bonds look increasingly attractive relative to stocks.

History says the S&P 500 and Nasdaq Composite are headed for market correction territory

As mentioned earlier, the 30-year Treasury bond paid 5.31% when the market closed on Aug. 17, the most it's paid since June 2007. In fact, there have been only two trading days in the last 20 years when the 30-year Treasury bond paid 5.3% or more. What happened in June 2007? The U.S. stock market suffered a correction. The S&P 500 and Nasdaq Composite dropped 15% by March 2008.

Additionally, as of Aug. 19, the 30-year Treasury bond has maintained a yield of at least 5% for 32 straight trading days, the longest streak since the summer of 2007. What happened then? The U.S. stock market suffered a correction. The S&P 500 and Nasdaq Composite fell by 18% and 16%, respectively, over the next year.

In short, history says the recent surge in 30-year Treasury bond yields could draw money away from stocks, potentially dragging the S&P 500 and Nasdaq Composite into market correction territory. Past performance is never a guarantee of future results, but bonds look increasingly attractive relative to stocks as yields rise.

Trevor Jennewine 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.

Palantir Technologies (NASDAQ: PLTR) is one of the most popular artificial intelligence trades on the market, particularly among retail investors. The stock has essentially moved sideways this year despite a series of strong financial results, but investors have reason to think it could break higher in the coming months.

Recent commentary from CEO Alex Karp suggests the company can maintain its impressive revenue growth trajectory for the foreseeable future, and most Wall Street analysts believe the stock is undervalued. Here are the important details.

Image source: The Motley Fool.

Alex Karp says Palantir can maintain its growth trajectory for the next 18 months

Palantir develops data integration and analytics platforms for customers in the public and private sectors. The company also provides an adjunct artificial intelligence platform (AIP) that serves as an orchestration tool for large language models (LLMs).

Palantir has received praise from several independent research firms. Dresner Advisory Services has ranked the company as a leader in three market studies: AI, data science, and machine learning; model operations; and agentic AI. And Forrester Research has recognized Palantir as a leader in AI decisioning platforms.

Palantir reported tremendous financial results in the second quarter, beating consensus estimates on both the top and bottom lines. Revenue rose 93% to $1.9 billion, marking the 12th consecutive acceleration, and non-GAAP (generally accepted accounting principles) net income increased 215% to $0.41 per diluted share. Palantir also achieved a phenomenal Rule of 40 score of 155%.

Here's the good news: During a recent CNBC interview, CEO Alex Karp said Palantir was a "business unlike any other." He also said the company was "poised to grow with these margins and this revenue growth for another 18 months."

Karp pins his confidence on the strong demand for sovereign AI, meaning systems that ensure a company has absolute control over its proprietary data and model weights. "Demand for AI sovereignty has now been unleashed," said Karp. "Palantir is the only company that has demonstrated it can transform tokens into actual economic value."

Palantir is the application layer that makes AI models safe, useful, and precise

Palantir plays a critical role in the AI value chain. Companies like Anthropic and OpenAI have built incredible models, but businesses need an application layer not only to unlock operational value with those models but also to safeguard proprietary data. Palantir is that application layer.

One way Palantir has differentiated itself is through its unique software architecture. Whereas most analytics products focus on reporting through spreadsheets and charts, Palantir built its platforms around a decision-making framework called an ontology. Think of an ontology as a real-time digital twin for an organization. It connects abstract data to physical assets, creating an intuitive interface that lets users surface insights and take action.

Here's the bottom line: Most analytics products are simply visualization dashboards, but Palantir actually bridges the gap between data and decision-making, allowing its software to create real operational value. And ontology-based software is the secret to its success. CEO Alex Karp says the company's ontology makes large language models "safe, useful, and precise."

The Wall Street consensus says Palantir stock will increase 18% in the next year

Wall Street expects Palantir's adjusted earnings to increase at 56% annually through 2027. That is impressive, but the current price-to-earnings ratio of 144 still looks very expensive by comparison. Those figures give a price-to-earnings-to-growth (PEG) ratio of 2.5, and values above 2 are generally considered rich.

Nevertheless, Palantir has such a long runway for growth that most Wall Street analysts anticipate upside in the stock. Palantir has a median 12-month target price of $205 per share among 35 analysts. That implies 18% upside from its current share price of $173.

Personally, I think investors should be cautious with Palantir. While the stock has traded sideways this year, it has also climbed more than 60% since late June, and the valuation is not cheap. I think it's OK to purchase a few shares today, but I would limit the position to no more than 1% of my portfolio.

Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Year to date, the broad-based S&P 500 (SNPINDEX: ^GSPC) has advanced 13%, while the growth-focused Nasdaq Composite (NASDAQINDEX: ^IXIC) has added 15%. The driving force behind those double-digit gains has been strong corporate earnings results.

However, stock market corrections (and even crashes) are inevitable. Near term, the market faces headwinds related to elevated energy prices and potential interest rate increases. And long term, the S&P 500 and Nasdaq Composite could decline for any number of reasons.

Fortunately, history provides a clear blueprint regarding how investors should navigate the next stock market correction. Here are the important details.

Image source: Getty Images.

Stock market corrections are inevitable, but the S&P 500 and Nasdaq Composite have always recovered

The S&P 500 is widely regarded as the best benchmark for the overall U.S. stock market because it includes about 80% of domestic equities by market value. Since 2010, the index has suffered 10 market corrections, two of which eventually became bear markets.

The Nasdaq Composite is regarded as the best gauge for growth stocks because the Nasdaq Exchange has more flexible listing rules and lower fees than the New York Stock Exchange, which makes it a more attractive destination for innovative technology companies. Since 2010, the index has suffered 14 market corrections, four of which became bear markets.

In short, stock market corrections were relatively common during the past 15 years. In all cases, the smartest move investors could have made would have been buying the dip. The S&P 500 and Nasdaq Composite have never failed to recoup their losses, meaning investors who put money into funds tracking those indexes during past corrections would be sitting on profit today.

Warren Buffett, whose value-oriented investment strategy helped build Berkshire Hathaway into one of the largest companies in the world, has often advocated for buying the dip. "The best chance to deploy capital is when things are going down," he said during a CNBC interview in 2018. "Be greedy when others are fearful," he wrote during the financial crisis in 2008.

The S&P 500 and Nasdaq Composite tend to deliver robust returns after entering correction territory

Since 2010, the S&P 500 has dropped into market correction territory about once every 18 months, while the Nasdaq Composite has dropped into correction territory about once every 13 months. Any attempt to avoid those periodic dips is likely to backfire because investors must be correct twice: They must know when to sell and when to buy again.

One reason market timing strategies tend to fail is they increase the odds that investors will miss out on the market's best days. Historically, about 50% of the S&P 500's best days have taken place during bear markets and another 25% of its best days have occurred during the first two months of new bull markets.

Investors who sell stocks simply because the market is falling are likely to miss at least some of the best days, and missing even a few of them can have a devastating impact on long-term returns. "If you missed the market's 10 best days over the past 30 years, your returns would have been cut in half," according to Hartford Funds.

Instead, investors should focus on buying the dip, particularly once the major stock market indexes have closed in correction territory (i.e., 10% below their record high). Here's why:

• Since 2010, following the S&P 500's first close in correction territory, the index has returned an average of 18% during the next year and 38% during the next two years.
• Since 2010, following the Nasdaq's first close in correction territory, the index has returned an average of 23% during the next year and 41% during the next two years.

Here's the big picture: Stock market drawdowns are inevitable, and the next major crash will happen sooner or later. But the S&P 500 and Nasdaq Composite have always recovered, and there is no reason to think next time will be different. That means investors who buy an S&P 500 index fund or Nasdaq index fund during the next drawdown will almost certainly turn a profit eventually.

Trevor Jennewine 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.

More than 5,500 companies were listed on U.S. stock exchanges as of Q1 2026, according to the Security Industry and Financial Markets Association (SIFMA). Those stocks are grouped into different indexes that track various aspects of the domestic market.

The three most widely followed indexes are the S&P 500 (SNPINDEX: ^GSPC), Nasdaq Composite (NASDAQINDEX: ^IXIC), and Dow Jones Industrial Average (DJINDICES: ^DJI). But the S&P 500 is generally considered the best gauge for the overall U.S. market.

Read on to learn how the S&P 500 performed during the past 20 years, and what Wall Street expects from the index in the next year.

Image source: Getty Images.

The S&P 500 returned 9.5% annually (excluding dividends) over the past 20 years

The S&P 500 was created in March 1957. The index is generally viewed as the best gauge for the U.S. stock market because it tracks 500 large companies, including value stocks and growth stocks from every market sector, that account for more than 80% of domestic equities by market capitalization.

Which stocks are included is ultimately at the discretion of a selection committee, but no company can be considered unless it meets certain eligibility criteria. That includes GAAP profitability during the past four quarters, a sufficiently liquid stock, and a minimum market capitalization of $22.7 billion.

The index is updated during quarterly rebalancing events, which happen on the third Friday of March, June, September, and December. Marvell Technology and Flex joined the index in June. But companies can be added at any time. Reddit will join the index later this month to replace AvalonBay Communities, which is being acquired by Equity Residential.

The S&P 500 is most heavily weighted toward technology stocks. The 10 largest positions in the index are, as listed by weight:

1. Nvidia: 8.1%
2. Apple: 6.7%
3. Microsoft: 5.5%
4. Alphabet: 5.4%
5. Amazon: 3.8%
6. Broadcom: 3%
7. Meta Platforms: 2%
8. Micron Technology: 1.6%
9. JPMorgan Chase: 1.5%
10. Eli Lilly: 1.4%
11. Tesla: 1.4%

Excluding dividends, the S&P 500 advanced 515% (9.5% annually) in the past two decades. Including dividends, the index achieved a total return of 800% (11.6% annually) during the same period.

Wall Street analysts expect the S&P 500 to advance 17% over the next year

Wall Street analysts expect S&P 500 earnings to increase 33% in 2026, an acceleration from 14% in 2025, according to LSEG. If accurate, that will represent the fastest growth since 2021. The energy and technology sectors are expected to lead the way because of elevated oil prices and heavy spending on artificial intelligence infrastructure.

In turn, most Wall Street analysts are forecasting substantial upside in the S&P 500 during the next year. The index has a median 12-month target level of 9,106, according to FactSet Research. That implies 17% upside from its current level of 7,786, which is well above the average of 9.5% annually over the past two decades.

At the sector level, analysts anticipate the most upside in communication services (24%), technology (22%), and consumer discretionary (18%) stocks. Of course, investors should never put too much weight on Wall Street's forecasts. Not even the most intelligent analyst can predict the future, and the market is entering what has historically been a difficult time of year.

During the past decade, the S&P 500 had declined by an average 2% in September, making it the worst month of the year by a wide margin. Additionally, the S&P 500 typically declines sharply ahead of midterm elections because the president's party generally loses seats in Congress, which creates policy uncertainty.

Here's the bottom line: In aggregate, S&P 500 companies in 2026 are projected to report the fastest earnings growth since 2021, driven primarily by heavy spending on AI infrastructure. In turn, analysts expect the S&P 500's return in the next year to crush the long-term average.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has positions in Amazon, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, Eli Lilly, FactSet Research Systems, JPMorgan Chase, Marvell Technology, Meta Platforms, Micron Technology, Microsoft, Nvidia, Reddit, and Tesla. The Motley Fool recommends AvalonBay Communities and Flex. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) is the cornerstone of the artificial intelligence infrastructure build-out. The company not only dominates the market for data center accelerators, with nearly 90% market share, but also has booming businesses in networking solutions and central processing units (CPUs).

Nvidia shareholders recently got some good news from Space Exploration Technologies (NASDAQ: SPCX). Here are the important details.

Image source: The Motley Fool.

Nvidia shareholders got good news from SpaceX

In the second quarter, SpaceX reported 247% revenue growth in the artificial intelligence (AI) segment, driven in large part by cloud services deals with Alphabet and Anthropic and, to a lesser extent, enterprise AI tools. SpaceX plans to invest heavily in AI infrastructure in the coming quarters.

CEO Elon Musk told analysts:

We expect to end this year with over 2 gigawatts of compute. And probably our cumulative compute online by the end of next year will be several times higher. It may, let's say, be closer to 10 gigawatts of compute than 5 gigawatts of compute.

Additionally, Elon Musk said SpaceX would only use Nvidia systems in the future. "We've decided to build exclusively on Nvidia because we think the Vera Rubin architecture is the best architecture," he told analysts. "We think it's the best AI computer."

Vera Rubin is Nvidia's next-generation superchip. It features Vera CPUs and Rubin GPUs paired with chip-to-chip interconnects called NVLink. Compared to its predecessor Grace Blackwell, the Vera Rubin module delivers about 10 times more performance per watt, meaning it is far more efficient.

Today, the top five hyperscalers -- Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle -- account for a substantial portion of data center capital expenditures (capex). Collectively, those hyperscalers are forecast to invest about $800 billion in AI infrastructure in 2026, while total AI-related capex is projected to top $1 trillion, according to Goldman Sachs.

In the years ahead, SpaceX may become a sixth major hyperscaler. The company reported $13 billion in AI-related capex in 2025, but it has already surpassed that figure through the first half of 2026. Morgan Stanley estimates SpaceX's investments in AI infrastructure will hit $110 billion in 2028, representing annual growth of about 100%.

Here's the big picture: SpaceX is aggressively expanding its data center footprint. "We're building AI compute capacity at scale faster than anyone else," Musk told analysts on the recent earnings call. The fact that SpaceX has decided not to explore alternatives is a nod to Nvidia's superiority in AI infrastructure. It not only represents additional revenue for Nvidia but may also foreshadow similar decisions from other large companies.

Wall Street says Nvidia stock is deeply undervalued

Wall Street estimates Nvidia's earnings will increase at 45% annually over the next three years. That makes the current valuation of 33 times earnings look downright cheap. Those numbers give Nvidia a price-to-earnings-to-growth (PEG) ratio of 0.75, and values below 1 are usually taken to mean a stock is undervalued.

More importantly, Nvidia's PEG ratio hasn't been this low at any point in the last five years, making the stock a compelling investment. Indeed, among 65 analysts, Nvidia has a median target price of $300 per share. That implies 33% upside from its current share price of $225.

Nvidia stock looks cheap for another reason. Wall Street has consistently underestimated how much money hyperscalers would invest in data center infrastructure. Last year, the consensus estimate said capex spending among the top five hyperscalers would total $525 billion in 2026, but analysts now anticipate almost $800 billion.

If analysts are underestimating how much hyperscalers will spend on AI infrastructure, it stands to reason that they are also underestimating Nvidia's future earnings growth. For that reason, I think investors should consider buying a small position today.

Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) shares are up 1,390% since the artificial intelligence boom began in January 2023, and Wall Street still thinks the stock is undervalued. Among 65 analysts, the median target price is $300 per share, implying 37% upside from the current share price of $218.

Nvidia shareholders recently got good news from Wall Street. Consensus earnings estimates have recently been revised higher, such that analysts now expect earnings to increase at 44% annually over the next three years. In March, the consensus estimate said earnings would increase at 33% annually over that period.

What changed? Wall Street analysts once again underestimated how much money hyperscalers would spend on AI infrastructure. Here are the important details.

Image source: Getty Images.

Nvidia dominates the market for AI infrastructure across GPUs, CPUs, and networking equipment

Nvidia is a full-stack accelerated computing company that develops graphics processing units (GPUs), central processing units (CPUs), and networking equipment, supported by a robust ecosystem of software tools. That approach lets the company optimize performance and power efficiency in ways most competitors cannot, which explains why Nvidia systems are the gold standard in artificial intelligence.

Most readers probably know that Nvidia GPUs account for a large percentage of data center accelerator sales (around 90%, according to HPC Wire). But readers may be less familiar with the company's prowess in other categories. Nvidia recently became the largest networking company in the world, and it's on pace to become the largest CPU supplier by the end of this year.

Of course, there's been a lot of talk about application-specific integrated circuits (ASICs), chips purpose-built for specific workloads like artificial intelligence. Some investors are worried that custom silicon will eventually displace Nvidia. But those fears are unwarranted. ASICs perform certain tasks more cheaply than Nvidia GPUs, but they are less flexible and lack the robust software development ecosystem that backs Nvidia chips.

"Nvidia isn't going anywhere anytime soon," according to Meera Pandit, global market strategist at J.P. Morgan. "Only Nvidia chips can handle any AI workload. Custom hardware is a safe and efficient bet for known workloads like inference, but there's an obsolescence risk as AI evolved."

Wall Street raised its hyperscaler capital expenditure (capex) spending forecast for 2026

Currently, 26% of hyperscaler capital expenditures (capex) go straight to Nvidia's bottom line, according to research from J.P. Morgan. That astonishing metric underscores the essential role Nvidia plays in the AI infrastructure market. And assuming the company maintains its pricing power and market share, earnings growth should more or less match capex growth going forward.

Here's the good news for shareholders: Wall Street has consistently underestimated how much hyperscalers will spend on AI infrastructure. "At the start of both 2024 and 2025, consensus estimates implied capex growth of roughly 20% for the year," writes Goldman Sachs. "In reality, it exceeded 50% in both years."

The same thing happened in 2026. Last June, the consensus estimate said capex spending among the five largest hyperscalers -- Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle -- would total $361 billion this year. But Wall Street has since raised its forecast by over 100%, such that the consensus estimate now says their capex spending will total $733 billion in 2026.

Similarly, investors have reason to think Wall Street is making the same mistake with 2027. The consensus estimate currently says capex spending among the top five hyperscalers will grow 28% to $939 billion next year. But that would be a major slowdown compared to capex growth of 56% in 2024, 73% in 2025, and the projected capex growth of 90% in 2026.

Here's the big picture: Wall Street currently expects capex spending among the five largest hyperscalers to grow at 41% annually through 2028. Meanwhile, the consensus estimate says Nvidia's earnings will increase at 44% annually over the same period. It makes sense that those figures are roughly equivalent.

However, if analysts are underestimating hyperscaler capex, which is plausible given their track record, it stands to reason that they are also underestimating Nvidia's future earnings. And if earnings grow faster than expected over the next few years, the efficient market hypothesis predicts the stock price will rise. That makes Nvidia a worthwhile long-term investment.

Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Goldman Sachs Group, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.

Shares of Elon Musk's Space Exploration Technologies (NASDAQ: SPCX) have fallen 35% from their post-IPO high, but Wall Street says the stock is deeply undervalued. Among 40 analysts, the median target price is $217 per share, implying 65% upside from its current share price of $131.

Adam Jonas at Morgan Stanley is particularly optimistic. Shortly after SpaceX went public, Jonas put a buy rating on the stock and set his target at $300 per share. That implies 129% upside from its current price.

Here's what investors should know.

Image source: Getty Images.

SpaceX's revenue growth accelerated in the second quarter, but the company is losing money

SpaceX is a vertically integrated business whose operations span three segments: space, connectivity, and artificial intelligence (AI). The company has an important competitive moat in reusable rockets, which have substantially reduced the cost to launch payloads into orbit. That economic edge helped SpaceX build Starlink, the largest satellite internet service in the world.

CEO Elon Musk wants to combine those proficiencies to develop orbital (space-based) data centers, which could theoretically solve the power and cooling problems that limit terrestrial data centers. SpaceX discussed its advantageous positioning in its SEC Form S-1: "We believe we are the only company with a commercially viable path to building orbital AI compute at scale."

SpaceX delivered encouraging second-quarter financial results, its first report as a public company. Revenue increased 92% to $7.8 billion, a sharp acceleration from 15% revenue growth in Q1. The driving force behind that acceleration was strong momentum in the AI segment, where sales more than tripled.

However, SpaceX's expenditures continued to swell, primarily due to massive investments in AI compute and, to a lesser extent, costs related to developing its next-generation Starship rocket. The company reported a net loss of $541 million ($0.09 per diluted share), and management indicated that AI infrastructure spending is likely to accelerate in the coming quarters.

"We expect to end this year with over 2 gigawatts of compute," Elon Musk told analysts on the earnings call. "Our cumulative compute online by the end of next year will be several times higher. It may, let's say, be closer to 10 gigawatts of compute than 5 gigawatts of compute." Musk has also said the first orbital data centers could launch in 2027.

SpaceX just passed its first lockup expiration, but its float will more than triple before the end of 2026

SpaceX recently overcame an important hurdle in the expiration of its first lockup period on Aug. 6. The company sold 555 million shares in its initial public offering (IPO), representing less than 5% of its total shares outstanding, but another 911.5 million shares became available for trading on the second trading day following its Q2 financial report.

Countless pundits framed the event as a potential disaster, assuming that early investors and insiders would sell shares at the first opportunity. However, SpaceX stock has actually advanced more than 10% since the lockup period expired last week. Even so, shareholders aren't out of the woods yet. There are more lockup expirations on the horizon.

SpaceX's float (the number of shares available for public trading) will increase from about 1.4 billion today to more than 5 billion by year end. Some insiders and early investors may be eager to sell in the future, especially if the stock continues to decline.

Morgan Stanley's Adam Jonas believes AI is a massive growth opportunity for SpaceX

Adam Jonas at Morgan Stanley justifies his target price of $300 per share by highlighting vertical integration. "SpaceX combines near-monopoly launch economics, the largest low-Earth orbit satellite network, and a fast-scaling AI infrastructure business," he wrote in a note to clients in July. "We see the company as one of the few platforms that can link real estate in orbit, global connectivity, and compute capacity into one infrastructure stack."

Jonas estimates SpaceX's revenue will increase at 88% annually to hit $319 billion by 2030. He thinks the driving force will be the AI segment, where he anticipates annual revenue growth of 148% to reach $190 billion, driven by a combination of AI infrastructure services and enterprise AI applications. Meanwhile, Jonas says connectivity and space revenue will grow at 69% annually and 16% annually, respectively.

Unfortunately, SpaceX is a difficult stock to value, not only because the company is burning cash, but also because its plans to launch AI infrastructure into space are still entirely theoretical. Nevertheless, with the stock trading below its IPO price of $135 per share, I think investors with a time horizon of at least five years should consider buying a very small position today.

Trevor Jennewine 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.

The S&P 500 (SNPINDEX: ^GSPC) is up 13% in 2026, putting the index on course for a fourth straight year of double-digit gains. The stock market has been supported by strong corporate earnings driven by massive investments in artificial intelligence, and Wall Street expects that strength to continue in the coming quarters.

However, the S&P 500 hit a record high of 7,758 on Aug. 7. Is it safe to buy stocks with the benchmark index near its peak? Investors should consider this advice from legendary investor Warren Buffett and also contemplate historical data on the S&P 500's performance after a record high.

Image source: Getty Images.

Warren Buffett's advice about picking stocks in any market environment

Warren Buffett never shied away from purchasing stocks simply because the S&P 500 was trading near its record high. Instead, he consistently put money to work for Berkshire Hathaway throughout his career using a value-oriented investment framework. He explained that framework in very simple terms in his 1996 letter to Berkshire shareholders:

Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, 10, and 20 years from now.

Buffett's explanation does not even mention the broader stock market. That's because it matters very little whether the S&P 500 trades near its record high.

What matters is the valuation of the stock (or stock market index) in question. Is it cheap or expensive when compared to projected earnings growth? How does the current valuation stack up against the historical average?

The S&P 500 currently trades at 28 times earnings, a material premium to the five-year average of 24 times earnings. However, S&P 500 earnings are projected to increase at 22% annually through 2027, according to FactSet Research. In that context, the S&P 500's current valuation looks quite reasonable, so long-term investors should feel comfortable buying an S&P 500 index fund today.

In the past, the S&P 500 has delivered robust returns from record highs

Conventional wisdom (and perhaps gut instinct) tends to dissuade investors from buying stocks when the S&P 500 trades near its record high. Investors often consider market peaks as a sort of ceiling, not realizing that the S&P 500 has historically hit new highs about once every 15 trading days.

Readers may be surprised to learn that, in the past, the S&P 500 has generally delivered robust returns from record highs. In fact, the index has often performed better when starting from a peak than on any random day, as shown in the table below.

Data source: J.P. Morgan. The table shows the average cumulative total return in the S&P 500 over different time periods. Data was collected from 1988 to 2024.

As shown, between 1988 and 2024, the S&P 500 achieved an average return of 13% during the year following record highs. That was slightly better than its average return of 12% over the year following an investment made on any random day, according to J.P. Morgan. Furthermore, the S&P 500 performed better during the two-, three-, and five-year periods following record highs than investments made on any random day.

In short, history says record highs are no reason to avoid the stock market. That fact, considered alongside Buffett's advice to buy stocks or index funds only when valuations are reasonable, means investors should feel comfortable investing in the stock market today if compelling opportunities present themselves.

However, past performance is not a guarantee of future results. In the months ahead, potential interest rate hikes and midterm elections pose downside risk to the stock market. Additionally, if S&P 500 companies' earnings fall short of Wall Street's lofty expectations in the coming quarters, the stock market could drop sharply as investors reset their expectations.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Berkshire Hathaway and FactSet Research Systems. The Motley Fool has a disclosure policy.

Warren Buffett stepped down as Berkshire Hathway's CEO last December, but he is still involved in investment decisions for the company. For instance, Berkshire bought stock in Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) last year and has continued to buy shares this year, and Buffett, not current CEO Greg Abel, initiated the investment.

Which company will draw Buffett's attention next? One Wall Street expert says the answer might be Netflix (NASDAQ: NFLX), a megacap stock worth $305 billion. With shares down 41% from the high, the valuation is cheap enough that it may be on Buffett's radar, according to Ross Gerber, CEO of Gerber Kawasaki Wealth and Investment Management.

Here's what investors should know.

Image source: Getty Images.

How Alphabet fits Warren Buffett's investment framework

Warren Buffett's decision to buy Alphabet was somewhat surprising because, apart from buying Apple (NASDAQ: AAPL), Berkshire has largely avoided technology stocks during the past decade. That's not because there's some problem with that market sector, but rather because technology companies fall outside Buffett's circle of competence.

Buffett clearly explained his reservations in his 1999 shareholder letter. "Our problem -- which we can't solve by studying up -- is that we have no insights into which participants in the tech field have a truly durable competitive advantage." Nevertheless, Buffett stepped outside his comfort zone when he purchased Apple stock in 2016 and he did so again with Alphabet stock in 2025.

What gave him the confidence to invest in those companies? Buffett says, while he may not understand the underlying technologies, he does understand consumer behavior. Apple and Alphabet inspire tremendous consumer loyalty, the former with smartphones and the latter with platforms like Google Search, YouTube, and Google Cloud.

Buffett once joked that consumers would sooner give up a second car than their iPhone. Similarly, many brands see Alphabet's advertising tools and cloud services (especially those related to artificial intelligence) as indispensable. Even to someone like Buffett who is uncomfortable with technology stocks, such brand loyalty is an unmistakable sign of a competitive moat. And Buffett has historically focused on stocks that meet two criteria: They must (1) have a sustainable moat and (2) trade at a reasonable price.

How Netflix fits Warren Buffett's investment framework

Buffett in 1996 wrote, "Your goal as an investor should simply be to purchase, at a rational price, a part interest in an easily understandable business whose earnings are virtually certain to be materially higher five, 10, and 20 years from now." Netflix checks those boxes.

Like Apple and Alphabet, Netflix has a durable competitive advantage built on brand loyalty that should keep it at the forefront of its industry for years to come. While competition is far more intense today than it was five years ago, Netflix remains the dominant streaming service by almost every metric of consequence.

Specifically, Netflix has more monthly active users, generates more revenue, maintains a better retention rate, and accounts for a larger percentage of viewing time than any other subscription streaming service. The secret behind its dominant market position is quality original content. Netflix originals consistently outperform shows made by other streamers in terms of engagement.

So what? The streaming industry still has room to grow. I say that because all streaming services combined account for less than 50% of TV viewing time today, according to market research company Nielsen. Also, connected TV advertising accounts for less than 50% of total TV ad spending. So, Netflix has a durable competitive advantage in a growing industry, which suggests earnings will be materially higher in the future.

Most Wall Street analysts think Netflix stock is deeply undervalued

Netflix reported solid financial results in the second quarter. Revenue increased 13% to $12.5 billion, driven by particularly strong sales growth in international markets, and net income climbed 11% to $0.80 per diluted share. Management also provided solid guidance, saying revenue would increase between 13% and 14% for the full year.

Looking ahead, Wall Street estimates Netflix's earnings will increase at 20% annually over the next three years. That makes the current valuation of 23 times earnings look cheap. In fact, Netflix hasn't traded at such a low valuation in more than three years. And most Wall Street analysts think the stock is deeply undervalued. Netflix has a median target price of $93 per share, which implies 25% upside from its current share price of $74.

Here's the big picture: Netflix stock is down 41% from its high, partly because investors are concerned about the company's growth prospects after it failed to win the bidding war for Warner Bros. Discovery and Roku. But I think the stock is oversold at its current price, and I wouldn't be surprised to see Berkshire Hathaway buy a position in the near future.

Trevor Jennewine has positions in Roku. The Motley Fool has positions in and recommends Alphabet, Apple, Berkshire Hathaway, Netflix, Roku, and Warner Bros. Discovery. The Motley Fool has a disclosure policy.

Year to date, the broad-based S&P 500 (SNPINDEX: ^GSPC) has advanced 13%, and the technology-heavy Nasdaq Composite (NASDAQINDEX: ^IXIC) has added 15%. But the stock market may lose its momentum in the months ahead if the Federal Reserve raises interest rates, and the downturn could be severe (perhaps even a market crash) because midterm elections tend to incite volatility.

On the bright side, history provides a simple blueprint for success. In the event of a stock market crash, the smartest move investors can make is to buy the dip, particularly after the S&P 500 and Nasdaq Composite have closed in correction territory. Here are the important details.

Image source: Getty Images.

Interest rate increases and midterm elections could cause a stock market correction

Oil prices have increased substantially this year because the Iran conflict has disrupted a key supply route in the Persian Gulf. As of Aug. 7, WTI crude futures (the U.S. benchmark) have risen nearly 40% since January, and the upward pressure on energy prices has caused inflation to reaccelerate.

The Personal Consumption Expenditure (PCE) price index, the Federal Reserve's preferred measure of inflation, rose 4.1% in May. That was the highest reading in five years. PCE inflation has cooled slightly since then, but projections from the Cleveland Fed show the metric trending toward 3.8% in August. That is still much higher than the central bank's 2% target.

The most worrisome part is that PCE inflation has now exceeded the Fed's target for more than five years, and policymakers are starting to lose patience. The Federal Open Market Committee (FOMC), the Fed's rate-setting division, updated its economic projections in June. Half of participating Fed governors and presidents now expect at least one quarter-point rate increase in 2026. By comparison, zero officials anticipated rate increases earlier this year.

The next interest rate increase will signal the beginning of a new tightening cycle, and history says it could trigger a stock market correction. Since 1997, the FOMC has initiated five other tightening cycles, and the S&P 500 and Nasdaq Composite fell by an average of 10% and 12%, respectively, at some point in the next three months.

However, the stock market could drop more sharply than those figures suggest this year because of the midterms. The president's party typically loses seats in Congress at midterm elections, which creates policy uncertainty. Some investors navigate that uncertainty by selling stocks. Since 1950, the S&P 500 has fallen by an average of 18% at some point during midterm election years, per Carson Research.

The S&P 500 and Nasdaq Composite have historically rebounded quickly from stock market corrections

The S&P 500 has suffered 10 market corrections since the Great Recession, two of which turned into bear markets. During the same period, the Nasdaq Composite has suffered 14 market corrections, four of which became bear markets. But both indexes have always recovered, meaning a buy-the-dip strategy has always made money.

The statements below pertain to market corrections since the Great Recession:

• After the S&P 500's first close in correction territory (i.e., the first close 10% below its high), the index returned an average of 18% during the next year and 38% over the next two years.
• After the Nasdaq Composite's first close in market correction territory, the index returned an average of 23% in the next year and 41% during the next two years.

The one thing investors should not do is attempt to time the market by selling stocks with the intention of repurchasing them at some point the future. Legendary fund manager Peter Lynch once warned, "Far more money has been lost by investors in preparing for corrections, or anticipating corrections, than has been lost in corrections themselves."

The smartest move investors can make? Buy the dip (after the S&P 500 and Nasdaq close in correction territory)

Stock market corrections are unavoidable and unpredictable. We may see one this year if the Federal Reserve starts a new rate-incresase cycle, and the decline could be particularly steep (perhaps even a market crash) because midterm elections tend to coincide with material losses in the stock market.

Regardless, there is a simple lesson: The smartest decision investors can make if the stock market crashes is to buy the dip. In particular, investors should buy an S&P 500 index fund or Nasdaq Composite index fund after the benchmark index has closed in correction territory. Historically, investors who followed that blueprint turned sizable profits during the next one and two years.

Trevor Jennewine 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.

Required minimum distributions (RMDs) are mandatory annual withdrawals from tax-deferred retirement accounts, such as 401(k) plans and traditional individual retirement accounts (IRAs). The IRS enforces RMDs to ensure income tax is eventually paid on contributions and any gains that were allowed to grow in a tax-free environment.

RMD rules change periodically due to legislative updates. For instance, the Secure 1.0 Act (passed in 2019) increased the age at which RMDs begin and introduced a mandatory 10-year liquidation rule for retirement accounts inherited by non-spouse beneficiaries.

Similarly, the Secure 2.0 Act (passed in 2022) once again increased the age at which RMDs begin, exempted Roth 401(k) plans from RMDs during the original account holder's lifetime, and reduced the excise tax penalty charged when someone fails to complete an RMD on time.

Retirees need to understand those changes to avoid making costly financial mistakes.

Image source: Getty Images.

The Secure 1.0 Act and the Secure 2.0 Act raised the age at which RMDs begin

The age at which required minimum distributions (RMDs) begin depends on when you were born, but the thresholds have gradually increased over time. The chart below provides a consolidated view of when RMDs begin.

Data source: Internal Revenue Service.

RMDs on traditional 401(k) plans and traditional IRAs (including SEP IRAs and SIMPLE IRAs) are mandatory once you reach the age listed in the chart, regardless of your employment status. RMDs must generally be completed by Dec. 31, but the first distribution can be delayed until April 1 of the following year. Regardless, all subsequent distributions must be completed by the end of each year.

Here is an example: Kate turns 73 in 2026. She has savings in a traditional IRA. She can take her first RMD before Dec. 31, 2026, or she can delay it until April 1, 2027. No matter which option Kate chooses, her second RMD must be completed by Dec. 31, 2027.

The Secure 2.0 Act exempted Roth 401(k) plans from RMDs while the original account holder is alive

A discrepancy existed prior to the Secure 2.0 Act in that RMD rules applied to Roth 401(k) plans but not Roth IRAs. The legislation exempted Roth 401(k) plans from RMDs while the original account holder is alive. But once the account is inherited by a beneficiary, RMD rules apply.

If the original account holder died before RMDs started, spousal beneficiaries can (1) keep the assets in the inherited account, in which case they can delay RMDS until withdrawals would have been mandated for the original owner, or (2) roll the assets into their own account, in which case surviving spouses can delay RMDs until they reach the required age.

Importantly, non-spousal beneficiaries at least 10 years younger than the original account holder must generally follow the 10-year rule. That means the inherited retirement account must be liquidated within 10 years of the original owner's death. Prior to the Secure 1.0 Act, non-spousal beneficiaries could take RMDs based on their own life expectancy, but that is no longer an option unless the original account holder died before the legislation became effective in 2020.

The Secure 2.0 Act reduced the penalty charged when RMDs are not completed on time

Previously, the IRS could charge a 50% excise tax penalty if you neglected to complete your RMD before the deadline. But the Secure 2.0 Act reduced that penalty to 25%, and it can be further reduced to 10% if the error is fixed within two years. Anyone who fails to complete an RMD before the deadline must file an IRS Form 5329 with their federal tax return.

Alternatively, the penalty can be waived entirely if (1) the account owner corrects the error immediately and (2) attaches a letter of explanation to the IRS Form 5329 that explains how the RMD shortfall was due to a reasonable error.

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Year to date, the S&P 500 (SNPINDEX: ^GSPC) has added 13%, and the Nasdaq Composite (NASDAQINDEX: ^IXIC) has added 14%. Strong corporate financial results and economic resilience, fueled by large investments in artificial intelligence, have been the driving forces behind those double-digit returns.

However, investors just got bad news from the Federal Reserve. Three officials voted to increase interest rates when the Federal Open Market Committee (FOMC) met in July, and history suggests a new hiking cycle could sink the stock market.

Here are the important details.

Fed Chair Kevin Warsh speaks at the FOMC press conference in June. Image source: Official Federal Reserve Photo.

Inflation has now exceeded the Federal Reserve's 2% target for five years

The Federal Reserve operates under a dual mandate whereby its monetary policy decisions are supposed to promote price stability and maximum employment. Price stability does not mean no inflation, but rather 2% inflation, as measured by the PCE (Personal Consumption Expenditures) price index.

PCE inflation accelerated to 4.1% in May as the Iran conflict disrupted oil supplies moving through the Strait of Hormuz, a critical chokepoint in the Persian Gulf. That was the highest reading in three years. PCE inflation cooled slightly to 3.7% in June as geopolitical tensions eased, but projections point to similar readings for July and August, meaning inflation is sticky.

So what? PCE inflation has exceeded the Federal Reserve's 2% target in every month since February 2021, meaning the FOMC has failed to achieve price stability for over five years. To that end, three FOMC officials (out of 12 voting members) wanted to raise interest rates in July. For context, zero FOMC officials wanted to raise rates in June.

Higher interest rates are typically a headwind for the stock market. Not only do higher rates make bonds more attractive, which can pull money away from equities, but they also slow corporate earnings growth by raising borrowing costs. The mechanism is simple: High rates directly raise interest expense and indirectly suppress spending.

If the Fed raises interest rates, history says a stock market correction will follow

The Federal Reserve has initiated five tightening (rate-hiking) cycles during the last three decades. After the first hike in each cycle, the S&P 500 and Nasdaq Composite fell by an average of 10% and 12%, respectively, at some point during the next three months. The chart below contains specific details.

Data source: Federal Reserve, YCharts. The chart shows the maximum drop in the S&P 500 and Nasdaq Composite during the three-month period following the first interest rate hike in a tightening cycle.

As shown in the chart, the S&P 500 and Nasdaq Composite have dropped by an average of 10% and 12%, respectively, during the three months following the first rate hike in a tightening cycle. That means both major stock market indexes have generally slipped into correction territory under those circumstances.

Going forward, inflationary pressure from tariffs and the Iran war make it unlikely that PCE inflation will return to target without central bank intervention. So, traders expect the Fed to raise rates by a quarter percentage point in September 2026, followed by a second quarter-point hike in March 2027, according to CME Group's FedWatch tool.

The FOMC's most recent projections corroborate that outlook. In June, nine of 18 FOMC participants said they anticipated at least one quarter-point rate hike during the remaining months of 2026, and six participants said they anticipated at least two quarter-point hikes this year. That is a dramatic change from March, when zero participants signaled rate hikes.

So what? The Fed last modified its monetary policy when it cut interest rates in December 2025. If the next change is a rate hike, it would mark the beginning of a new tightening cycle. And history says a new tightening cycle could tip the S&P 500 and Nasdaq Composite into a correction. So, investors should be prepared for a drawdown.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group. The Motley Fool has a disclosure policy.

Nvidia was one of the first stocks to soar as demand for artificial intelligence infrastructure exploded after the release of ChatGPT. The company designs graphics processing units essential to accelerating AI training and inference tasks, and the stock is up 1,360% since January 2023.

Micron and Sandisk were part of the second wave. They make memory chips and storage solutions, which are currently the biggest bottleneck in the industry, according to Nvidia CEO Jensen Huang. Micron is up 1,690% since January 2023, and Sandisk is up 3,860% since it was spun off from Western Digital in 2025.

Which industry will benefit next? Some Wall Street analysts think networking companies like Astera Labs (NASDAQ: ALAB) and Arista Networks (NYSE: ANET) will be the next big winners.

Here's what investors should know about these AI stocks.

Image source: Getty Images.

Astera Labs: A leader in cloud connectivity solutions

Astera does not build the primary compute chips used in artificial intelligence, such as graphics processing units (GPUs) or central processing units (CPUs). Instead, it designs semiconductors and software that connect primary compute chips to peripheral components such as storage and networking, thereby scaling individual servers and racks into cohesive systems.

Astera, a leader in cloud AI connectivity solutions, generates revenue through four product families. The Aries and Taurus lines boost data signals to improve communication within and between server racks. The Leo line overcomes memory bottlenecks by allowing servers to share resources. And Scorpio switches route data between primary compute chips and storage.

Astera reported strong financial results in the second quarter. Revenue increased 104% to $392 million, an acceleration from 93% growth in the previous year. Non-GAAP (generally accepted accounting principles) net income increased 82% to $0.80 per diluted share. In the third quarter, management estimates revenue growth will accelerate to 139% as Scorpio switches become the largest product line.

Astera is well-positioned for future growth. Broader adoption of autonomous agents and multistep reasoning models will increase the volume of data moving through artificial intelligence systems, creating demand for connectivity solutions to overcome data transmission bottlenecks.

Wall Street estimates Astera's adjusted earnings will grow at 52% annually through 2027. That makes the current valuation of 144 times earnings look expensive.

But analysts have consistently underestimated the company's growth trajectory. Astera beat the consensus earnings estimate by an average of 25% during the last six quarters. For that reason, risk-tolerant investors should consider buying a very small position today.

Arista Networks: The market leader in high-speed Ethernet switches

Arista designs high-speed networking solutions. Its portfolio includes Ethernet switches (connecting servers and storage within a network) and routers (connecting multiple networks). Arista also develops adjacent software that helps customers monitor and automate network operations across public and private clouds.

Arista has differentiated itself with its Extensible Operating System (EOS). A single image of EOS runs on the company's switches and routers, reducing cost and complexity. "This approach is a large differentiator to legacy vendors who use multiple operating systems with numerous images to implement a siloed network," according to the company.

Arista reported impressive financial results in the second quarter. Revenue increased 38% to $3 billion, an acceleration from 35% sales growth in the previous quarter, and non-GAAP net income rose 40% to $1.02 per diluted share. In the current quarter, management expects revenue and non-GAAP net income growth to accelerate to 43%.

Further ahead, Arista is well-positioned to maintain its momentum due to its leadership in high-speed Ethernet switches. With twice as much market share as closest competitor Cisco Systems, Arista should be a big winner as the proliferation of AI workloads creates demand for faster network switches.

Wall Street expects Arista's adjusted earnings to grow 18% annually through 2027. That makes the current valuation of 61 times earnings look expensive. But analysts have underestimated the company. Arista beat the consensus earnings estimate by an average of 10% over the last six quarters. If that trend continues, the current valuation is tolerable.

Trevor Jennewine has positions in Arista Networks and Nvidia. The Motley Fool has positions in and recommends Arista Networks, Cisco Systems, Micron Technology, Nvidia, and Western Digital. The Motley Fool recommends Astera Labs. The Motley Fool has a disclosure policy.

Nvidia (NASDAQ: NVDA) stock has advanced 1,300% since the artificial intelligence (AI) boom began in January 2023. The company's success, in terms of both financial results and share price appreciation, has been driven by its dominance in artificial intelligence accelerators, a market projected to top $300 billion this year.

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has dabbled in AI accelerators for over a decade, but the company recently started selling custom silicon directly to customers, marking a more deliberate attempt to compete with Nvidia. Read on to learn more.

Image source: The Motley Fool.

Alphabet just positioned itself as a more serious threat to Nvidia

Nvidia invented the graphics processing unit (GPU) in 1999. Those chips, originally built to render realistic video game and computer graphics, have become the industry standard for accelerating complex data center workloads, such as artificial intelligence (AI), because they perform trillions of calculations per second.

Last year, Nvidia accounted for more than 80% of AI accelerator sales, according to Silicon Analysts. But its market share is likely to fall in the years ahead as more companies turn to custom silicon solutions. Three of its largest customers -- Amazon, Microsoft, and Alphabet -- have deployed chips purpose-built for AI.

Alphabet was the first to pursue a custom silicon strategy, and it remains the most significant threat to Nvidia. In 2016, Alphabet deployed its first tensor processing unit (TPU), a chip designed specifically for the matrix and vector-based math needed to build and run AI models.

Initially, Alphabet limited TPUs to internal use cases, but the company made its custom silicon accessible to Google Cloud customers in early 2018. In the second quarter, Alphabet began selling TPUs directly to clients for use in external data centers, positioning itself as a more direct threat to Nvidia.

Nvidia is unlikely to lose its market leadership in AI accelerators

Nvidia is unlikely to cede its dominance in the AI accelerator market for two reasons. First, the company has a significant competitive advantage in CUDA, a software platform comprising hundreds of code libraries and frameworks (building blocks) that help programmers write GPU-accelerated applications.

CUDA is the main reason Nvidia GPUs have become the dominant AI accelerators, and the proprietary nature of the platform constitutes a durable economic moat. "Once a team has built pipelines on CUDA, switching to another platform is prohibitively expensive," explains VentureBeat.

Second, TPUs run far fewer algorithms than GPUs because they are built for specific tasks. "While TPUs excel at specific deep learning workloads, they are far less flexible," according to VentureBeat. That means Nvidia GPUs could immediately run a new AI technology if one were invented tomorrow, but the same is not true of Alphabet TPUs.

Alphabet TPUs could become a $100+ billion revenue stream by 2030

Gil Luria, head of technology research at D.A. Davidson, sees custom silicon as a massive growth opportunity for Alphabet. Anthropic and Meta Platforms have agreed to spend billions of dollars on TPUs in the years ahead, and Alphabet recently announced a joint venture with Blackstone to build a TPU cloud business.

Looking ahead, Lura says Alphabet could eventually capture 20% of the AI infrastructure market, which would value its chips business somewhere around $900 billion. Meanwhile, Morgan Stanley analysts expect custom silicon (primarily Alphabet's TPUs) to account for 24% of AI accelerator sales in 2030, up from 15% today.

Those estimates suggest Nvidia will retain its dominance, but they also underscore the massive opportunity that sits before Alphabet. AI accelerator spending is projected to reach $600 billion in 2030, which means Alphabet could bring in more than $100 billion in revenue annually from TPU sales alone by the end of the decade.

I think investors are overlooking this opportunity. Alphabet trades at 19 times earnings, well below the three-year average of 25 times earnings. That valuation is cheap for a company whose earnings are projected to grow at 14% annually over the next three years. That's why Alphabet shares could soar as the company targets the AI accelerator market.

Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Blackstone, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Social Security provides guaranteed income for life to retired workers and their spouses. In most cases, that income becomes more important over time as other sources of savings, such as 401(k) plans and IRAs, are gradually depleted.

But what happens when one spouse dies? In certain instances, survivors benefits allow the surviving spouse to inherit the deceased partner's payout. Unfortunately, many Americans misunderstand the program, which could cause them to miss out on financial support at a vulnerable time.

Read on to learn more about Social Security's survivors benefits.

Image source: Getty Images.

The difference between Social Security's retirement benefits and survivors benefits

Broadly speaking, Social Security benefits fall into three categories: (1) retirement benefits for retired workers and their spouses, (2) survivors benefits for widows and widowers, and (3) disability benefits for disabled workers and their spouses. The differences between retirement benefits and survivors benefits are discussed in detail below:

Retirement benefits are paid to retired workers and spouses

Retired-worker benefits are based on lifetime earnings and claim age. A worker's primary insurance amount (PIA), the payout awarded to individuals who claim Social Security at full retirement age (FRA), is calculated as a percentage of inflation-adjusted earnings from the 35 highest-paid years of work. The actual payout is then adjusted based on claim age, downward if they claim earlier and upward if they claim later.

Spousal benefits allow the spouses of retired workers to claim Social Security even if they have no personal work history. Payments are calculated as a percentage of the retired worker's PIA. The precise benefit awarded depends on the age at which the spouse claims Social Security, but it can't exceed 50% of the retired partner's PIA. Spouses who claim earlier than FRA receive a reduced payout, meaning less than 50% of the retired partner's PIA.

Importantly, workers and spouses are eligible for retirement benefits at age 62, but claiming strategies differ because the payments are calculated in different ways and capped at different ages. For instance, retired workers maximize their benefit by delaying Social Security until age 70, but spouses maximize their benefit by claiming Social Security at full retirement age (i.e., 67 for anyone born in 1960 or later).

Spousal benefits are paid to widows and widowers

Survivors benefits let surviving spouses inherit their deceased partner's Social Security, so long as the payout exceeds their own and certain conditions are met: The survivor must be at least 60 years old, they must have been married for at least nine months, and they must not have remarried before age 60.

The survivors benefit will equal the retired-worker benefit paid to the deceased spouse if the widow(er) claims Social Security at FRA. But widow(er)s who collect survivors benefits before FRA will receive a smaller payout, meaning less than 100% of the benefit paid to the deceased spouse. The precise reduction depends on how many months early payments begin, but it could be as much as 29%.

What happens to your Social Security benefit when your spouse dies

In most cases, married couples receive two Social Security checks. Sometimes that means two retired-worker benefits; other times it means one retired-worker benefit and one spousal benefit. Either way, one revenue stream disappears when one spouse dies.

Survivors benefits compensate for the lost income by letting widow(er)s keep the larger of the two Social Security checks. If the widow(er) already receives the larger check, nothing happens to their benefit when their spouse dies. But if the widow(er) receives the smaller check, they can replace their own retirement benefit with that of their deceased partner by applying for survivors benefits.

Here's an example: James is a retired worker who collects $2,500 in monthly benefits. His wife, Sarah, also a retired worker, collects $2,000 in monthly benefits. If Sarah dies, James need not apply for survivors benefits because he already receives the larger payout. But if James dies, Sarah should apply for survivors benefits. Her monthly benefit would increase to $2,500.

To apply, Sarah can either call the Social Security Administration (1-800-772-1213) or visit her local Social Security office.

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President Trump's investment accounts made over 6,200 stock trades year to date through May, according to financial disclosures filed with U.S. Office of Government Ethics. Those accounts are managed by third-party advisors, meaning Trump was not responsible for any decision, but it's still interesting to explore where his money is invested.

This year, Trump bought shares of Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG), with net purchases totaling $1.7 million to $3.6 million through May. He also increased his stake in Meta Platforms (NASDAQ: META), with net purchases totaling $845,000 to $4.8 million over the same period.

Alphabet and Meta Platforms sit at the center of the artificial intelligence infrastructure build-out, and most Wall Street analysts believe the stocks are undervalued. Here are the important details.

President Donald J. Trump speaks on the phone in the Oval Office. Image source: Official White House Photo by Joyce N. Boghosian.

Alphabet: 20% upside implied by Wall Street's median target price

Alphabet reported strong second-quarter financial results that beat estimates on the top and bottom lines. Revenue increased 24% to $119.7 billion, the sixth consecutive acceleration, driven by 82% sales growth in the cloud computing segment. Operating income (which excludes unrealized gains on its investment in SpaceX) increased 30% to $40.7 billion.

Alphabet shares have added 4% since the report, but the stock still looks very attractive at 18 times earnings. That is a massive discount to the five-year average of 24 times earnings, and the company has compelling growth prospects due to its full-stack approach to artificial intelligence (AI), which spans custom chips, cloud services, models, enterprise tools, and consumer applications.

On the earnings call, CEO Sundar Pichai highlighted momentum in each product category: Nearly 90% of Fortune 100 companies use Gemini Enterprise, a platform that helps businesses build AI agents and automate workflows. More than 9 million developers are building on the company's Gemini models each month. And Google Search engagement is trending higher due to AI Overviews and AI Mode.

Pichai also mentioned strong demand for custom AI chips called Tensor Processing Units (TPUs), the most popular alternative to Nvidia GPUs. Alphabet rents these chips to cloud computing customers, but it recently began selling TPUs directly to certain clients for use in external data centers. That shift positions Alphabet as a more direct competitor with Nvidia.

Wall Street estimates that Alphabet's earnings will increase at 14% annually over the next three years. That makes the current valuation of 17.9 times earnings look reasonable. In fact, most Wall Street analysts think the stock is undervalued. The median target price of $425 per share implies 20% upside from the current share price of $355.

Meta Platforms: 39% upside implied by Wall Street's median target price

Meta Platforms delivered mixed financial results in the second quarter, beating analysts' consensus estimate on the top line but missing on the bottom line. Revenue increased 28% to $60.8 billion, but operating margin dropped 12 percentage points, and net income fell 13% to $6.18 per diluted share.

A combination of legal fees, severance costs, and heavy spending on AI infrastructure crushed margins and reduced earnings. That caused the stock to drop 10%. But there are silver linings. The expenditures related to lawsuits and headcount reductions were one-time charges, and investments in AI infrastructure lay the foundation for strong future growth.

"We are now at a point where our investments in AI are accelerating every major part of our core business," CEO Mark Zuckerberg told analysts. "They're improving the experience for people using our apps, driving better performance for advertisers, and helping our teams build new experiences and ship faster."

Zuckerberg also shed light on how Meta will monetize AI products in the future. "We're developing new personal agents that will be the foundation of our next wave of products." He noted the recent launch of Meta Business Agent, which answers questions and automates employee workflows. Meta is also exploring renting out excess data center capacity directly to customers through a new cloud computing division.

Wall Street expects Meta's earnings to grow at 21% annually over the next three years. That makes the current valuation of 21 times earnings look cheap. Indeed, among 71 analysts, Meta has a median target price of $770 per share. That implies 39% upside from the current share price of $554.

Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.

The U.S. stock market has historically performed poorly in August. In fact, over the last three decades, the S&P 500 (SNPINDEX: ^GSPC) has declined by an average of 0.5% during the month. The benchmark index has only done worse in September, falling by an average of 0.7%.

Unfortunately, August could be particularly brutal this year. Not only does it mark the sixth month of the Iran war, which has created enough inflationary pressure that the market now anticipates higher interest rates, but also the S&P 500 has often dropped into correction territory in August during midterm election years.

Here's what investors need to know.

Image source: Getty Images.

The S&P 500 tends to drop sharply during midterm election years, and the bottom usually comes in August

Midterm elections create uncertainty because the president's party usually loses seats in Congress, which raises questions about future fiscal, trade, and regulatory policy. In fact, dating back to 1950, the president's party has lost an average of 24 seats in the House and three seats in the Senate during midterm elections.

Some investors choose to navigate that uncertainty by pulling money out of stocks. Since 1950, the S&P 500 has suffered an average peak-to-trough decline of 18% during midterm election years, meaning the benchmark index for the U.S. stock market has usually fallen into correction territory. And those corrections, on average, hit bottom in August, according to Carson Investment Research.

So what? The S&P 500 closed at a record high of 7,910 on June 2. If the index's performance aligns with the historical average, it will decline 18% from that peak to 6,240 at some point before the year ends. That implies about 16% downside from its current level of 7,467. And history says the bottom could come in August.

Of course, past performance is not a guarantee of future results, but a stock market decline around midterms is particularly plausible this year for two reasons. First, recent polls show Democrats could take control of the House, which would make it nearly impossible for President Trump to pass legislation. Second, investors are simultaneously concerned that the Federal Reserve will raise its benchmark interest rate to combat inflation created by various economic shocks, especially the Iran war.

Expectations about future interest rate hikes could put more downward pressure on the stock market in August

WTI crude oil prices (the U.S. benchmark) increased about 25% in July after the U.S.-Iran ceasefire collapsed and the two nations resumed fighting. Inflation had already been running above target for about five years, but oil supply disruptions have added to the problem. So, the market expects the Federal Reserve to raise interest rates by a quarter percentage point this year to restore price stability.

Legendary investor Warren Buffett says interest rates are the "most important" variable in stock market valuations. When interest rates are low, investors are willing to pay more for stocks because bonds are unattractive. But the opposite is also true. When interest rates are high, investors are willing to pay less for risky stocks because relatively safe bonds offer reasonably attractive returns.

Since 1987, the Federal Reserve has pivoted from rate cuts to rate hikes nine times, and the U.S. stock market has not performed well in the aftermath. The S&P 500 has declined by an average of 10% at some point during the next three months. If the Fed raises interest rates this year, it will be the 10th pivot from cuts to hikes in the last 40 years.

Here's the big picture: History says the S&P 500 could drop into market correction territory if the Fed raises interest rates. The FOMC does not meet until September, but anticipation of the rate hike could still put downward pressure on the stock market in August, especially because the months leading up to midterm elections have historically been volatile in their own right. That's why the stock market may be headed for trouble in August.

Trevor Jennewine 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.

Palantir Technologies (NASDAQ: PLTR) delivered triple-digit returns in 2023, 2024, and 2025, but the stock has been dragged lower by an indiscriminate sell-off in software names in 2026. Palantir is down 40% from its high as of July 28.

However, investors' fears that generative artificial intelligence tools will displace Palantir are unwarranted, and the stock's valuation -- once excruciatingly expensive -- now looks more tolerable. I predict Palantir will trade at $192.50 per share by mid-2027. That implies 55% upside from its current share price of $124.

Here's my logic.

Image source: Getty Images.

Palantir has secured a leadership position in AI platforms because of unique software architecture

Palantir develops data integration and analytics platforms for customers in the public and private sectors. The company also provides an adjunct artificial intelligence platform (AIP), which serves as an orchestration tool for large language models. Importantly, AIP is an agnostic tool that lets customers apply the models of their choosing to data.

Palantir's products are particularly powerful because they are designed around a decision-making framework called an ontology. Most analytics tools help users understand data with dashboards and reports, but actions must be taken in separate applications. Palantir's ontology goes further by creating a digital twin that not only surfaces insights, but also lets users take action and automate workflows within the platform.

"The core ontology function and value proposition is that Palantir not only organizes and displays data, but it also creates prioritized, ranked data that can be quickly understood and interacted with, ultimately automating real-world efficiency gains," explains Mark Giarelli at Morningstar.

Palantir has received praise from several independent research firms. Dresner Advisory Services has ranked the company as a leader in three market studies: (1) artificial intelligence, data science, and machine learning, (2) model operations, and (3) agentic AI. And Forrester Research has recognized Palantir as a leader in AI decisioning platforms.

Palantir's business momentum is impressive. In the first quarter, the company increased its customer count 31%, and average sales per existing customer rose 50%. In turn, revenue climbed 85% to $1.6 billion, the 11th straight acceleration, and non-GAAP net income rose 153% to $0.33 per diluted share. Palantir also achieved a phenomenal Rule of 40 score of 145%, which is unheard of in software.

Palantir stock has dropped 40% from its high, creating a buying opportunity for patient investors

Palantir has dropped 40% from its high partly because investors are worried that generative AI tools from Anthropic and OpenAI could displace its products. But agnostic platforms like Palantir will only become more important as LLMs proliferate. As an agnostic orchestration layer, Palantir lets clients swap and mix models without rewriting applications or disrupting enterprise workflows.

Wall Street estimates Palantir's TTM adjusted earnings will increase 67% to $1.59 per share over the next four quarters. That makes the current valuation of 130 times adjusted earnings look tolerable, especially when the company beat the consensus earnings estimate by an average of 16% over the last six quarters. For context, the stock traded around 370 times adjusted earnings at this time last year.

Looking ahead, I will assume Palantir's adjusted earnings reach $1.75 per share after the company reports financial results in Q1 2027; that is 10% higher than the Wall Street consensus. I will also assume the valuation drops to 110 times earnings. If both figures are correct, Palantir stock will trade at $192.50 per share by mid-2027, which implies 55% upside from its current share price of $124.

Wall Street is even more optimistic. Among 35 analysts, Palantir has a median target price of $200 per share, implying 61% upside from the current price.

Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

The S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) are up 8% and 6%, respectively, year to date. But whether the stock market can maintain its momentum is questionable.

Investors recently got some bad news about President Trump's economy: As of July 28, oil prices have risen 30% month to date amid renewed hostilities between the U.S. and Iran, and the market now anticipates two interest rate hikes from the Federal Reserve this year.

History suggests that a shift in monetary policy will drag the S&P 500 and Nasdaq Composite into correction territory. Here are the important details.

President Donald J. Trump addresses Congress. Image source: Official White House Photo.

Investors expect the Federal Reserve to raise interest rates twice by December

CME Group's FedWatch tool uses futures prices (tied to the federal funds rate) to calculate the odds of future monetary policy decisions. In other words, it translates what traders are willing to pay for futures contracts into percentage probabilities that the Federal Reserve will raise, lower, or keep interest rates steady at future meetings.

In January, the market expected two quarter-point rate cuts this year. In March, the case for rate cuts began to crumble as the Iran conflict caused the largest oil supply disruption in history, driving inflation to a multiyear high. By May, the probability of rate cuts had fallen to zero, and investors were betting the Fed would hold rates steady.

Today, the FedWatch tool signals two quarter-point rate hikes before year's end, one at the FOMC meeting in September and another at the meeting in December. That's because the Iran conflict reescalated after a short-lived ceasefire collapsed earlier this month, such that Brent crude oil prices (an international benchmark) have increased about 30% in the last 30 days.

Frank Flight, head of macro strategy at Citadel Securities, expects the Fed to raise rates at the meeting that ends on July 29. "The market may once again be underestimating the extent of the hawkish shift at the Fed," he wrote in a note to clients. Flight argues that a rate hike would help restore price stability while also refuting the idea that President Trump compromised the Fed's independence through his nomination of Kevin Warsh.

When the Fed pivots to rate hikes, stock market corrections often follow

If the Federal Reserve raises interest rates this year, it will mark the onset of the fifth tightening cycle (i.e., a period where rates are rising) since 1999. Past performance is never a guarantee of future results, but we can make an educated guess about where the stock market is headed by examining previous cycles.

The table shows the start date for the last four tightening cycles. It also lists the maximum drop in the S&P 500 and the Nasdaq Composite during the three months following the first rate hike in each cycle.

Data source: Federal Reserve, YCharts. The table shows the maximum drawdown in the S&P 500 and Nasdaq Composite during the three months following the Fed's first rate hike in a tightening cycle.

As shown, following the first interest rate hike in a tightening cycle, the S&P 500 and Nasdaq Composite have fallen by an average of 10% and 15%, respectively, at some point in the next three months. Put differently, both major stock indexes have typically entered correction territory when the Fed has pivoted from rate cuts to rate hikes.

Here's the big picture: The Federal Reserve may raise interest rates once, or even twice, this year, and history suggests the pivot to tighter monetary policy could sink the stock market. But investors should be prepared to buy the dip should a correction materialize. The S&P 500 and Nasdaq Composite have recovered from every past decline, and there is no reason to think the next one will be any different.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CME Group. The Motley Fool has a disclosure policy.

The U.S. stock market has delivered decent returns in 2026 despite persistent economic uncertainty created by tariffs and, more recently, elevated oil prices tied to the Iran war. This year, the S&P 500 (SNPINDEX: ^GSPC) has added 8% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) has added 7%.

However, the S&P 500 recently flashed a warning last seen during the dot-com era, and it hints at big losses in the stock market over the next three years. Read on to learn more.

Image source: Getty Images.

The S&P 500 flashes a warning seen only once before

In 1988, economist Robert Shiller introduced the cyclically adjusted price-to-earnings (CAPE) ratio as means of evaluating entire stock market indexes. Whereas the traditional price-to-earnings ratio can be distorted by cyclical fluctuations in earnings, the CAPE ratio eliminates that noise by averaging inflation-adjusted earnings from the past decade.

The S&P 500 recorded an average CAPE ratio of 40.9 in June, the second straight monthly reading above 40. Not only is that well above the 20-year average of 27.6, but the last two months mark the first time since the dot-com bubble (in the late 1990s and early 2000s) that the S&P 500 recorded a CAPE ratio above 40.

Unfortunately, the index's rich valuation hints at substantial downside in the stock market. The following chart shows the S&P 500's best, worst, and average returns over different periods following a monthly CAPE ratio above 40.

Data source: Robert Shiller, YCharts.

There are two important data points in the chart. First, the S&P 500 has never generated a positive three-year return following a monthly CAPE ratio above 40. Second, if the S&P 500's future returns match the historical average, the index will drop 30% by July 2029.

Of course, past performance does not guarantee future results. The CAPE ratio did predict the dot-com crash, but the internet boom was different than the artificial intelligence (AI) boom. The internet did not reach mainstream adoption for more than a decade, but AI has achieved mainstream adoption in under five years.

In fact, AI ranks among the "fastest-adopted technologies in history, with nearly one in four American firms deploying it at scale," according to Justin Bieman, global investment strategist at JPMorgan Chase. That means AI could become a material source of corporate profits more quickly than the internet.

So what? The CAPE ratio is a backward-looking metric, meaning it does not account for the possibility that earnings growth will accelerate. Earnings growth failed to keep pace with stock price appreciation during the dot-com bubble, which ultimately led to a market crash. The AI boom could play out differently. Earnings could grow fast enough to keep the S&P 500 moving higher while its CAPE ratio falls.

Wall Street expects the S&P 500 to gain 22% over the next year

S&P 500 companies reported exceptionally strong financial results in Q1 2026. At the index level, revenue increased 11.4% (the fastest growth since Q2 2022) and earnings increased 28.6% (the fastest growth since Q4 2021), according to FactSet Research.

Wall Street expects that momentum to continue. For the full year, the consensus estimate says revenue will increase 11% (the fastest growth since 2022) and earnings will increase 27% (the fastest growth since 2021). At the sector level, analysts anticipate the strongest earnings growth in the technology (65%), communication services (112%), and energy (128%) sectors.

In turn, Wall Street anticipates substantial upside in the S&P 500 over the next year. The median forecast puts the S&P 500 at 9,072 in July 2027. That implies 22% upside from its current level of 7,412. At the sector level, analysts expect the most upside in technology (24%) and communications services (27%). Investors should look closely at those sectors when searching for stocks.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems and JPMorgan Chase. The Motley Fool has a disclosure policy.

Meta Platforms (NASDAQ: META) stock is down 24% from its high amid concerns about how much money the company is spending on artificial intelligence infrastructure. Investors will get more information on that topic when Meta announces second-quarter financial results on Wednesday, July 29.

However, Wall Street sees a buying opportunity ahead of the report. Among 71 analysts, Meta has a median target price of $815 per share. That implies 36% upside from its current share price of $598.

Here's what investors should consider before buying Meta stock.

Image source: The Motley Fool.

Meta is primarily monetizing AI through its advertising business

Meta Platforms owns the three most popular social media platforms by monthly active users: Facebook, WhatsApp, and Instagram. The company uses consumer data generated by those platforms to recommend content and target ads, creating a network effect that makes its social media properties more engaging for users (and more valuable for advertisers) over time.

Meta Platforms is investing aggressively in artificial intelligence infrastructure. Earlier this year, the company raised its 2026 capital expenditure (capex) forecast to $135 billion at the midpoint, up from $125 billion. That is nearly double its $72 billion in capex spending in 2025, which itself was nearly double the $39 billion in capex spending in 2024.

Meta is already realizing returns on those investments. In the first quarter, ad impressions delivered across its social media properties increased 19%, and the average price per ad increased 12%. Those changes reflect higher user engagement and greater advertiser demand, driven by proprietary AI models that rank and recommend content.

Nevertheless, Meta stock currently trades 24% below its high, suggesting that investors are worried about whether the company can earn sufficient returns on that invested capital. On that topic, Bloomberg reports that Meta is planning to rent out excess compute capacity to customers, essentially creating a neocloud business similar to CoreWeave.

Meta has not commented on the Bloomberg report, but management could weigh in on the topic when the company reports financial results this week. Meta may also address other AI monetization opportunities, including its personal assistant, Meta AI. The company recently added shopping mode and task automation features to the product, expanding its addressable market.

Meta stock looks cheap despite the risk of post-earnings volatility

Meta Platforms will report second-quarter financial results after the stock market closes on Wednesday, July 29. The Wall Street consensus estimate calls for revenue to increase 26% to $60.1 billion, while earnings grow less than 1% to $7.22 per share. Whether the stock moves up or down after the report depends as much on what management says as it does on the actual financial results.

For example, Meta beat estimates in the first quarter, but the stock still dropped 9% the next day because investors were more concerned about the company raising its capex outlook. The same thing could happen this time. Indeed, Alphabet stock dropped following a strong financial report last week, simply because the company raised its capex forecast.

As of July 27, options pricing information implies a 7% move in Meta stock (either higher or lower) after the company announces its second-quarter financial results. That means the stakes are particularly high for prospective investors, but I think the stock is worth buying at its current price, despite near-term volatility.

Wall Street expects Meta's earnings to increase at 22% annually over the next three years. That makes the current valuation of 21.5 times earnings look cheap. Those metrics give a price-to-earnings-to-growth (PEG) ratio slightly below 1, which is usually interpreted as indicating a stock is undervalued. Meta's PEG ratio is currently at its lowest level in three years. I see that as an attractive entry point for long-term investors.

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

Memory chip makers Micron and Sandisk are two of the hottest artificial intelligence stocks on the market, with shares gaining 720% and 3,200%, respectively, in the past year. But Shopify (NASDAQ: SHOP) is also leaning into the AI revolution, and Wall Street thinks the stock is undervalued.

Among 55 analysts, Shopify has a median target price of $150 per share, implying 32% upside from its current share price of $113. But Keith Weiss at Morgan Stanley is among the most optimistic analysts; he recently set Shopify with a bull-case target price of $287 per share, implying about 150% upside from its current price.

Here's what investors should know.

Image source: Getty Images.

Shopify is leaning into agentic commerce

Shopify provides a turnkey solution for omnichannel commerce. Its software platform lets merchants manage their businesses across physical and digital storefronts, including social media, online marketplaces, and custom websites. Shopify also provides adjacent merchant solutions for payments, marketing, logistics, and artificial intelligence (AI).

Shopify's gross merchandise volume (GMV) increased 35% in the first quarter as investments beyond its core retail e-commerce offering continued to pay off. In particular, wholesale (business-to-business) GMV rose 80% and international GMV increased 45%. In turn, total revenue rose 31% to $3.1 billion and non-GAAP net income climbed 44% to $0.36 per diluted share.

Shopify is the market leader in e-commerce software and its merchants account for nearly 15% of U.S. e-commerce sales, which makes it the second largest company in the industry behind Amazon. Shopify is well positioned to gain market share in the agentic commerce era. Agentic commerce is a new technology where AI agents shop for consumers, handling everything from product research and comparisons to purchases.

Shopify co-developed the Universal Commerce Protocol (UCP) with Alphabet's Google, an open standard that allows commerce platform to syndicate merchant product catalog across agentic surfaces. Shopify is the only platform that enables product discovery and selling inside OpenAI's ChatGPT, Microsoft's Copilot, and Google's Gemini, according to President Harley Finkelstein.

Shopify is already benefiting from investments in agentic commerce. In the first quarter, AI-driven traffic to merchant storefronts climbed 8x, and orders from AI-powered searches increased 13x. "Early signals on AI channels are really compelling," Finkelstein told analysts. That bodes well for the future. Grand View Research estimates that agentic commerce sales will increase at 36% annually through 2033.

Meanwhile, Shopify employees are also leaning on AI to improve productivity. AI tools now handle over 50% of coding and management expects that figure to increase. By automating that work, Shopify was able to ship more than 300 new products last year while keeping its headcount flat. Those internal efficiencies should drive greater profitability over time.

Shopify stock is expensive but still worth consideration

Wall Street expects Shopify's adjusted earnings to increase at 31% annually through 2028. In that context, the current valuation of 74 times earnings looks relatively expensive. Yet, Keith Weiss at Morgan Stanley believes his bull-case scenario will materialize if sales growth accelerates on stronger-than-anticipated adoption of merchant solutions like Shopify Payments and Shopify Audiences (machine learning marketing software).

I doubt revenue growth will accelerate enough for the stock to hit $287 per share any time soon; the valuation is simply too rich. However, Wall Street's median target price values Shopify at $150 per share. That is more reasonable, though the company will probably still need to beat estimates and deliver encouraging guidance to reach that price.

Here's the bottom line: Shopify is well positioned to take market share in e-commerce as the agentic AI era unfolds. Yes, the stock is expensive, but it's also down 36% from its high. I think that creates a reasonable entry point for patient investors with a time horizon of at least five years. But I would start with a very small position and add shares if the stock continues to fall.

Trevor Jennewine has positions in Amazon and Shopify. The Motley Fool has positions in and recommends Alphabet, Amazon, Micron Technology, Microsoft, and Shopify. The Motley Fool has a disclosure policy.

Elon Musk's Space Exploration Technologies (NASDAQ: SPCX) completed its historic initial public offering (IPO) on Friday, June 12. The rocket and satellite company raised a record $75 billion at an unprecedented market value of $1.7 trillion.

SpaceX stock is down 42% from its post-IPO high, partly because some insiders will be allowed to sell shares two days after the company reports second-quarter financial results on August 4. But a rich valuation, debt issuance, and launch delays have also factored into the decline.

Nevertheless, Wall Street is overwhelmingly bullish. Among 37 analysts, SpaceX has a median target of $225 per share, implying 96% upside from its current share price of $115. My prediction is a little more conservative: I think SpaceX will trade at $167 per share by June 2027.

Here's why.

Image source: Getty Images.

SpaceX is chasing a $26.5 trillion opportunity in AI products and services

SpaceX is a vertically integrated business that designs hardware and software across three operating segments: space, connectivity, and artificial intelligence. The company has a key competitive advantage in reusable rockets, which dramatically reduce launch costs. That economic moat has helped SpaceX build Starlink, the largest satellite internet service in the world.

SpaceX also runs two Colossus data centers, which collectively form the largest AI training cluster on the planet. Using its low-cost launch capabilities, massive satellite network, and AI expertise, the company plans to provide AI cloud services from orbital (space-based) data centers. Solar power and cold temperatures could solve the energy and cooling problems that limit terrestrial data centers.

"We believe we are the only company with a commercially viable path to building orbital AI compute at scale," SpaceX explains its SEC Form S-1. The company values its addressable market at $28.5 billion, and the vast majority of that sum ($26.5 trillion) is attributed to AI products and services.

Wall Street says SpaceX's revenue will grow at 102% annually through 2028

In the first quarter, SpaceX reported a net loss of $4.2 billion, but the company has plenty of cash on its balance sheet after raising $75 billion from its initial public offering (IPO) and AI revenue is likely to grow quickly in the quarters ahead. Anthropic and Alphabet have agreed to rent cloud capacity from SpaceX for monthly fees of $1.25 billion and $920 million, respectively.

SpaceX brought in revenue of $19.3 billion in the past year, and the company currently has a market value of $1.5 trillion as of July 25. Those figures give SpaceX a price-to-sales ratio of 78. That would be a very rich valuation in almost any circumstance, but it's tolerable here because Wall Street estimates sales will increase at 102% annually through 2028. In other words, SpaceX currently trades at about 11 times projected sales for 2028.

History says SpaceX's stock price will increase 45% by June 2027

SpaceX had a market capitalization of $1.7 trillion at its IPO price of $135 per share. That made it the largest IPO in history by a wide margin. There is no perfect comparison, but we can look at how other large IPOs have performed to make an educated guess about where SpaceX is headed.

The following chart shows the 10 largest U.S. IPOs (as measured by market value at the IPO price) between 2016 and 2025. It also details how those stocks performed during their first year on the market.

Data source: BlackRock. Note: Coinbase went public through a direct listing.

Among the 10 largest U.S. IPOs in history, the average stock returned 24% during its first year on the public market. If SpaceX follows that trajectory, the stock will trade at $167 per share in June 2027. That implies 45% upside from the current share price of $115.

I think $167 per share is a sensible forecast. It implies a market value of $2.1 trillion, which means the stock would trade at 30 times projected sales for 2027. That is not cheap, but it is much cheaper than the current valuation.

More importantly, even if I am wrong about SpaceX reaching $167 per share by June 2027, I think patient investors who buy the stock today will outperform the S&P 500 over the next five years. I would start with a small position and add shares if the stock continues to move lower.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Airbnb, Alphabet, BlackRock, DoorDash, Roblox, Rocket Companies, Snowflake, and Uber Technologies. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.

Under Warren Buffett, Berkshire Hathaway built a substantial stake in Apple. It still ranks as the company's largest equity investment, accounting for 22% of its U.S. stock portfolio. But Buffett's successor, Greg Abel, added a second megacap stock in the first quarter: Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG).

Berkshire initially had 2% of its U.S. stock portfolio in Alphabet, but Abel tripled the stake in the second quarter. Alphabet now accounts for 6% of Berkshire's domestic equity investments, a noteworthy change because the company's $263 billion U.S. stock portfolio accounts for a large percentage of its $1 trillion market value.

Here's what investors should know about Alphabet.

Image source: Getty Images.

Alphabet monetizes AI at multiple layers of the value chain

Alphabet stock is compelling not only because the company has reported strong financial results in several consecutive quarters, but also because it has strong growth prospects tied to cloud computing and artificial intelligence, not to mention its dominant position in internet search and advertising.

Alphabet reported encouraging financial results in the second quarter, despite missing Wall Street's consensus estimate on the bottom line. Revenue climbed 24% to $119.8 billion, the sixth straight acceleration, driven by particularly strong sales growth in the cloud segment. Operating income (which excludes unrealized gains from its investment in SpaceX) increased 31% to $40.8 billion.

"It's clear that our AI investments and full-stack approach are driving performance across our business," CEO Sundar Pichai explains. That full-stack approach -- meaning Alphabet develops products at every layer of the value chain -- creates cost efficiencies and lets the company innovate more quickly than competitors that rely on third-party suppliers.

Beyond that, Alphabet's full-stack strategy means it can monetize AI in several different ways. Revenue streams include custom chips (tensor processing units or TPUs), cloud infrastructure services, proprietary models (Gemini), and applications like Google Search, YouTube, and Gemini Enterprise. No other company touches every layer of the value chain to the same degree as Alphabet.

Custom silicon, in particular, is important because it represents a relatively nascent growth opportunity. Alphabet's TPUs are the second-most popular AI accelerators behind Nvidia's GPUs. Alphabet is unlikely to dethrone Nvidia, but it is well positioned to gain market share as companies search for more cost-efficient AI infrastructure solutions.

Indeed, Pichai recently told analysts, "As TPU demand grows from AI labs, capital markets firms, and high-performance computing applications, we will begin to deliver TPUs to a select group of customers in their own data centers." In other words, Alphabet is now selling custom chips directly to customers, in addition to renting TPUs through its cloud computing platform.

Alphabet stock trades at a very reasonable valuation after its post-earnings drawdown

Alphabet stock is down 7% since the company announced second-quarter financial results on July 22, and shares currently trade 21% below the record high they hit in May. The recent drawdown reflects anxiety about the company raising its capital expenditure (capex) outlook for the year.

"We are updating our full-year 2026 capex guidance range to $195 billion to $205 billion, up from our previous estimate of $180 billion to $190 billion," explained CFO Anat Ashkenazi on the earnings call. Demand for AI infrastructure continues to exceed supply, so Alphabet is trying to address that problem as quickly as possible.

I think the market overreacted. Alphabet's cloud revenue increased 82% during the second quarter, the fifth straight acceleration. Admittedly, the company has spent a tremendous amount of money to fund that growth, but investments in AI infrastructure are paying off. Neither Amazon nor Microsoft has reported cloud sales growth anywhere close to that figure in recent quarters.

Looking ahead, the Wall Street consensus says Alphabet's earnings will increase at 14% annually during the next three years. That makes the current valuation of 16 times earnings look quite reasonable. Investors should be comfortable purchasing a stake in this AI stock today, especially after the recent sell-off.

Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

The Social Security Administration updates certain financial limits and formulas on an annual basis to keep benefit payments aligned with inflation and wages. Next year, Social Security benefits will receive a cost-of-living adjustment, the earnings limits will increase, and some workers will pay more taxes into the program.

The Social Security Administration announces similar changes every year, usually in mid-October. However, a recent survey from Nationwide Retirement Institute found that many Americans lack a basic understanding of those topics. Read on to learn about three changes coming to Social Security in 2027.

Image source: Getty Images.

1. Social Security benefits will get a cost-of-living adjustment (COLA) in 2027

Nationwide Retirement Institute reports that 68% of surveyed adults don't know that Social Security benefits are protected from inflation.

Social Security benefits lose purchasing power over time due to inflation, but beneficiaries receive annual cost-of-living adjustments (COLAs) designed to compensate them for that loss. COLAs are based on how much the CPI-W (a subset of the Consumer Price Index) changes in the third quarter (July to September) of each year.

For instance, CPI-W inflation measured 2.8% in the third quarter of 2025, so Social Security benefits increased 2.8% in 2026. But inflation is trending higher this year, due in large part to elevated energy prices tied to the Iran war, so the 2027 COLA is likely to be larger. The Senior Citizens League (TSCL) anticipates a 3.8% COLA, while independent policy analyst Mary Johnson expects a 3.7% COLA.

Importantly, the cost-of-living increase cannot be finalized until the Labor Department publishes September inflation data. That will happen on Oct. 14 at 8:30 a.m. ET. The Social Security Administration will issue a press release detailing the 2027 COLA (and other changes) shortly thereafter.

2. Social Security's earnings limits will increase in 2027

Nationwide Retirement Institute reports that 33% of surveyed adults don't know that some Social Security benefits are temporarily withheld for workers under full retirement age (FRA) whose earnings exceed certain limits.

In 2026, the lower limit is $24,480, and the higher limit is $65,160. The lower limit applies to workers who will not reach FRA this year; they will have $1 in benefits withheld for every $2 in earnings above $24,480. The upper limit applies to workers who will reach FRA this year; they will have $1 in benefits withheld for every $3 in earnings above $65,160.

The Social Security earnings limits generally increase each year to account for changes in the national average wage index, which tracks Americans' average annual earnings. The Social Security Board of Trustees expects the lower limit and upper limit to reach $25,200 and $67,200, respectively, in 2027. But the numbers will not be finalized until Oct. 14.

Importantly, the earnings limits do not apply to workers once they reach FRA. And any benefits withheld before that point are gradually repaid, such that affected beneficiaries recoup most or all of their benefits during an average lifespan.

3. Social Security's maximum taxable earnings limit will increase in 2027

Nationwide Retirement Institute reports that 73% of surveyed adults believe workers pay Social Security taxes on all of their income. That is actually false.

Social Security is primarily funded by a payroll tax, but the amount of income subject to that tax is capped by law. In 2026, the maximum taxable earnings limit is $184,500, which means any income above that level is not taxed. However, the maximum taxable earnings limit generally increases each year to account for changes in the national average wage index.

The Social Security Board of Trustees estimates the maximum taxable earnings limit will hit $190,200 in 2027. In that scenario, an additional $5,700 would be subject to Social Security's 6.2% payroll tax, meaning some workers would owe an additional $353.40 in taxes. But the exact figure will not be finalized until Oct. 14.

The Motley Fool has a disclosure policy.

Palantir Technologies (NASDAQ: PLTR) has been a cornerstone of the artificial intelligence (AI) trade for several years. Its stock price, despite dropping 30% year to date, has increased 1,800% since January 2023.

In a recent interview, Gil Luria, head of technology research at D.A. Davidson, told Schwab Network, "Palantir may be the best company in the world. It's at least the best software company." He also explained that, while the stock remains expensive, the valuation is more attractive today than it has been in the past.

Earlier this month, Luria raised his target price to $175 per share. That implies 42% upside from the current share price of $123. However, most Wall Street analysts expect even larger gains. Palantir has a median target price of $200 per share, implying 62% upside.

Image source: Getty Images.

Palantir's unique software architecture gives the company an edge

Palantir develops analytics platforms that integrate data and apply artificial intelligence to help customers make better decisions. The company has differentiated itself with a unique software architecture. While most analytics tools focus on charts and tables, Palantir built its platforms around a decision-making framework called an ontology.

Think of the ontology as a digital twin. It connects data to real-world assets and processes, creating a single source of truth for an entire organization. By structuring information in a manner conducive to artificial intelligence, Palantir's ontology makes it easy for customers to surface insights and automate workflows.

Additionally, Palantir's Artificial Intelligence Platform (AIP) is an agnostic large language model orchestration tool, meaning customers can apply any AI model to the ontology data. That distinguishes Palantir from companies like Anthropic and OpenAI, whose products center on proprietary models rather than agnostic orchestration.

Luria says the market needs agnostic products, citing a recent U.S. government directive that forced Anthropic to temporarily suspend access to its Fable model. "So now companies know we need somebody like Palantir, where if something like that happens, they can swap in an OpenAI model or even an open-source model," he told Schwab Network.

Luria went on to say Palantir has always been a major player in the AI platforms market, but its role in that market is becoming even more important as the number of available models increases. "Most companies are in the very initial stages of trying everything to see what catches. But Palantir customers are using AI already to deliver results," he said.

Palantir has received praise from several independent research firms. Dresner Advisory Services has ranked the company as a leader in three market studies: artificial intelligence, data science, and machine learning; model operations; and agentic AI. Likewise, Forrester Research has recognized Palantir as a leader in AI decisioning platforms.

Palantir's impressive growth trajectory makes its rich valuation tolerable

Palantir reported impressive financial results in the first quarter. Revenue increased 85% to $1.6 billion, the 11th consecutive acceleration, and non-GAAP (generally accepted accounting principles) earnings increased 153% to $0.33 per diluted share. The company also raised full-year guidance, now anticipating 71% revenue growth in 2026, up from 56% in 2025.

"Our financial results now demonstrate a level of strength that dwarfs the performance of essentially every software company in history at this scale," CEO Alex Karp told analysts on the earning call. "We are in a category of our own."

Looking ahead, Wall Street expects Palantir's earnings to grow at 56% annually through 2027. In that context, Palantir's current valuation of 128 times earnings is not cheap, but it is tolerable, especially given that the company has topped the consensus earnings estimate by an average of 15% over the last six quarters.

Luria's assertion that Palantir might be the best company in the world is rather bold. I'm not sure I'd go that far. Regardless, patient investors should consider buying a small position in the stock today.

Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

The S&P 500 (SNPINDEX: ^GSPC) has advanced 10% in the past year, an impressive return by any standard. But these two Vanguard index funds have generated superior returns:

• The Vanguard U.S. Momentum Factor ETF (NYSEMKT: VFMO) has added 22% year to date.
• The Vanguard Information Technology ETF (NYSEMKT: VGT) has added 23% year to date.

Here's what investors should know about these index funds.

Image source: Getty Images.

The Vanguard Momentum Factor ETF: 22% gain year to date

The Vanguard Momentum Factor ETF is an actively managed fund that uses a rules-based quantitative model to select stocks with strong recent performance. It currently tracks 670 equities, most of which come from the technology sector. The top five holdings are, as listed by weight:

1. Alphabet: 1.3%
2. Applied Materials: 0.9%
3. Advanced Micro Devices: 0.9%
4. KLA: 0.8%
5. Micron Technology: 0.8%

If dividends were reinvested, the Vanguard U.S. Momentum Factor ETF returned 88% over the past three years, which is equivalent to 23.4% annually. But the S&P 500 returned 71%, which is equivalent to 19.6% annually. Going further back, the Vanguard U.S. Momentum Factor also beat the S&P 500 by four percentage points over the past five years.

With a modest expense ratio of 0.13% and track record for outperformance, this Vanguard index fund is a convenient way to get exposure to the hottest stocks on the market. But investors should understand that momentum stocks tend to be more volatile than the broader market, and volatility cuts both ways.

Momentum stocks tend to outperform when the broader market is rising, but they tend to underperform when the broader market is falling. For instance, after President Trump announced sweeping tariffs in April 2025, the S&P 500 declined 19% while the Vanguard U.S. Momentum Factor ETF dropped 25%.

The Vanguard Information Technology ETF: 23% gain year to date

The Vanguard Information Technology ETF is a passive fund that tracks 321 small, medium, and large stocks in the technology sector. The index fund is most heavily weighted toward the semiconductor, hardware, and software industries, but it also includes IT consultants and electronic component suppliers. The five largest holdings are:

1. Nvidia: 16.1%
2. Apple: 14.3%
3. Microsoft: 8.2%
4. Micron Technology: 5%
5. Broadcom: 3.8%

If dividends were reinvested, the Vanguard Information Technology ETF returned 105% over the last three years, which is equivalent to 27.1% annually. Meanwhile, the S&P 500 gained 71%, which is equivalent to 19.6% annually. The Vanguard Information Technology ETF also beat the S&P 500 by 46 percentage points over the past five years.

With an expense ratio of 0.09%, this fund provides cheap exposure to hundreds of stocks that are likely to benefit from the artificial intelligence boom. Furthermore, the index fund currently trades at 36 times earnings, which is a reasonable valuation when technology sector earnings are projected to increase at 44% annually through 2027, according to LSEG.

However, the Vanguard Information Technology ETF is also highly concentrated in a small number of stocks. Nvidia, Apple, and Microsoft account for nearly 40% of the fund's performance. So, investors who already own large positions in those stocks should avoid this index fund unless they truly want to double down on those companies.

Here's the big picture: Index funds are essentially ready-made portfolios that make investing simpler. They are a great option for anyone who prefers not to research individual stocks, but investors don't have to choose between the two. In fact, CNBC's Jim Cramer recently made a good argument for owning both. He thinks investors should split their money 50-50 between index funds and stocks. He says index funds are "insurance against your individual stock portfolio blowing up in your face."

Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Apple, Applied Materials, Broadcom, KLA, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Memory chip maker Sandisk (NASDAQ: SNDK) was the best-performing stock in the S&P 500 (SNPINDEX: ^GSPC) in 2025, and it's currently leading the index higher in 2026. The stock has advanced 570% year to date amid a severe memory chip supply shortage fueled by the artificial intelligence infrastructure build-out.

In general, analysts think Sandisk remains undervalued. Wall Street's median target price of $2,500 per share implies 57% upside from its current share price of $1,590. But I think the stock will increase 91% to $3,040 per share by August 2027 (i.e., when the company reports financial results for the full fiscal year).

Here's my logic.

Image source: The Motley Fool.

Sandisk is capitalizing on AI-driven demand for NAND flash memory

Sandisk develops storage solutions based on NAND flash memory. Once a sleepy consumer brand, it has shifted focus to enterprise solid-state drives (SSDs), which play an important role in supporting artificial intelligence workloads. Specifically, NAND-based SSDs provide storage for active AI training data and models before they are loaded into DRAM (working memory).

"NAND flash is emerging as the only economically viable solution to deliver the capacity, performance, and efficiency required to keep models accessible for real-time inference at scale," according to CEO David Goeckeler. Sandisk is capitalizing on that opportunity by expanding its enterprise SSD portfolio. Products based on Stargate, a new controller built to improve enterprise SSD storage density, will begin shipping this quarter.

Meanwhile, Sandisk in July started sampling chips built on BiCS10 architecture, the 10th generation of its 3D NAND flash memory technology. Compared to the previous generation, BiCS10 increases bit density by 59%, meaning more data can be store in the same physical space. Also, memory chips built on the new architecture are 33% faster and much more power efficient than chips built on the previous BiCS8 architecture.

Wall Street expects Sandisk's revenue to grow 155% in fiscal 2027

Sandisk reported impressive financial results for the third quarter of fiscal 2026 (ended in March). Revenue rose 251% to $5.9 billion, driven by especially strong sales growth in the data center segment. And non-GAAP earnings increased to $23.41 per diluted share, up from a loss of $0.30 per diluted share in the previous year.

Sandisk will likely keep posting strong numbers for the foreseeable future. But memory chips sales have historically been highly cyclical because manufacturers tend to overproduce during periods of robust demand. That creates supply gluts that ultimately drive prices lower. For instance, demand for memory chips soared during the pandemic, but DRAM and NAND prices had dropped about 70% by 2023.

Naturally, investors are concerned that history will repeat itself. Those fears are warranted, at least to some degree. Several memory chip manufacturers are constructing new plants to increase production capacity, and some of that new supply will hit the market in 2027 and 2028. On the other hand, demand is so intense today that memory chip manufacturers have secured multiyear contracts.

As of April, Sandisk had signed five long-term agreements. "These partnerships support durable, structurally higher earnings and a significantly more predictable and less cyclical business for Sandisk," said CEO David Goeckeler. "We believe this marks a fundamental evolution of our business centered on deeper customer alignment, enhanced visibility, and long-term value creation."

Nevertheless, concerns about a sharp decline in memory prices will likely linger, putting downward pressure on Sandisk's valuation over the next year. The stock currently trades at 18 times sales, but I will assume that metric falls to 9 times sales after Sandisk reports financial results for fiscal 2027 next August.

The Wall Street consensus says revenue will increase about 155% to $50 billion in fiscal 2027. If that forecast is accurate and shares trade at 9 times sales, Sandisk's market value would reach $450 billion. That implies 91% upside from its current market value of $235 billion. It also implies a stock price of $3,040 per share.

Trevor Jennewine 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.

On June 12, Space Exploration Technologies (NASDAQ: SPCX) became the largest initial public offering (IPO) in U.S. history as measured by market value. The rocket and satellite company was worth nearly $1.8 trillion at the listing price of $135 per share.

SpaceX peaked around $202 per share on its third trading day. However, the stock has since fallen 36% to $129 per share, and history says it has further to fall. Here's what investors should know.

Image source: Getty Images.

History says SpaceX's stock will drop 13% by June 2027

Highly anticipated IPO stocks frequently notch large gains on the first trading day. SpaceX was no exception; the stock closed just shy of $161 per share (about 19% above the IPO price) on day one. However, companies that go public with large market capitalizations have historically performed poorly over the long term.

Among the 10 largest U.S. IPOs in the last decade, the median stock fell 17% from its IPO price during its first year on the public market. SpaceX priced its IPO at $135 per share. If its performance matches the historical median, the stock will trade at $112 per share by June 2027 (i.e., 17% below its IPO price). That implies 13% downside from the current share price of $129.

In that scenario, $10,000 invested in SpaceX today would be worth $8,820 by June 2027. But there is more bad news: History says SpaceX could decline even further in the interim.

Among the 10 largest U.S. IPOs in the last decade, the median stock dropped 25% from its IPO price at some point during the first year. If SpaceX follows that trajectory, the stock will fall to $101 per share at some point before June 2027. That implies 20% downside from its current price.

SpaceX has compelling growth prospects, but the stock is very expensive

SpaceX's reusable rocket architecture enables the company to launch payloads into orbit more frequently and cost-effectively than its competitors. That economic moat has not only helped SpaceX build the world's largest satellite internet service, Starlink, but also positioned the company to disrupt the artificial intelligence industry with orbital data centers.

SpaceX values its addressable market at $28.5 trillion, and the company attributes the vast majority of that figure ($26.5 trillion) to artificial intelligence products and services. Its SEC Form S-1 (registration statement) states:

We believe SpaceX's reusable rockets, scaled satellite manufacturing, and operational expertise can enable the cost-effective and rapid deployment of massive AI compute satellite constellations -- with potentially millions of satellites -- for orbital data centers. We believe these AI compute satellites in sun-synchronous orbit will be able to handle energy-intensive AI workloads, such as inference demand, at far greater scale and efficiency than terrestrial alternatives.

However, SpaceX will not launch orbital data centers until 2028 at the earliest. Meanwhile, the stock currently trades at 88 times sales. By comparison, Palantir Technologies is the most expensive stock in the S&P 500 (SNPINDEX: ^GSPC) at 62 times sales.

That means SpaceX is currently 40% more expensive than the most richly valued member of the benchmark index for the entire U.S. stock market. I doubt that premium is sustainable.

Here's the big picture: History suggests SpaceX stock is headed lower in the coming months. The current valuation hints at the same outcome. That does not mean SpaceX will always be a bad investment. But I think investors should wait patiently for a more attractive buying opportunity. Better entry points are sure to arise eventually.

Consider Uber Technologies. Since its IPO in May 2019, the stock has underperformed the S&P 500 by 99 percentage points. But the stock has also outperformed the S&P 500 by 140 percentage points since July 2022.

The lesson is simple: Uber shareholders who didn't dive headlong into the IPO but waited for a more reasonable buying opportunity have been well rewarded. I believe the SpaceX story will be similar in hindsight.

Trevor Jennewine has positions in Palantir Technologies. The Motley Fool has positions in and recommends Palantir Technologies and Uber Technologies. The Motley Fool has a disclosure policy.

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) will announce its second-quarter financial results after the market closes on Wednesday, July 22. The stock is up 87% in the past year, but it's also down 14% from the record high it reached in May.

Should investors buy a few shares ahead of the earnings report? Most Wall Street analysts say the answer is "yes." Alphabet has a median target price of $440 per share, which implies 27% upside from the current share price of $346. However, investors should first acquaint themselves with the company.

Read on to learn more.

Image source: The Motley Fool.

Here's what Wall Street expects when Alphabet reports earnings on July 22

Alphabet reported impressive financial results in the first quarter. Revenue increased 22% to $109.8 billion, the fourth straight acceleration, driven by particularly strong sales growth in the cloud segment, which itself was due to insatiable demand for artificial intelligence (AI) infrastructure.

Meanwhile, net income increased 82% to $5.11 per diluted share, but that figure was inflated by unrealized investment gains, primarily from Alphabet's stake in SpaceX. Operating earnings, which excludes those investment gains, increased 29% to $39.6 billion.

Alphabet didn't provide guidance for the second quarter. But the Wall Street consensus estimate says revenue will increase 21% to $116.8 billion and earnings (excluding the impact of unrealized investment gains) will increase 25% to $2.89 per diluted share.

Investors should review management's commentary about capital expenditures (capex), meaning what the company plans to spend on property, plants, and equipment this year. During the first-quarter earnings call, management said capex would total $180 billion to $190 billion in 2026, slightly higher than what it projected earlier in the year. Investors may get nervous if the company revises that figure even higher.

The investment thesis for Alphabet centers on AI cloud services

Alphabet's primary growth driver will be its cloud computing business. The company still trails Amazon and Microsoft, but it's steadily gaining market share because of the popularity of its Gemini models and custom AI accelerators called tensor processing units (TPUs). Google Cloud accounted for 14% of cloud infrastructure spending in Q1 2026, up from 12% in Q1 2025.

Gemini could become a major source of revenue. Using Google Cloud tools, developers can fine-tune and integrate the models into custom applications. For instance, Apple used Gemini infrastructure to develop the foundation models that power its upgraded Siri voice assistant. But Alphabet also offers prebuilt applications, such as the AI agent Gemini Spark.

TPUs could also become a major source of revenue. Earlier this year, Alphabet announced plans to create a new AI cloud company in partnership with private equity firm Blackstone. Unlike other cloud platforms, TPUs (rather than Nvidia GPUs) will power the infrastructure. Additionally, Alphabet recently started selling TPUs to customers for use in their own data centers.

Morgan Stanley analyst Brian Nowak estimates TPUs will account for 25% of Google Cloud revenue by 2028, up from about 5% today. In turn, he expects Google Cloud revenue to grow at 75% annually over that period, bringing Alphabet's companywide earnings per share to $19 in 2028. That implies annual growth of 15%, which more or less aligns with the Wall Street consensus.

In that context, Alphabet's current valuation of 26 times earnings looks quite reasonable. That's especially true because the company has another compelling growth opportunity in its autonomous driving business Waymo. Investors should feel comfortable buying a small position today, though I would keep some cash in reserve to capitalize on a post-earnings dip should the company's second-quarter results fail to impress.

Trevor Jennewine has positions in Amazon and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Blackstone, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

The S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) have added 8% and 9%, respectively, this year. The driving force behind that upside has been surprisingly strong corporate earnings, especially within the technology sector.

Unfortunately, investors have reason to worry that both major indexes could drop sharply in the months ahead. Inflation tied to rising oil prices may force the Federal Reserve to raise interest rates, and midterm elections tend to make the market nervous.

However, even if those major stock market indexes crash, history says investors who simply buy the dip will come out ahead in the long run. Here are the important details.

Image source: Getty Images.

History says the stock market could suffer a steep correction in the coming months

Oil prices just notched their largest weekly gain in several months, with futures contracts for West Texas Intermediate (WTI) crude (the U.S. benchmark) and Brent crude (the international benchmark) rising roughly 13% over the seven-day period that ended on July 17. That inflationary pressure makes it more likely that the Federal Reserve will pivot to interest rate hikes this year.

So what? In the last 40 years, the Fed has initiated nine tightening cycles, meaning it has pivoted from rate cuts to rate hikes nine times. Following the first hike in each cycle, the S&P 500 and Nasdaq Composite fell by an average of 10% and 12%, respectively, at some point during the next three months. In other words, both indexes usually fell into correction territory.

Additionally, midterm elections tend to incite larger stock market drawdowns. In the last 40 years, the S&P 500 and Nasdaq Composite have declined by an average of 17% and 24%, respectively, at some point during midterm years. That happens because the political party in the White House usually loses seats in Congress, which creates uncertainty about the president's political agenda.

History says investors who sit tight and buy the dip during a correction will come out ahead

The S&P 500 has suffered six market corrections in the last decade, and two of them eventually became bear markets. However, following the index's first close in correction territory (i.e., the first day it closed at 10% below its high), the S&P 500 returned an average of 18% over the next year, and it added 40% over the next two years.

Similarly, the Nasdaq Composite has suffered nine market corrections during the last decade, and four of them eventually became bear markets. However, following the index's first close in correction territory, the Nasdaq returned an average of 21% over the next year, and it added 39% over the next two years.

Importantly, the one thing investors should not do is attempt to time the market by selling stocks with the intention of repurchasing them in the future. It is impossible to predict the bottom of a drawdown, and many of the market's best days occur in close proximity to its worst days.

"In the past 20 years, seven of the 10 best market days occurred within 15 days of the 10 worst days," explains the global investment strategy team at JPMorgan Chase. "This highlights the risk of exiting the market during volatility, potentially causing investors to miss rebounds and derail long-term goals."

The lesson here is simple: Stock market corrections are unavoidable. We may see one this year if the Fed starts a new rate-hiking cycle, and the correction could be particularly steep (perhaps even a market crash) because midterm elections tend to incite volatility. But history says investors who buy an S&P 500 index fund or Nasdaq Composite index fund -- particularly after the benchmark's first close in correction territory -- will earn substantial returns in the future.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends JPMorgan Chase. The Motley Fool has a disclosure policy.

Space Exploration Technologies (NASDAQ: SPCX) and Micron Technologies (NASDAQ: MU) are two of the most popular stocks on the market, but CFRA analysts think they are headed in opposite directions.

• Keith Snyder at CFRA has a sell rating on SpaceX. His target price of $115 per share implies 12% downside from its current share price of $131.
• Angelo Zino at CFRA has a buy rating on Micron. His target price of $1,500 per share implies 76% upside from its current share price of $853.

Here's what investors should know about these popular stocks.

Image source: The Motley Fool.

SpaceX: 12% downside implied by CFRA's target price

SpaceX dominates the global space industry. The company accounted for more than 80% of spacecraft launches last year, and it has fired more satellites into orbit than the rest of the world combined. SpaceX's competitive advantage lies in reusable rockets. Its Falcon 9 rocket cut launch costs by 85% compared to the historical average, and its next-generation Starship will reduce costs by 99%.

"Central to our cost advantage is the reusability of key hardware -- most notably boosters -- which we recover, refurbish, and refly many times instead of discarding after single use," SpaceX explained in its Form S-1. "This dramatically lowers per-launch costs by minimizing hardware replacement expenses and spreading fixed production costs across repeated uses."

SpaceX has leaned on its ability to launch rockets quickly and efficiently to build Starlink, the largest space-based internet service. Starlink has more than 10,000 satellites in orbit, and it serves 12 million subscribers. Recently, the company set its sights on mobile connectivity, where it may challenge AT&T and Verizon. Tim Horan at Oppenheimer writes, "SpaceX will disrupt the $1.6 trillion communications industry."

SpaceX's first-quarter financial results were unimpressive. Revenue increased 15% to $4.6 billion. Sales in the connectivity segment (i.e., Starlink) grew quickly, but that was offset by weaker sales growth in the artificial intelligence segment and a sales decline in the space segment. The company also reported a net loss of $4.2 billion, much worse than its $528 million loss in the previous year.

However, SpaceX's revenue growth should accelerate in the coming quarters, particularly in the AI segment. The company recently signed cloud services agreements with Anthropic and Alphabet's Google, which will rent AI infrastructure for monthly fees of $1.25 billion and $920 million, respectively.

The problem is valuation. SpaceX trades at 88 times sales. That makes it more expensive than every other stock in the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq-100, which leaves plenty of room for downside.

I think patient investors can buy a small position today, but the keyword is small. Despite trading below its IPO price of $135 per share, the stock is still risky.

Micron Technology: 76% upside implied by CFRA's target price

Micron develops memory and storage solutions across four end markets: automotive, data center, cloud, and mobile. The company manufactures DRAM products, including high-bandwidth memory (HBM), which serves as working memory for artificial intelligence tasks. Micron also builds NAND flash products, which serve as long-term storage for training data and models.

In terms of market share, Micron trails the industry leaders Samsung and SK Hynix in DRAM and NAND. But the company is still growing quickly because demand for memory far exceeds supply. In fact, the supply shortage is so severe that DRAM and NAND prices have increased about 90% and 110%, respectively, in the past year.

Micron's third-quarter fiscal 2026 (ended in May) financial results trounced Wall Street's estimates. Revenue increased 345% to $41.4 billion due to particularly strong growth in the data center segment, which serves non-hyperscalers. Meanwhile, non-GAAP (generally accepted accounting principles) net income surged 1,215% to $25.11 per diluted share.

CEO Sanjay Mehrotra delivered great news during the conference call. Micron has now signed 16 long-term supply agreements (i.e., three to five years) that offer some downside protection in a historically cyclical industry. Those deals generally include minimum pricing terms and binding commitments to purchase specific volumes.

So what? The memory chip industry has traditionally run on boom-and-bust cycles. Periods of robust demand (and price hikes) have generally preceded periods of weak demand (and price cuts). That led to substantial volatility.

For instance, Micron's sales fell 50% in fiscal 2023. But multiyear supply agreements should limit downside during the next industry downturn.

Micron currently trades at 10.7 times sales, a big premium to the five-year average of 4.7 times sales. But that valuation is quite reasonable, perhaps even cheap, for a company whose sales are forecast to grow at 115% annually through fiscal 2027 (ends in August). Micron stock is currently 30% below its high, and investors should consider buying the dip.

Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet and Micron Technology. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.

In many cases, Social Security benefits are the largest source of income for retired workers. For that reason, many retirees look forward to the annual cost-of-living adjustment (COLA), pay raises designed to protect the purchasing power of benefits from inflation.

On that topic, Social Security beneficiaries recently got some bad news and some good news about the 2027 COLA. Here are the important details.

Image source: Getty Images.

The bad news: Social Security's 2027 COLA forecast was just revised lower

Social Security's annual cost-of-living adjustments (COLAs) are calculated based on how inflation changes in the third quarter of each year, meaning the three-month period from July through September. In this context, inflation is based on a subset of the Consumer Price Index known as the CPI-W.

Here's the bad news: The Senior Citizens League (TSCL), a nonprofit advocacy group, recently cut its 2027 forecast to 3.8%, down from its previous estimate of 3.9%. The driving force behind the downward revision was the sharp drop in oil prices (and subsequent drop in inflation) following a ceasefire agreement between the U.S. and Iran last month.

However, the ceasefire has ended and the two nations have resumed fighting. In turn, oil prices are once again climbing. Brent crude (an international benchmark) reached $85 per barrel on July 17, the highest level since mid-June. Without de-escalation in the near term, CPI-W inflation could accelerate in the third quarter, meaning the actual 2027 COLA could be higher than TSCL's latest estimate implies.

The good news: Social Security's 2027 COLA may accurately reflect inflation for the first time since 2023

Some experts think COLAs should be calculated differently. The CPI-W is based on the spending habits of working-age adults with clerical or hourly-wage jobs. But working-age adults tend to spend money differently than retirees on Social Security.

Specifically, retirees generally spend more on housing and medical care, which means the CPI-W inherently underemphasizes those spending categories. For that reason, certain policy analysts and politicians think COLAs should be tied to another subset of the Consumer Price Index known as the CPI-E, which measures inflation based on the spending habits of individuals aged 62 and older.

Importantly, CPI-E inflation has historically run about two-tenths of a percentage point above CPI-W inflation. The chart below compares the metrics: For each year, it shows the actual COLA (based on the CPI-W) and the hypothetical COLA (based on the CPI-E).

Data source: Bureau of Labor Statistics. The chart compares the actual COLA based on CPI-W inflation to a hypothetical COLA based on CPI-E inflation.

As shown above, the average COLA since 2016 would have been two-tenths of a percentage point higher had it been tied to the CPI-E rather than the CPI-W. So, if the CPI-E is truly a better measure of inflation for retired workers, the average COLA since 2016 has been 0.2% too small. That may sound inconsequential, but it means Social Security benefits lost 2% of their purchasing power over that period.

Here's the good news: In 2026, CPI-W inflation is running even with CPI-E inflation. Both metrics averaged 3.3% through June. That means Social Security's 2027 COLA should reflect inflation from the perspective of retirees more accurately than it has in several years.

Specifically, the CPI-W COLA has not matched or exceeded the hypothetical CPI-E COLA since 2023, meaning Social Security has arguably lost purchasing power in each of the last three years. But benefits are on pace to retain their buying power next year because the CPI-W and CPI-E are rising at the same pace.

What's behind that trend? Medical care inflation averaged 2.7% during the first half of 2026, well below overall CPI-W inflation at 3.3%. Additionally, housing inflation averaged 3.3% in the first half of 2026, matching CPI-W inflation. This is the first time since 2022 in which housing inflation has not run hotter than overall CPI-W inflation through the first half of the year.

There is one more piece of good news for retired workers on Social Security. Since 2024, Medicare Part B premium increases have outpaced COLAs, contributing to the loss in Social Security's purchasing power. But that could change in 2027. As my colleague Sean Williams explains, Medicare Part B premiums are forecast to rise 3.25% next year, below the projected 3.8% COLA for Social Security benefits.

The Motley Fool has a disclosure policy.

The U.S. stock market has delivered sizable returns this year despite economic uncertainty created by the Iran conflict. The S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) have added 10% and 12%, respectively, year to date. The primary driver behind the stock market's upside has been surprisingly strong corporate earnings.

But investors recently got a subtle warning from the Federal Reserve. Earlier this week, Fed Governor Christopher Waller delivered a speech at the New York Association for Business Economics. "The FOMC has to be ready to tighten monetary policy to prevent a repeat of the 2021-to-2022 inflation episode," he said, referring to the Federal Open Market Committee. "I am committed to returning inflation to the FOMC's 2% goal."

That may not sound like a warning, but Waller's comments underscore a hawkish shift at the Fed. A few months ago, most policymakers expected to lower interest rates this year, but the median projection now implies higher rates. And new tightening cycles have often coincided with stock market corrections.

Kevin Warsh is sworn in as chairman of the Federal Reserve. Image source: Official White House Photo.

Fed Chair Kevin Warsh is committed to bringing inflation back to target

The FOMC held its benchmark federal funds rate steady in June. But Chair Kevin Warsh acknowledged a serious problem in a speech following the meeting. "We recognize that inflation has been running well ahead of the Fed's long-stated goal of 2%. That's been going on for more than five years."

Warsh made it clear that above-target inflation was unacceptable. "I am pleased to report that members of the FOMC are unambiguous and unanimous: This committee will deliver price stability," he said. "We have the capability and commitment to deliver on our price-stability objective of 2%. That's exactly what we're going to do."

Reporters tried to coerce Warsh into divulging more. "Under what circumstances would you support the Fed taking some action and raising rates?" asked Colby Smith of The New York Times. But Warsh, who has criticized the practice of providing forward guidance, did not take the bait.

Nevertheless, investors can read between the lines. Inflation has been running above target for years, so the Fed must make changes to bring inflation down. That could mean holding rates steady for an extended period, but that may be too passive, especially since oil prices are rising again amid renewed hostilities between the U.S. and Iran.

Policymakers have become much more hawkish in recent months. As of June, the median estimate among FOMC officials implies one quarter-point rate increase in 2026, but six of 18 members expect at least two rate increases. Comparatively, zero FOMC officials anticipated rate increases in March, and the consensus actually called for a quarter-point rate cut this year.

History says interest rate increases could lead to a stock market correction

Since 1999, the Federal Reserve has initiated four tightening cycles, meaning it has pivoted from rate cuts to rate increases four times in the past quarter-century. The following chart shows the maximum drawdown in the S&P 500 and Nasdaq Composite during the three-month period following the first interest rate increase in each cycle.

Data source: Federal Reserve, YCharts. The table shows the maximum drawdown in the S&P 500 and Nasdaq Composite during the three-month period following the Fed's first rate increase in a tightening cycle.

Following the first interest rate increase in a tightening cycle, the S&P 500 and Nasdaq have fallen by an average of 10% and 15%, respectively, at some point in the next three months. In other words, both major stock market indexes have historically dropped into correction territory when the Fed has pivoted from rate cuts to rate increases.

Of course, rate increases are not set in stone. Micheal Feroli, chief U.S. economist at JPMorgan Chase, thinks the Fed will stay on hold in the remaining months of 2026, before raising in the second half of 2027. David Mericle, chief U.S. economist at Goldman Sachs, also expects the Fed to hold rates steady this year, but he expects two rate cuts in 2027.

Here's the bottom line: The Federal Reserve is determined to bring inflation back to target, and the consensus among policymakers calls for a quarter-point rate increase this year. History says that rate increase could sink the stock market, so investors should be ready for a drawdown.

JPMorgan Chase is an advertising partner of Motley Fool Money. Trevor Jennewine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and JPMorgan Chase. The Motley Fool has a disclosure policy.