It's always good to look for new investment ideas. While investors can look at various sectors, I like to focus on artificial intelligence (AI) stocks. This technology is still in its early stages and can fundamentally change societies. Autonomous vehicles, humanoid robots, drones, and AI chatbots are some of the products and services that can scale rapidly as AI evolves.

That's why the two stocks I am buying in 2027 revolve around that theme. I already have positions in each of these companies and intend to build on them in 2027.

Image source: Getty Images.

1. Iren

Iren (NASDAQ: IREN) is my favorite neocloud stock. Nebius (NASDAQ: NBIS) is also a strong contender and slightly ahead of Iren in revenue recognition, but I do not believe Nebius should have a market cap almost four times Iren's.

The neocloud thesis is straightforward. Hyperscalers need access to compute, and companies like Iren create the data centers that supply hyperscalers with the necessary chips, power, software, and facilities.

Iren wrapped up its fiscal 2026 fourth quarter with $1 billion in operating annual recurring revenue. The company expects to reach $4 billion in annual recurring revenue by the end of 2026. As Iren strategically waits to sign big deals, the value of compute continues to climb. The landmark five-year, $9.7 billion deal with Microsoft comes to $9.7 million per megawatt-year. Iren is now negotiating deals for $25 million per megawatt.

If Iren can eventually realize $25 million per megawatt across its entire 5.8-gigawatt portfolio, it can generate $145 billion in annual recurring revenue, assuming the per-megawatt value doesn't continue to climb.

Some investors are worried about rising capital expenditures, but I don't think it will be that big of a deal. Iren is getting customers to prepay 45% to 55% of each contract, which makes it easier to fund data center builds. The company can also continue GPU financing and borrow against its data centers to ensure no further dilution occurs.

2. Netlist

I like to focus on smaller AI stocks, and Netlist (OTC: NLST) certainly qualifies with a $2 billion market cap. It is developing CXL solutions that can be a major part of AI infrastructure in the future. Netlist also makes a lot of money reselling memory products, but its patent portfolio can yield immediate upside.

The company reached a strategic agreement with Samsung after a lengthy patent infringement legal battle. Samsung must pay an up-front licensing fee of $239 million plus quarterly royalty payments of up to $32.9 million for five years. Netlist also has the right to buy up to $300 million in Samsung memory products each year for five years, guaranteeing chips at a time of intense supply constraints.

The total five-year contract can reach up to $897 million in gross license revenue, including the up-front fee. Almost all of that is pure profit, and Netlist no longer has to spend as much on legal. The company is pursuing similar actions against Micron Technology, which can result in another lucrative agreement, especially after its success with Samsung.

Some investors exited their positions due to a headline about Netlist losing its appeal in a patent case to Micron. While Netlist lost that case, it's completely different from the critical patents that Netlist used to get a deal with Samsung. Micron is still on the hook for $445 million in the patent infringement case that serves as a major catalyst for Netlist shares.

The growth stock plummeted by more than 20% on that news, but the price move was misguided. Losing one patent deal isn't synonymous with losing the critical deals that can force a strategic deal like the one Netlist secured for Samsung.

Marc Guberti has positions in Iren and Netlist. The Motley Fool has positions in and recommends Micron Technology and Microsoft. The Motley Fool has a disclosure policy.

Boring investing strategies aren't always bad. While some people look for hidden opportunities that no one is considering, the best investments may be hidden in plain sight.

That's why my boring prediction is that AI stocks will continue to rally. These stocks aren't exactly the greatest-kept secrets. Nvidia (NASDAQ: NVDA) has grown into the world's most valuable publicly traded company in recent years. More investors are also looking toward smaller AI stocks instead of just relying on chipmakers, which is the same approach I have used for my portfolio.

It may be boring to hear yet another person advocate for AI stocks, but the technology's evolution and upcoming catalysts suggest that this approach is still solid.

Image source: Getty Images.

Nvidia and Broadcom offered multiyear forecasts

AI investors should carefully monitor Nvidia and Broadcom (NASDAQ: AVGO) when assessing how far the AI rally can go. This has been true for years. While I have been bullish about AI stocks for years, their recent results have increased my resolve.

Broadcom reported 86% year-over-year revenue growth in its fiscal 2026 third quarter. Revenue for its AI semiconductor segment was up by 221% and made up more than half of total sales.

However, the bigger news came in the chipmaker's earnings call. Broadcom told investors that it expects its AI chip revenue to double to $115 billion in its fiscal 2027, and then to double yet again to $230 billion in its fiscal 2028.

It's rare for a company to give revenue guidance two years in advance, and this outlook points to continued parabolic growth. It's not just Broadcom. Nvidia said it anticipates 70% year-over-year revenue growth in its fiscal 2028, and cited supply chain issues as a factor limiting growth to that level. If the shortages of components are less of an issue than expected, Nvidia anticipates a level of demand that would result in a higher growth rate.

Hyperscalers are reaping massive rewards for their AI investments

The money that is going toward AI data centers is producing tangible growth for the largest developers of that infrastructure. Hyperscalers like Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) have produced tremendous results from their respective cloud platforms.

Amazon Web Services' growth has reignited, and it just had its best quarter in more than four years. Microsoft is sitting on a $678 billion backlog for its Azure cloud platform, and Google Cloud delivered 82% year-over-year revenue growth in the second quarter.

When announcing Alphabet's first quarter results, CEO Sundar Pichai told investors that the company's "AI investments and full stack approach are lighting up every part of the business."

That quote truly captures the returns AI investments have produced for the leading tech companies. It suggests that hyperscalers will continue to ramp up their capital investments, and Nvidia's and Broadcom's multiyear guidance supports that thesis.

It's not just chipmakers and hyperscalers

I believe that to find the most exciting AI investment opportunities requires investors to look beyond chipmakers and hyperscalers. Their earnings reports offer a good idea of where the AI industry is heading. If chips continue to fly off the shelves and cloud backlogs continue to grow, AI spending and demand will continue to climb.

However, that's not where I'm looking for investment opportunities. I prefer to find smaller companies that are responsible for different parts of AI infrastructure. For instance, each GPU requires memory chips. All of those chips also have to go inside data centers that have the necessary power, liquid cooling, and other components.

The deeper you go down this rabbit hole, the higher the returns you can potentially find. Neoclouds like Nebius (NASDAQ: NBIS) and Iren (NASDAQ: IREN) have my attention since they provide necessary compute capacity and power to hyperscalers.

Investors will continue to hear that artificial intelligence presents some of the best opportunities right now. It may sound boring since it has been the main headline on Wall Street for multiple years, but sometimes, the best opportunities are the most obvious ones.

Marc Guberti has positions in Broadcom and Iren. The Motley Fool has positions in and recommends Alphabet, Amazon, Broadcom, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Visa (NYSE: V) and American Express (NYSE: AXP) are two of the most well-known financial companies that enable countless transactions each day. Although they operate in the same industry, there are subtle differences between the two that are important for investors to know. If you could only invest in Visa or American Express, these are the factors to consider.

Image source: Getty Images.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Visa will always have higher net profit margins

Visa wrapped up its fiscal 2026 third quarter with a 48.4% net profit margin, while American Express reported a 16.8% net profit margin. American Express is unlikely to close that gap because the companies have some differences in their business models.

While many people use Visa and American Express credit cards, these companies make most of their revenue through their payment networks. They earn a small percentage of each transaction they process.

The difference emerges when looking beyond payment networks. Visa is a pure play in the industry. It does not collect interest on credit card debt, and if a consumer defaults on their card, that debt does not affect Visa's financials.

American Express operates as a lender. It makes money from interest but also loses money when consumers default on their balances. The lending model American Express uses results in higher operating expenses.

Analyzing the valuation gap

It makes sense for Visa to trade at a richer valuation than American Express, since the former enjoys higher profit margins. However, the gap has become quite sizable. American Express trades at a 20 price-to-earnings (P/E) ratio compared to Visa's 32 P/E ratio.

That gap seems excessive when considering that both companies are achieving similar growth rates. Visa posted 14% year-over-year revenue growth in its fiscal 2026 Q3, while American Express delivered a 10% growth rate. American Express' net income had a higher growth rate, although a 1% edge isn't much.

American Express has the edge when it comes to long-term growth. Its five-year compound annual growth rate (CAGR) is 16.1%, while Visa has maintained a 12.9% revenue CAGR over that stretch.

Both companies are achieving very similar revenue and net income growth rates. Even though Visa has higher net profit margins, both companies are moving at a similar pace. This detail suggests that Visa may not deserve to trade at a high premium over American Express. While Visa shouldn't drop down to a 20 P/E ratio, American Express' valuation may have more room to run.

Granted, American Express won't reach the same valuation as Visa due to credit risk.

American Express is winning over Gen Z

Both companies are well positioned for the future, but American Express may be making more progress with younger generations. It has become Gen Z's favorite credit card, and the company is now aiming to become that generation's favorite bank.

Visa is also doing well with this consumer base, but American Express touts it in quarterly press releases. American Express CEO Stephen J. Squeri said that the company has "continued to attract a large number of new customers, particularly Millennials and Gen-Zs who represent greater lifetime value."

Becoming the go-to choice among younger generations can help American Express maintain solid revenue growth for additional decades. Visa still has the larger network. It has more than five billion cards out in the wild, while American Express only has 155.9 million cards in force. Both fintech companies grew their total cards by 8% year over year.

American Express has a larger untapped market than Visa. The former's focus on high-end consumers ensures that it won't completely close the gap, but Visa is likely to report decelerating growth rates first just due to how many people already use Visa cards.

Both companies are foundational pieces of consumerism, but American Express looks like the better pick. It's no surprise that American Express has a lower valuation, but the gap may be a bit excessive.

American Express is an advertising partner of Motley Fool Money. Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends American Express and Visa. The Motley Fool has a disclosure policy.

Robinhood (NASDAQ: HOOD) is soaring as investors bet that prediction markets will meaningfully strengthen the online brokerage's revenue growth. Its revenue increased by 32% year over year in the second quarter, and event contract sales were up by more than 10 -fold.

Prediction markets are already a large part of Robinhood's business, but investors may want to focus on Webull (NASDAQ: BULL) instead. Once a failed SPAC (special purpose acquisition company), Webull is gaining meaningful market share in the fintech industry, and investors should keep it on their radars.

Image source: Getty Images.

Webull is also riding the prediction markets wave

Prediction markets have been a boon for many fintech companies. Event contracts let people engage in peer-to-peer wagers about the outcomes in sports games and other events, including the weather, whether the Federal Reserve will hike rates, or which politician will win an election.

Webull recently expanded business-to-business (B2B) access to futures and prediction markets. Although futures are a nice bonus, prediction markets should turn into a major money-maker for the company, just as they have for Robinhood and other brokers. It's designed to attract more institutional investors, corporate partners, and accredited investors to the industry. Webull has offered prediction markets to retail investors since 2025.

Prediction market revenue can increase quickly. Robinhood debuted this business segment in March 2025 and expanded it to include National Football League and college football event contracts in August 2025. The latter contributed to parabolic revenue growth. In less than one year, prediction markets went from a minuscule slice of total revenue not worth mentioning to more than 10% of Robinhood's entire business.

Something similar can also happen for Webull. There is strong demand for prediction markets, and that activity can translate into more engagement for Webull's other businesses.

Webull is growing faster than Robinhood

Although Robinhood's 32% year-over-year revenue growth is impressive, it trails Webull's 51% growth rate, fueled by a 13% year-over-year increase in registered users. Meanwhile, Robinhood only reported a 7% year-over-year increase in funded customers. Webull delivered that top-line improvement as its net profit margin widened, with profit almost tripling year over year.

The company's strengthening financial position also made stock buybacks possible. Webull repurchased 1.8 million shares at an average purchase price of $6.03.

Both financial companies reported higher assets under management, but Webull once again emerged as the winner, with a 79% year-over-year increase compared to Robinhood's 32% year-over-year boost.

Webull has been expanding to more regions to accelerate growth. Spain, Argentina, and Colombia were recently given access to Webull. The company also continues to make strides in attracting institutional investors, with the total assets under management (AUM) from that group exceeding $1.4 billion.

Webull even has a better valuation

Robinhood gets more attention than Webull in the fintech landscape. Webull is the smaller of the two and is growing faster, but investors may be shocked to hear that Webull even has a better valuation.

It has a forward price-to-earnings (P/E) ratio of 23, compared to Robinhood's 38 forward P/E ratio. This metric assesses current profits and anticipates what they will look like within the next 12 months.

As Webull gains market share in the prediction market industry and continues to report excellent user engagement, its recent outperformance versus Robinhood should continue to expand. Robinhood shares are up by 9% this year, compared to Webull's 25% gain during the same stretch.

Webull stock doesn't receive as much attention, and that can present an attractive buying opportunity for long-term investors. Robinhood is performing well in multiple business categories, but Webull is doing a better job of gaining market share at this time.

Marc Guberti 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.

It's normal for companies to offer guidance about the revenue they expect in the current year, but investors rarely receive two-year outlooks from companies. Nvidia (NASDAQ: NVDA) just broke that convention, with CFO Colette Kress telling analysts on its fiscal 2027 Q2 earnings call that Nvidia expects to deliver 70% year-over-year revenue growth in its fiscal 2028.

Kress also said that the 70% figure reflects supply constraints, and that absent the bottlenecks in the supply chain, its revenue could actually more than double year over year in fiscal 2028.

Although it would be easy to get excited about such a forecast, investors also have to assess the likelihood of it being achieved. Surprisingly, Nvidia has a shot at doubling its sales yet again.

Image source: Getty Images

Amazon boosts its chip orders

Amazon (NASDAQ: AMZN) is one of Nvidia's top customers, and its recent order of 2 million GPUs (graphics processing units) to be delivered across 2027 and 2028 adds credibility to the 2028 forecast.

Nvidia's powerful new Vera Rubin architecture, which includes both CPUs and GPUs, has started to ship, and its sales acceleration will start to show up in Nvidia's fiscal 2028 (which will begin Jan. 31, 2027).

Amazon and other tech giants expressed their excitement about the Vera Rubin platforms when Nvidia announced its kickoff in a January press release.

"Rubin will remind the world that Nvidia is the gold standard," Elon Musk said in the press release.

It isn't just Nvidia. Samsung (OTC: SSNLF) has locked in contracts for 70% of its memory chip capacity through 2031 thanks to key partnerships. A strong memory market with multiyear revenue visibility is also good for Nvidia, since its GPUs are the foundation of the AI boom.

Nvidia is still doubling its sales

It's not easy for any company to double its revenue year over year, but it's more difficult for giants that have already taken dominant shares of their core markets.

Nvidia is in that position. The entire world knows about the company's chips, and most of its sales come from the same few hyperscalers. Despite its commanding market position and sheer sales volume, the company still managed to more than double sales year over year in its fiscal 2027 second quarter, which ended July 31.

That was actually a revenue growth acceleration for a company so massive that it would be natural to expect it to have matured and settled down to low growth rates. Nvidia's revenue increased by 65% in its fiscal 2026, and sales were up by 85% year over year in its fiscal 2027 first quarter.

The 106% growth rate in its fiscal 2027 second quarter is a meaningful jump. Vera Rubin platforms are still ramping up into full production, and their sales will start to show up more meaningfully in future results. In the meantime, Nvidia's fiscal 2027 third-quarter guidance implies 12% sequential growth at the midpoint.

Strong financial results, recent growth acceleration, and the Vera Rubin rollout suggest that Nvidia can hit its ambitious target of 70% year-over-year revenue growth in its fiscal 2028.

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

Silicon Motion Technology (NASDAQ: SIMO) is one of the most promising memory chip stocks that you probably haven't heard of. It has more than doubled this year, but its market cap is still below $10 billion.

The growth stock has also dropped by roughly 30% from its all-time high, but that price action is all the more jarring due to the company's fundamentals. Here's what investors should know about Silicon Motion before determining if it is a buying opportunity.

Image source: Getty Images.

NAND flash controllers enable AI infrastructure

Silicon Motion produces NAND flash controllers, which are essential components for solid-state drives because they let companies scale up agentic AI. The company works with some of the largest memory makers, including Micron, Sandisk, SK Hynix, and Samsung. When each of these companies reports record sales and optimistic forecasts, it's a clear indication of how well Silicon Motion will perform in its upcoming quarter.

For instance, the company delivered 127% year-over-year revenue growth in its second quarter, along with a 32% sequential boost in sales. CEO Wallace Kou also told investors to expect "high-quality revenue and profitability growth for years to come."

Those results came as memory-chip makers crushed expectations, raised guidance, and told investors about their multiyear deals with large customers. With those tailwinds for Silicon Motion's key customers, it's no surprise that the company delivered excellent second-quarter results.

The dip has resulted in a more compelling valuation

The company's fundamentals have continued to improve. Not only are sales up significantly, but it's also delivering higher net margins. Profits more than doubled sequentially, lifting its net profit margin to 30.2% in the process.

These results don't jibe with the slide the stock has taken over the past couple of months. Silicon Motion now trade at a 30 price-to-earnings ratio (P/E). That's a nearly identical valuation to the S&P 500 despite the former achieving much higher growth than the average company in the index.

Kou told investors that he expects the business's momentum to continue through the second half of the year. The company has only become stronger, but recent stock price movements do not reflect that reality.

It's important to consider that top memory-chip makers like Micron and Sandisk recently delivered quarterly results that crushed their guidance. Silicon Motion is currently anticipating revenue growth of up to 124% year-over-year and up to 20% sequentially. It's reasonable to assume that it will outpace its forecasts just as its top customers have done.

Micron told investors in its fiscal 2026 second-quarter report to expect revenues of $33.5 billion at the midpoint in its fiscal 2026 third quarter. Once the company's results arrived, Micron actually showed $41.46 billion in revenue.

If Silicon Motion delivers a similar beat, its current average valuation will become even more compelling. That could result in a big spike when the company reports earnings in late October.

The memory chip trade has multiple years left

Silicon Motion hinted at multiple years of growth, and top customers like Micron and Sandisk have been signing multiyear sales deals with tech giants. However, the biggest recent news came from Samsung, which has made a set of deals that lock in buyers for 70% of its chip capacity through 2031.

These long-term deals will intensify and prolong the memory chip shortage and increase the need for Silicon Motion's NAND flash controllers.

These deals demonstrate that AI isn't a one- or two-year story. The growth stocks that are riding this momentum can continue to outpace the S&P 500 for another decade or more. Physical AI will further boost the demand for memory chips and all of the necessary components for AI infrastructure.

Silicon Motion is well positioned to benefit, yet the stock remains under the radar. Those two factors are key reasons the stock looks like a buy at current levels.

Marc Guberti has positions in Silicon Motion Technology. The Motley Fool has positions in and recommends Micron Technology. The Motley Fool has a disclosure policy.

Microsoft (NASDAQ: MSFT) continues to deliver exceptional quarterly results, with cloud computing playing a major role. Not only was cloud revenue up by 27% year over year in its fiscal 2026 fourth quarter, but that growth came along with sales backlog growth of 84% year-over-year to $678 billion.

It also came during a period when Microsoft Azure topped $100 billion in annual recurring revenue. All of these details create the narrative of a growing business, and for investors considering buying now, Microsoft's forward P/E ratio of 25 is the icing on the cake.

Image source: Getty Images.

High cloud revenue visibility makes future growth more predictable

Microsoft has been consistently delivering double-digit percentage revenue growth rates for many years. It has grown its top line at a compound annual rate of 14.6% over the past decade, and that compound annual growth rate (CAGR) accelerated to 16.1% over the past three years.

Artificial intelligence tailwinds that have boosted the demand for enterprise cloud solutions are the major catalysts. Microsoft Cloud made up roughly two-thirds of total revenue. This segment is also growing faster than most of Microsoft's businesses, so its continued success should lift total revenue and net income growth rates.

Microsoft Cloud revenue also came to 8.7% of its commercial remaining performance obligations. The backlog is growing at a faster rate than realized revenue. Eventually, all of that backlog will be realized as sales, which makes the stock's forward P/E ratio of 25 quite compelling.

AI-fueled cloud growth is a multiyear trend

The shift isn't just happening at Microsoft. Amazon's (NASDAQ: AMZN) cloud platform saw its highest revenue growth rate in more than four years, while Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) reported 82% year-over-year growth in Google Cloud revenue in the second quarter.

Cloud computing is becoming more important because it is the digital backbone of so many AI platforms and services. Grand View Research projects a 30.6% CAGR for the artificial intelligence industry through 2033, and all of that growth will require more complex cloud computing plans and storage. It's one of the main reasons why hyperscalers are scrambling to accumulate as much compute capacity as possible. They'll need more infrastructure to keep up with demand.

Although Microsoft has made many of its early investors wealthy, the stock has largely missed out on AI-driven momentum in 2026. It's only up by roughly 3% this year despite revenue and net income growth rates comfortably exceeding that return. These types of mismatches do not last forever, and a low valuation combined with strong fundamentals may serve as an open invitation for patient investors.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.

Not every investor wants to buy an index fund and settle for average returns. Some people want to try to beat the market, and the tech sector has offered some of the most compelling returns. For instance, the State Street Technology Select Sector SPDR ETF (NYSEMKT: XLK) has an annualized 24.3% return over the past decade, soundly outperforming the S&P 500 during that stretch.

While tech exchange-traded funds (ETFs) can outshine the S&P 500, investors can give themselves a chance to enhance their returns by investing in solid tech stocks with promising long-term catalysts. If you have $5,000 ready to put to work in the market now, these three look like some of the best options.

Image source: Getty Images.

Cipher Digital

Cipher Digital (NASDAQ: CIFR) builds artificial intelligence (AI) data centers for hyperscalers that need additional capacity. It relies on a co-location model, which means Cipher Digital provides the facilities and power, while its tenants are responsible for bringing their own chips.

This arrangement reduces the size of Cipher Digital's revenues, but it also reduces the company's overhead. Furthermore, when AI processors become obsolete because newer versions have come out, or because they've simply reached the end of their useful lives, the costs of replacing them do not fall on Cipher Digital.

The company has signed multiple long-term deals with hyperscalers. Cipher Digital began delivering data center capacity at its Black Pearl site in August, which was two months ahead of schedule. Its average contracted net operating income is projected to jump substantially from $97 million this year to $686 million next year.

Cipher Digital is targeting a 5.2 gigawatt (GW) portfolio by 2030. As Cipher Digital brings more of its data center sites online, its revenue should compound quickly. It has had no issue with securing deals, especially as demand for AI compute continues to accelerate.

Marvell Technology

Marvell Technology (NASDAQ: MRVL) first got people's attention when Nvidia CEO Jensen Huang predicted that it would be the next $1 trillion company. That remark brought more attention to the stock, which has more than doubled this year.

Marvell Technology specializes in AI networking products and application-specific integrated circuits (ASICs). ASICs are powerful custom chips designed for a narrow range of workloads, but they have become a more important part of AI infrastructure as tech giants seek ways to improve efficiency and lower costs. Broadcom (NASDAQ: AVGO) has dominated this space, but Marvell's $120 billion chip-design deal with Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) demonstrates how quickly it is gaining ground.

Its shares are actually down since Marvell Technology announced that deal, as investors wanted the revenue to arrive right away. The bulk of that revenue will start to show up in Marvell Technology's fiscal 2029. Meanwhile, it recently reported its fiscal 2027 second-quarter results, which showcased a 37% year-over-year revenue jump.

Management also guided for fiscal 2027 Q3 revenue of $3.15 billion at the midpoint. That would be a 52% year-over-year increase. All of this growth is taking place without the money from the Alphabet deal. When revenue finally materializes from that megacontract, the stock may continue to rally toward new highs.

Fortinet

Fortinet (NASDAQ: FTNT) is benefiting from a multiyear tailwind. As AI agents proliferate the digital world, organizations' cybersecurity needs will increase. AI will increase the number of vulnerable points, and this same technology also makes it easier for hackers to infiltrate online systems.

Investors have been connecting the dots, which is one reason Fortinet shares have more than doubled this year. Fundamentals remain strong, with 26% year-over-year revenue growth in Q2 being one of the main highlights of its latest report. Fortinet also raised its guidance for the year. A solid base of more than 900,000 lifetime customers offers Fortinet meaningful growth potential as more businesses use AI and end up needing additional cybersecurity protections.

Fortinet's valuation has increased a bit due to the run-up. The stock has long-term tailwinds, but it may be on the verge of a near-term correction that could lead to a more attractive entry point.

Marc Guberti has positions in Broadcom and Cipher Digital. The Motley Fool has positions in and recommends Alphabet, Broadcom, Fortinet, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.

Sandisk (NASDAQ: SNDK) stock has more than quintupled year to date, but despite those gains, its rally still doesn't appear to be over. The long-term tailwinds in the memory market just accelerated, and Sandisk is one of the best-positioned companies in the industry.

Image source: Getty Images.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Recent Samsung news will trickle to Sandisk's bottom line

Investors have greatly underestimated the durability of the current memory chip boom, even the most bullish ones. Samsung (OTC: SSNLF) recently reported that three large customers had signed deals locking up 70% of its memory chip capacity through 2031: Nvidia (NASDAQ: NVDA), Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).

Those deals are a big catalyst for the entire memory sector, and while Samsung is the immediate beneficiary, Sandisk may emerge as the bigger winner. That's because Sandisk has been growing sales at a faster rate than Samsung, thanks to its NAND flash memory storage chips.

Samsung reported 130% year-over-year revenue growth in the second quarter, while Sandisk delivered 372% year-over-year revenue growth. Sandisk told investors in its 2026 Investor Day that it, too, is securing multiyear deals with its top customers. The Samsung news has further limited the volume of memory chips that will be available for future customers, which will make it easier for Sandisk to command higher prices and sign more attractive multiyear deals.

These developments continue to squash the narrative about the cyclicality of the memory chip industry. While boom-and-bust cycles have long been the norm, these multiyear deals offer clear revenue visibility and demand, and lock in price floors. AI-driven demand for memory is also unlikely to slow down as companies invest more heavily in physical AI platforms such as humanoid robots and self-driving vehicles.

Sandisk stock remains cheap thanks to impressive growth rates

It's not every day that a growth stock can more than quintuple in eight months while having fundamentals that justify that move, but Sandisk's fundamentals do. The company went from a net loss in its fiscal 2025 fourth quarter to $6.9 billion in net income during its fiscal 2026 fourth quarter. This resulted in a compelling 77% net profit margin for the recent period.

The strong financial growth explains why Sandisk only trades at a 20 P/E ratio despite its incredible run-up. The Samsung deals show that the memory chip shortage is nowhere close to its conclusion. Just as it seems like memory will become more available thanks to new chip foundries coming online, tech giants snatch even more of it up. By the time we're getting close to 2031, memory-chip makers like Sandisk may have orders covered through the five years beyond it.

If the artificial intelligence market grows at a compound annual rate of 30.6% through 2033, as Grand View Research forecasts that it will, Sandisk will have a great opportunity to extend its existing partnerships and provide shareholders with clear revenue visibility and growth for multiple years.

These factors make Sandisk stock a compelling buy opportunity for long-term investors.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

It wasn't long ago when Oracle (NYSE: ORCL) was approaching a $1 trillion market cap, thanks in large part to optimism about its cloud computing business. However, the stock is down by more than 50% from the all-time high it set almost a year ago, and it currently has a market cap below $500 billion.

This dramatic drop has created a buying opportunity, and if Oracle can continue to ride the tailwinds of the AI megatrend for multiple years, it has a real shot at recovering past that peak and reaching a $1 trillion valuation for the first time.

Image source: Getty Images.

Cloud revenue continues to climb

Oracle's cloud segment is the most important part of the business to consider when assessing how far the stock can climb. That segment continues to do well. Oracle reported cloud revenue growth of 47% year over year in its fiscal 2026 fourth quarter. Total revenue for the company was up by 21%.

The major drag on the stock relates to Oracle's remaining performance obligations. It has $638 billion in its backlog. That's a good number on the surface since Oracle earned $19.2 billion in its fiscal 2026 fourth quarter. The issue is that its contract with OpenAI accounts for more than $300 billion of that $638 billion total.

There is a lot of uncertainty about that contract. First, in December, Bloomberg reported that Oracle was going to delay delivery of the OpenAI-related data center project by a year -- an assertion that Oracle promptly denied. According to Oracle, those data centers will be delivered on time in 2027.

Investors' bigger concern regards OpenAI's ability to pay $60 billion per year for five years to Oracle when it posted a $38.5 billion net loss in 2025. Its $40 billion in annual recurring revenue wouldn't be enough to cover that commitment, even if it operated with 100% net profit margins, and the Oracle contract is far from OpenAI's only expense.

These concerns are valid when it comes to the pipeline, but Oracle is delivering solid results right now, and it still has a lot of other customers with more reliable finances in its remaining performance obligations.

The valuation has dropped considerably

Anytime a stock goes through a deep correction, it's a good time to reassess its valuation. Although Oracle previously commanded a P/E ratio in the 50s, it only trades at a 26 P/E ratio right now. Furthermore, its price/earnings-to-growth (PEG) ratio is just 0.86. Any stock with a positive PEG ratio below 1 is generally viewed as being undervalued.

Oracle stock offers a more attractive margin of safety right now than it did a few months ago. Furthermore, if its revenue and net income continue to climb, investors should feel more willing to expand its valuations again and send it back toward its all-time highs.

The artificial intelligence boom isn't anywhere close to being over. Grand View Research projects a 30.6% compound annual growth rate for the artificial intelligence market through 2033. Oracle's cloud platform is poised to ride that wave, which could propel the company to a $1 trillion market cap.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.

Comfort Systems USA (NYSE: FIX) has been a linchpin for AI infrastructure. Data centers need HVAC, plumbing, piping, and electrical systems, which Comfort Systems USA provides. Demand for these services should only go up as AI data center construction continues.

However, the stock is down by more than 20% from its all-time high. Investors who bought their shares at the start of the year are still sitting on a nice gain, and shares are up by almost 2,000% over the past five years. That doesn't offer any solace to shareholders who started positions at their highs, but they may not have to wait for long.

Comfort Systems USA looks like a bargain at current levels and could reclaim its all-time high soon.

Image source: Getty Images.

Data center demand is accelerating

A core part of the Comfort Systems USA thesis is that demand for AI data centers will continue to accelerate. The U.S. has more than 3,000 operational data centers, with more than 1,500 data centers currently being built.

A large number of these upcoming data centers are being developed in rural areas. Since rural areas are more spacious than urban centers, it gives data center builders more flexibility to make their sites bigger. If data centers are larger, Comfort Systems USA will have to apply more of its solutions to each site. Getting the HVAC right for a 1-gigawatt site is a lot more lucrative than performing the same tasks for a 10-megawatt facility.

AI data centers, in particular, are gaining momentum. Fortune Business Insights anticipates a 25.8% compound annual growth rate (CAGR) for these facilities through 2034.

Comfort Systems USA also makes money maintaining data centers

Comfort Systems USA makes a large portion of its revenue during construction. HVAC systems and other components must be properly set up so the building can function efficiently. This demand for services during construction is one of the reasons why Comfort Systems USA generated $3.27 billion in the second quarter, which was a 51% year-over-year increase.

However, Comfort Systems USA also makes money by maintaining existing data centers. Systems must be repaired and maintained for data centers to continue functioning at a high level.

While Comfort Systems USA still makes most of its revenue during the construction process, its maintenance revenue should surge as more data centers are built. Each data center it constructs can turn into a steady, long-term income source for the company.

The acquisition strategy continues to increase market share

Other competitors exist in this industry, but Comfort Systems USA's acquisition strategy ensures it can continue to gain market share. Comfort Systems USA has more than 50 companies under its control across 184 locations throughout the U.S. The company outperforms many competitors and also has the option to absorb competitors that are doing well in desirable markets.

This acquisition strategy, plus demand for data center facilities, explains why Comfort Systems USA wrapped up Q2 with a $14.06 billion backlog. That's almost double the $8.12 billion backlog from Q2 2025, and it also represents a 13% sequential boost.

The momentum is unlikely to fade anytime soon. Comfort Systems USA CEO Brian Lane told investors in the Q2 press release that the company is "optimistic about [its] results for the remainder of 2026 and well into 2027."

These aren't the types of results that warrant a 20% drop from all-time highs. The stock trades at a price/earnings-to-growth (PEG) ratio below 1, which implies that it is currently undervalued. Multi-year tailwinds from the AI build-out suggest that it can continue to deliver high revenue and net income growth rates that will make the current price look like a great deal for patient investors.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Comfort Systems USA. The Motley Fool has a disclosure policy.

This week, Bill Gates published a note that laid out his thoughts on navigating the "turbulent AI era," and part of it touched upon a fear that strikes close to home for many people. The note was filled with references to the job losses that AI could cause, and he said that he believes AI will cause "many jobs to disappear forever." He believes that entry-level and mid-level jobs are the most at risk.

However, Gates' opinions aren't universally agreed upon in the tech industry. Nvidia CEO Jensen Huang believes AI will kill tasks instead of jobs, and believes that the fears about what the tech could do to the nation's employment picture are overblown.

Stock investors have to pay attention to this trend. As AI evolves, tech companies with exposure to it should benefit. However, too many jobs being eliminated could send the unemployment rate soaring, reduce consumer spending, and trigger a recession.

Image source: Getty Images.

Tech layoffs have been capturing headlines

Many of the same tech giants that have been investing heavily in artificial intelligence have also been laying off workers. Almost 250,000 people were laid off from the tech sector last year, and 270,000 layoffs are projected to happen in it this year, according to Trueup.io.

Notably, those job cuts include Amazon laying off 16,000 workers in January and Oracle laying off 30,000 employees in March. The size of Amazon's layoff was small as a percentage of its massive workforce, but Oracle's layoff shrank its workforce by almost 20%.

Some of the recent layoffs may have been related to over-hiring during the pandemic. For instance, The Wall Street Journal published an article earlier this year detailing how U.S. companies are still conducting layoffs to reverse the pandemic hiring boom. This dynamic certainly played out for Oracle, which went from 132,000 full-time employees in its fiscal 2021 to 164,000 full-time employees in its fiscal 2023. That's a 24% increase over two years.

Oracle's $28.3 billion acquisition of Cerner in 2022 was a major driver of that boost in workforce, as it put 28,000 Cerner employees on Oracle's payroll. Aggressive pandemic-era hiring and acquisitions help explain why some tech companies are laying off people now.

Oracle now has 141,000 employees, which is still more than it had in fiscal 2021. This context makes it fair to argue that not all of the recent job cuts are tied to artificial intelligence.

Even with the tech layoffs, the U.S. has still been adding more jobs than it has been losing due to AI. Some people are losing their jobs because of AI, but the job market remains strong overall.

Technology is advancing rapidly

Artificial intelligence isn't replacing that many jobs so far. That's another argument from skeptics, and it's also a point Gates brought up in his note.

He warned that blue-collar jobs will soon be affected by AI, especially as robots become more affordable and advanced. He believes smart robots will be able to competitively perform many tasks in construction, hospitality, and other physical jobs "by the end of the decade." He also believes customer support and sales jobs will be among the first white-collar jobs to be affected.

While artificial intelligence will make some jobs unnecessary, it will also create new ones, especially in constructing data centers and ensuring that AI-powered robots perform at optimal levels. Gates recognized this, but noted that it will take a while for people to pivot.

"Many people will shift to other jobs, but the turmoil of losing work, getting retrained, and finding other work will be significant," he said.

How stock investors should approach job cuts

Strictly from an investment perspective, job cuts can boost corporations' bottom lines and yield higher returns for their shareholders. If a company can cut some jobs while boosting revenue, it could end up with higher net profit margins. Higher profits give companies the flexibility to distribute dividends, buy back shares, or invest in new initiatives.

If the job cuts happen slowly, that also gives those people enough time to find new jobs and rotate back into the workforce. If that process keeps the unemployment rate in check, the economy won't go into a downward spiral. Physical AI hasn't been adopted quickly enough yet to pose a meaningful employment challenge right now, but Gates believes the window will be closed by the end of the decade.

Problems can emerge for the broader stock market if layoffs occur too quickly and meaningfully impact overall consumer spending. The U.S. is likely multiple years away from accelerated AI-driven layoffs that would have real economic consequences if that type of change takes form. Investors shouldn't panic at this stage, but they should carefully monitor unemployment rates for any spikes. Statistically small, gradual layoffs won't do much damage to equities.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Nvidia, and Oracle. The Motley Fool has a disclosure policy.

Broadcom (NASDAQ: AVGO) has truly become the next Nvidia in terms of recent price movements. Both chipmakers have crushed the S&P 500 over the past five years, but the year-to-date returns paint a very different picture.

A strong earnings report recently put Nvidia's year-to-date gains above the S&P 500, but Broadcom still lags the famed index. Broadcom is only up by 6% year to date, but this sluggish performance shouldn't last forever. Here's why Broadcom is primed to continue beating the S&P 500 in the long run.

Image source: Getty Images.

AI chip demand isn't slowing down

Artificial intelligence (AI) chips are foundational for large language models (LLMs), agentic AI, cloud computing, and other technologies. They will also play a major role in physical AI applications, such as humanoid robots and self-driving vehicles.

Grand View Research projects a 30.6% compound annual growth rate (CAGR) for the AI industry through 2033. Some companies will grow faster than others, and Broadcom is already proving it's a top-tier chipmaker in terms of growth.

The chipmaker reported 48% year-over-year revenue growth in the second quarter. AI semiconductor sales drove almost half of that growth.

Broadcom specializes in application-specific integrated circuits (ASICs), which are different from Nvidia's graphics processing units (GPUs). Soaring Nvidia demand isn't a bad thing for Broadcom since they are similar companies but not direct competitors like Nvidia and Advanced Micro Devices.

The Marvell Technology news is overblown

Marvell Technology is one of the biggest reasons Broadcom is trailing the S&P 500. The company, which also provides ASIC chips, partnered with Alphabet, which could lead to a long-term relationship and up to $120 billion in potential revenue over the next six years.

The theory is that Alphabet may become less reliant on Broadcom if the Marvell partnership goes well.

The guidance from Broadcom's Q2 results indicated that AI semiconductor revenue will at least triple year over year in its fiscal 2026 Q3 results. Broadcom also expects consolidated revenue to reach $29.4 billion, representing an 84% year-over-year increase. That projection also implies a 32% sequential jump.

This type of growth suggests that Broadcom's top customers are not slowing down on their purchases. Alphabet already works with Nvidia and AMD, two of the largest GPU makers, so it's not foreign for the company to work with two of the leading ASIC chipmakers.

Nvidia's earnings offer a hint for Broadcom's upcoming results

A catalyst is on the horizon that can help Broadcom catch up to the S&P 500 and outperform it by the end of the year. Broadcom is set to report its fiscal 2026 Q3 results on Sept. 2.

Investors will look closely at AI semiconductor revenue, which is supposed to reach $16 billion per guidance. It would represent more than half of total revenue in that quarter, and as it becomes a larger slice of Broadcom's business, its sales should continue to accelerate.

Investors can take a look at Nvidia's results for a hint of what Broadcom may deliver when it reports earnings. Nvidia crushed guidance by generating $96.2 billion in its fiscal 2027 Q2, compared to guidance of $91 billion.

It's much harder for a company like Nvidia to beat guidance and set higher targets. Nvidia is aiming for $108 billion in fiscal 2027 Q3 revenue, so it's still growing. Broadcom hasn't tapped into as large of a market share yet, so it should be easier for the ASIC chipmaker to beat guidance and offer optimistic remarks for the rest of the year.

Notably, Broadcom only trades at a 20 forward price-to-earnings (P/E) ratio. That valuation puts the stock in a prime position to rally if it beats expectations when it reports on Sept. 2.

Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Marvell Technology, and Nvidia. The Motley Fool has a disclosure policy.

Reddit (NYSE: RDDT) has had a bad year. Its stock is down by more than 30% year-to-date, making it one of the worst-performing stocks in the S&P 500.

However, that doesn't mean Reddit is doing poorly as a company. In fact, now looks like a good buying opportunity. Reddit's year-to-date performance does not align with its fundamentals.

Image source: Getty Images.

Reddit's financials are soaring

A lagging stock price does not always indicate poor fundamentals, and Reddit is a good example. The social media company's revenue soared by 61% year over year in its second quarter. Net income also almost tripled year over year.

These aren't one-off results, either. This was Reddit's eighth consecutive quarter of delivering more than 60% year-over-year revenue growth. Reddit is making some money by letting artificial intelligence training companies use its data, but almost all of its revenue still comes from online ads.

Its advertising segment was up 64% year over year, and accounted for roughly 95% of Reddit's total revenue. Growth and rising margins enabled Reddit to repurchase $235 million in shares in the quarter.

This growth is built on more users joining the platform

An 18% year-over-year boost in daily active users demonstrates that the current momentum is sustainable. Some companies scramble to raise advertising costs and set fees to achieve higher revenue growth as user growth declines. However, a user base built on healthy growth makes it easier for Reddit to realize high growth rates without penny-pinching its advertisers.

It's not just daily active users that are on the upswing, either. Reddit closed the quarter with 514.6 million weekly active users, which was a 24% year-over-year increase.

Reddit trades at a 30.5 forward P/E ratio, which isn't too far off from Meta Platforms' (NASDAQ: META) 19 forward P/E ratio when considering their fundamental progress. Meta Platforms delivered only 28% year-over-year revenue growth and a 3% year-over-year uptick in daily active users.

Reddit already trades at a premium to Meta Platforms, but it's fair to argue that Reddit may deserve a higher premium. Its net income is also growing at a much faster rate than Facebook's parent company, implying that its forward P/E ratio will quickly become more attractive than its current level.

U.S. revenue is still growing at a fast rate

Another big advantage Reddit has over most social media platforms is that its U.S. user base is still growing at a respectable rate. The U.S. is the most lucrative region for online platforms, including Reddit, as seen in Reddit's financial results.

Reddit has an average revenue per user of $11.85 in the U.S., compared to a $2.26 ARPU in the rest of the world. Furthermore, U.S. ARPU was up 51% year over year, compared with 31% year-over-year growth in its international ARPU.

It has also become common for companies to report higher user and revenue growth rates in international regions than in the U.S., where markets are more saturated. However, Reddit is still delivering respectable U.S. results, with U.S. weekly active users up 9% year over year, and the international figure up 24%. Q2 was a soft spot for Daily Users in America due to "choppy" search referrals, but Reddit has seen these challenges before.

Reddit is achieving higher U.S. growth numbers than Meta Platforms' global numbers. It demonstrates Reddit still has more market share to tap into, while Meta Platforms has fewer new customers it can add to its family of apps.

International revenue is still up more than U.S. revenue, since Reddit is attracting more users from different regions. Eventually, Reddit will lean more heavily into international opportunities to drive higher revenue growth. However, with U.S. activities still playing a critical role and growing at an exceptional rate, Reddit looks poised to rebound from its lows.

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

Growth investors are OK with trading off profits for high revenue growth as long as losses get smaller over time. That setup implies that a company can eventually become profitable.

However, if a company remains unprofitable for 15 years, it's best to stay on the sidelines. Snapchat (NYSE: SNAP) fits that category. It's still unprofitable despite having 971 million monthly active users (MAUs). The stock is down by more than 30% year to date.

Image source: Getty Images.

Margins have been improving, but it's also been too long

Snapchat delivered second-quarter results that revealed 19% year-over-year revenue growth and narrowing losses. It's a good combination for any growth stock, but investors have every right to be impatient with a company that has remained unprofitable for 15 years.

Still, net losses came in at $164 million compared to $1.6 billion in revenue. That's a negative net profit margin of roughly 10%. It's still not growing as fast as Meta Platforms (NASDAQ: META), which delivered 28% year-over-year revenue growth in Q2 2026.

Snapchat anticipates $300 million to $350 million in adjusted EBITDA in the third quarter. That doesn't translate into positive net income, though it's an improvement from the $250 million in adjusted EBITDA during the second quarter. Leadership anticipates positive net income in 2027. A "multi-year dilution management program" beginning in 2027 may undo some of the benefits of positive net income.

The company has done a good job of keeping costs in control as other tech companies scramble to increase their AI spending. Snapchat may fall behind on compelling long-term opportunities because of that decision, but it's a prudent one given the company's financials.

User activity is declining in key regions

One of Snapchat's strengths and weaknesses is its 971 million monthly active users. It's a large user base Snapchat can tap into for additional revenue growth, but that also means the company has fewer opportunities to meaningfully grow its user base.

For instance, Snapchat's 971 million MAUs represent a 4% year-over-year growth rate. It's also adding users at a slower rate. Between Q1 2025 and Q2 2025, Snapchat added 19 million MAUs. Looking at Q1 and Q2 2026, Snapchat added only 15 million MAUs.

The positive year-over-year growth rate also masks declining growth rates in North America and Europe, two of Snapchat's most critical markets. Its daily active users in North America are down by 6% year over year and have been steadily declining for multiple quarters. European DAUs are down by 2% year over year and have been flat for multiple quarters.

The U.S. accounted for 59% of Snapchat's Q2 revenue, and Europe made up 22% of total revenue. Sure, DAUs across the rest of the world continue to grow, but ARPU remains much lower than in the U.S. and Europe. The ARPU for non-U.S. and non-European regions is only $1, while the ARPU is $10.26 in the U.S.

This long-term trend does not look good for Snapchat, and if it's not reversed, potential profits in 2027 may not last for long.

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

The "Magnificent Seven" stocks have captured a lot of headlines over the years, but they haven't been as impressive recently. The Roundhill Magnificent Seven ETF (NYSEMKT: MAGS), a fund that exclusively tracks them, is only up by 5% year to date.

It's trailing the S&P 500 and Nasdaq Composite this year. There are a few key details investors should consider when assessing whether the underperformance is temporary or part of a long-term trend.

Image source: Getty Images.

Tesla is dragging down the Magnificent Seven

Most of the Magnificent Seven stocks are still up year to date. The low returns from the Roundhill Magnificent Seven ETF are largely due to Tesla's (NASDAQ: TSLA) poor performance. The electric vehicle maker's stock is down by more than 20% year to date.

The company's profit margins continue to narrow despite rising revenue. One big concern is that Tesla is losing ground to Waymo in the autonomous vehicle race, a critical piece of Tesla's lofty valuation.

Meta Platforms (NASDAQ: META) has also endured a tough stretch despite posting rising revenue. A legal battle has forced the company to limit teens to two hours per day on Facebook and Instagram, cumulatively, time that can be extended with a parent's permission. It's big news for child safety advocates, but it's unlikely to make a big impact on Meta Platforms' financial results.

Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), Amazon (NASDAQ: AMZN), and Microsoft (NASDAQ: MSFT) continue to do well in multiple industries, with their respective cloud computing platforms accelerating rapidly due to artificial intelligence (AI). Accelerated iPhone demand has been helping Apple (NASDAQ: AAPL) outperform the S&P 500, and Nvidia (NASDAQ: NVDA) continues to crush Wall Street forecasts.

Valuations aren't as good as they appear

Most of the Magnificent Seven stocks are still gaining market share and posting respectable growth rates. In fact, all of them posted higher revenue growth rates in the second quarter than the blended revenue growth rate for the S&P 500.

That has resulted in some attractive price-to-earnngs (P/E) ratios. For instance, Alphabet trades at a P/E or 17 and Amazon at 21.

These valuations are good for the type of net income growth those companies are achieving, but a closer look at the numbers indicates that the net income improvements aren't as good as they appear. Alphabet and Amazon both include gains from their investments in SpaceX and Anthropic in their net incomes, which has inflated their earnings. Operating income, which isn't reflected in the P/E ratio, is a more useful metric for reviewing those two companies.

Investment gains are why Alphabet's net income rose by 298% year over year in the second quarter but its operating income increased by only 30% year over year. This lower figure is a more accurate assessment of how well Alphabet's underlying business performed.

Microsoft and Nvidia also use this strategy to artificially boost net income. Meta Platforms, Apple, and Tesla avoid this accounting practice, so their P/E ratios more accurately reflect the value of the underlying business.

Smaller companies are achieving higher growth rates

Most of the Magnificent Seven stocks have produced serviceable year-to-date returns, with some of them outperforming the S&P 500. They also tend to have good fundamentals and are well positioned for the AI boom.

However, growth investors who want higher returns might consider smaller companies that are posting high revenue growth rates. Nvidia is the only Magnificent Seven stock that is producing otherworldly revenue growth. The AI chipmaker's sales rose by 106% year over year in its fiscal 2027 second quarter (ended July 26).

The Magnificent Seven have produced generational returns for early investors, but if you are looking for a stock that can produce generational returns, you should probably focus on smaller companies. It's easier for a company with a $10 billion market cap to reach a $100 billion valuation than it is for Nvidia to jump from a $5 trillion valuation to $50 trillion. It simply requires far more capital for Nvidia to increase its value 10-fold than it does for a smaller company to achieve that same growth rate.

Smaller companies like Silicon Motion Technology (NASDAQ: SIMO) and Nebius (NASDAQ: NBIS) get my attention because they are more than doubling revenue year over year. They also have smaller market caps and are less well known than the Magnificent Seven. The tech giants are not as risky, but higher returns are available for people who dig for smaller AI stocks.

Marc Guberti has positions in Apple and Silicon Motion Technology. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.

Target (NYSE: TGT) is extremely unlikely to repeat its 67% year-to-date gain in 2027. However, the dividend stock still has a lot to offer for value investors who prefer stability over high-growth picks that come with substantial volatility.

Target's numbers have become financially sound after multiple years of declining sales. The transformation is complete, and a low valuation creates the opportunity for further upside.

Image source: Getty Images.

Target is winning on two major fronts

Target's second-quarter results didn't resemble a retailer getting pinched by Walmart (NASDAQ: WMT) and Costco (NASDAQ: COST) for market share. It delivered growth in two critical metrics.

First, comparable sales were up 3.8% year over year. That means each store, on average, did a little better this year than in the previous one. Target is making more money with its existing locations. Second, foot traffic increased by 3.6% year over year. People are returning to Target, and new people are coming in more often. The result was a 5.3% year-over-year increase in total sales.

Digital sales greatly contributed to overall numbers. Digital comparable sales were up 8.7% year over year, while same-day deliveries surged 25% year over year. All six of Target's core merchandising categories were up year over year as well.

If comparable sales and foot traffic continue to climb higher, these trends should continue. Target raised its full-year guidance from 4% year-over-year sales growth to 5%, showing additional optimism about upcoming results.

This rebound warrants a higher valuation

Despite the rally, Target still offers a dividend yield of almost 3%. Furthermore, it trades at a 17 P/E ratio. Meanwhile, Walmart trades at a 37 P/E ratio.

It's unreasonable for Target to have the same valuation as Walmart. The latter has higher revenue growth rates and more retail locations. Both companies have similar net profit margins, with few options to meaningfully expand those margins since they are in the retail industry.

However, the current gap between these two retail stocks is excessive. Target shouldn't be trading at less than half of Walmart's current valuation. Target has been making more investments in its grocery segment to attract more customers in an attempt to rival Walmart. Target isn't going to dwarf Walmart, but the thought of Walmart and Costco continuing to whittle away at Target's market share isn't as common.

It's unlikely that Target beats the S&P 500 in the long run. The stock is down by more than 30% over the past five years, but these current gains are driven by real fundamental growth. A yield close to 3%, a low valuation, and rising sales should be enough to keep this stock on value investors' radar.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale, Target, and Walmart. The Motley Fool has a disclosure policy.

You can make money in any stock market. Luckily, you only have to prepare for bullish and bearish markets. While each market has different catalysts that determine the bullishness or bearishness of the current trend, knowing how to navigate these markets can open the doors to higher returns.

I optimize my portfolio and investment decisions to increase the probability of making money. It's not a guarantee, but having a game plan for each market type is better than being unprepared. Here's how I navigate bull and bear markets.

Image source: Getty Images.

Prioritize fundamentals

I like Warren Buffett's mentality of buying and holding companies for multiple years rather than buying shares and then strategically exiting after an earnings report. Those moves sound flashy when they work, but they can also backfire. Even if you win those types of trades, you incur short-term capital gains, which are taxed less favorably than long-term capital gains.

Knowing what a company does, which catalysts will influence its stock price, and what it did in its recent earnings is vital before making any investment. You need this information to outperform the S&P 500 in both bearish and bullish markets.

The fundamentals differ for each company, but there are a few common metrics to monitor. Revenue and net income growth rates are two of the most important data points from an earnings report. They indicate if a company is gaining market share, and guidance indicates where the company is heading next.

I also like to look at valuations, giving preference to growth-oriented metrics like forward P/E ratios and PEG ratios. The problem with the P/E ratio is that it doesn't factor in growth, which is why a bank stock may look like a better deal than a fast-growing tech stock on the surface.

Following multiple companies makes it easier to find undervalued picks in bull markets

During a bull market, most assets gain value. This is a good time for investors who have been accumulating shares of various companies and funds. However, you may have some extra cash on the sidelines, and not everyone likes the idea of it sitting idle while inflation eats away at its purchasing power.

The best way around this is to monitor multiple companies and funds. Even in a bull market, some growth stocks will lose value. A bad earnings report may be enough to send a high-flying growth stock down by more than 10%. If you like the company's long-term fundamentals, that drop may present a good buying opportunity.

I'm not the type of investor who looks to short companies at the top or buy puts to maximize returns in anticipation of a correction. Those strategies are extremely risky and can lead to substantial losses. The more stocks you monitor, the easier it is to find a stock that hasn't rallied as much as it should have, even in a bull market.

Bear markets create discounts

Although bull markets offer opportunities, you can make even more money in bear markets. Many people panic and sell their investments after multiple weeks of losses. Some people are forced to sell their positions due to margin calls.

Margin has become more popular in recent years, and it can accelerate downturns. One of the biggest recent examples of margin calls moving the stock market was when Leopold Aschenbrenner's Situation Awareness hedge fund had to liquidate all of its positions due to a margin call. The days leading up to the big margin call spooked many AI stock investors, but those same stocks recovered dramatically after the margin unwind had concluded.

If you know a company's fundamentals, you won't be bothered if it is down by 10% or 20%. I only buy a stock if I like where it is heading within the next five years. Short-term noise and volatility do not change long-term fundamentals. This mentality can help you hold assets during bear markets and build your positions while others are rushing for the exits.

Marc Guberti 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.

Iren (NASDAQ: IREN) isn't a 2026 story. Many investors rushed to sell their shares after the company's fiscal 2026 fourth-quarter results were released. Iren delivered $137.2 million in revenue in Q4 of fiscal year 2026 (FY26), a 26.7% year-over-year decline.

A $684 million net loss in the quarter and a projected $25 billion to $30 billion in capital expenditures (capex) for fiscal 2027 made things worse and accelerated the sell-off. It's hard to call it disappointing, since it was expected this quarter. The catalysts that make people think Iren is a generational buying opportunity are on the horizon, and this earnings result strengthened the long-term thesis.

Image source: Getty Images.

Iren is taking its sweet time to secure deals

Iren is aiming for 300 megawatts of delivered power by 2026 and intends to boost that number to 800 megawatts by the end of 2027. That's a small slice of the company's 5.8 gigawatt portfolio.

Although the company announced a "multi-year AI Cloud contract with a leading frontier AI lab" in the Q4 FY26 press release, that hasn't been enough for investors. Iren will be forever compared to Nebius, which is closing bigger deals at the moment and realizing AI cloud revenue at a faster rate.

However, the decision to wait has been fruitful. Iren has been closing deals that come to $20 million per megawatt annually. It's even working on deals with tech companies that will provide $25 million per year for each contracted megawatt.

For comparison, the 5-year, $9.7 billion deal with Microsoft was for 200 megawatts. The annual $1.94 billion from that deal puts it at $9.7 million per megawatt. That's less than half of what Iren is getting right now.

If Iren were negotiating that same deal today, it could have ended up with more than $20 billion over five years. This math justifies Iren's decision to be selective with deals. The longer they wait, the more valuable their compute becomes.

The major catalyst did not show up in fiscal 2026 results

The Microsoft deal put Iren on the map. While the stock rallied long before this deal as investors speculated about the opportunities, the thesis truly materialized with that deal.

Iren finally announced that it delivered Horizon 1 on Aug. 13. It covers 50 megawatts out of the 200 megawatts included in the deal. Iren CEO Dan Roberts said the company is working to deliver Horizons 2 to 4 "later this year." When that happens, Iren will start to realize all $1.94 billion in annual recurring revenue instead of just a quarter of that figure.

Naturally, a project delivered in August will not appear in the financial results for the quarter ended June 30, 2026. That's why AI cloud revenue only came in at $70.5 million. Horizon 1 will only show up in part of next quarter's results. It will take a little longer for Horizons 2 to 4 to show up in results, but they should be in all future results when the calendar flips to 2027.

Horizon 1 unlocks $485 million in annual recurring revenue. The next two fiscal quarters will feature meaningful sequential growth for Iren's cloud segment just due to the timing of Horizon 1. The delivery of additional projects will fuel the compounding.

Iren can cover its capital expenditures without diluting shareholders

The $25 billion to $30 billion capital expenditure figure also spooked investors. That's how much Iren expects to spend in its fiscal 2027. However, Iren CFO Anthony Lewis put those concerns to rest when explaining how the company would raise the necessary capital.

Iren already has $14 billion sitting on its balance sheet. Lewis said the company intends to close the gap with an additional $8 billion in graphics processing unit (GPU) financing and prepayments. He also said that data center financing was on the table.

This news means shareholder dilution, a major point of contention, may be in the past. Prepayments are also rising because Iren can command higher revenue per megawatt. Iren said in its Q4 FY26 press release that prepayments have been representing 45% to 55% of GPU capex.

Iren closed out Aug. 26 with $1 billion in operating annual recurring revenue. That figure includes Horizon 1. It's also expecting $4 billion in operating annual recurring revenue by the end of the year, which puts future AI cloud revenue at $1 billion per quarter. That's vastly higher than the $70.5 million in Q4 FY26 cloud revenue.

The sell-off is an extreme miscalculation from investors who expected Iren to deliver meaningful results right now. That was never in the cards, but the foundation has been set for a big rally in 2027 and beyond.

Marc Guberti has positions in Iren. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.

Tech ETFs have offered some of the highest returns in the stock market in recent years. They have a front row seat to major opportunities like the internet, e-commerce, and artificial intelligence (AI).

That last sector has been the hottest in the stock market recently, so it makes sense to focus on that when searching for the best tech ETF. If you have $5,000 to invest right now, you may want to consider the iShares Semiconductor ETF (NASDAQ: SOXX).

Image source: Getty Images.

Semiconductors are the foundation of the AI boom

Semiconductor companies produce the chips and equipment that enable AI technology. Nvidia is the fund's largest position, and it's also the most valuable publicly traded company. The chipmaker reached that status with its GPUs, which command high margins due to intense demand and supply shortages.

Nvidia recently released earnings and managed to surprise some of the biggest bulls with 106% year-over-year revenue growth and a 62% net profit margin. Numbers like that are almost impossible to find anywhere else, but the iShares Semiconductor ETF's second-largest position, Micron Technology, has actually managed to deliver better growth rates than Nvidia.

Its three next-largest positions, Advanced Micro Devices, Broadcom, and Marvell Technology, benefit from the same tailwinds as Nvidia. All of these stocks have crushed the S&P 500 over the past five years.

Hyperscalers have committed themselves to long-term deals

Many of the chipmakers' customers are known as hyperscalers, companies investing heavily in data centers. Amazon, Microsoft, and Meta Platforms are among the largest. Each of these companies has committed to high capital expenditures, and it has become common for tech giants to raise their projected expenses due to rising AI costs.

Amazon raised its capital expenditures from $200 billion to $220 billion and cited higher memory costs. These companies simply seem to shrug off rising costs due to their strong balance sheets.

Micron also announced multi-year customer agreements that offer long-term revenue visibility. This breaks the narrative that AI spending is cyclical since chipmakers are guaranteed sales over multiple years.

The top five holdings make up almost 40% of the iShares Semiconductor ETF's portfolio. That gives the fund outsize exposure to the current semiconductor opportunity. Its remaining positions are primarily chipmakers and semiconductor equipment providers.

This ETF has only 30 holdings and a 0.33% expense ratio. It also has a long history of outperforming the broader market, with an annualized 27.6% return over the past 15 years.

Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Broadcom, Marvell Technology, Meta Platforms, Micron Technology, Microsoft, Nvidia, and iShares Trust-iShares Semiconductor ETF. The Motley Fool has a disclosure policy.

Micron (NASDAQ: MU) has more than tripled this year, and the memory chipmaker actually has a real shot at doubling again in 2027. That would give the stock a $2 trillion market cap and see it approach $2,000 per share.

Micron's ability to reach that valuation depends on the AI boom maintaining its momentum. That seems likely, and there are other factors at play that apply exclusively to Micron.

Image source: Getty Images.

Micron's fundamental growth is outpacing its stock gains

Investors have to look at a company's fundamentals to determine if a rally is justified or excessive. Some stocks are due for corrections after a 5% rally, while other stocks are still undervalued after more than doubling.

Micron fits in the latter category. It is up by a little more than 200% this year, but it delivered 346% year-over-year revenue growth in its fiscal 2026 third quarter. Net income also grew by more than 1,000% year-over-year.

Those growth rates support Micron's rally. Furthermore, Micron only trades at a 6 forward P/E ratio. That's a much lower valuation than the majority of tech stocks and the S&P 500.

Multi-year deals solidify revenue visibility

One of the main issues with memory chipmakers is that their revenue is cyclical. Supply shortages cause companies to increase production. Then, demand dries up, and the same semiconductor companies suddenly have massive inventory gluts that require selling at lower prices and dealing with low margins.

Some investors have feared that when the AI trade slows down, Micron will be stuck with a bunch of chips that it can't sell unless it reduces prices sharply. However, this scenario has become increasingly less likely.

Micron announced that it has secured multi-year strategic customer agreements with top customers. These deals provide more revenue visibility and make the company less susceptible to a cyclical downturn.

These deals aren't just about preserving existing revenue. They are also extending Micron's growth rates. For instance, the company told investors to expect $50 billion when it reports its fiscal 2026 fourth quarter results. Micron crushed guidance when reporting $41.46 billion in its fiscal 2026 third quarter, and now it's implying more than 20% sequential growth.

Memory chip demand should heat up during the physical AI rollout

The companies that are investing heavily in memory chips are already seeing more growth. Salesforce (NYSE: CRM) reported that its AgentForce ARR more than tripled year-over-year, contributing to 14% year-over-year sales growth in its fiscal 2027 second quarter.

Salesforce uses cloud computing providers like Amazon Web Services for its platform. Those cloud companies are heavily buying memory chips, and as Salesforce sees more annual recurring revenue growth for its AI segment, its cloud costs should also go up. That development would further boost the demand for Micron's memory chips.

However, it isn't just AI agents and models that need memory chips. Micron is currently working with a robotaxi customer, which can open the door to more opportunities like that in the future. Elon Musk, who is trying to make Optimus humanoid robots mainstream, referred to memory as the biggest bottleneck in AI.

Nvidia (NASDAQ: NVDA) CEO Jensen Huang told investors that physical AI is "coming online" in the company's fiscal 2027 second-quarter press release. Those results included revenue more than doubling year-over-year, breezing past prior guidance. Nvidia is anticipating a mind-boggling $108 billion in fiscal 2027 third-quarter revenue, which represents a 12% sequential growth rate.

Humanoid robots and autonomous vehicles are two physical AI products that should become mainstream within a few years and dramatically boost the demand for memory chips.

These long-term catalysts, combined with immediate financial successes, suggest that Micron stock can double yet again in 2027. It's all about soaring earnings, not expanding multiples.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Micron Technology, Nvidia, and Salesforce. The Motley Fool has a disclosure policy.

There has been a lot of talk about an artificial intelligence (AI) stock bubble, but I'm not buying it. Arguments about a bubble often go back to the Dotcom Bubble, claiming that there are similarities between that event and the current AI buzz.

Bears also point out that most of the spending comes from a few hyperscalers, but even that assertion requires a deeper look. Here's why I believe the AI rally still has room to run and isn't a bubble that's about to burst.

Image source: Getty Images

The AI rally is fueled by solid fundamentals and multi-year deals

The Dotcom era captured people's imaginations just as artificial intelligence does now. However, the dotcom bubble was also a time when a company could add ".com" to its name and immediately see a spike in its stock price, regardless of its fundamentals.

It's impossible to deny that some of that is going on in the AI industry. Sustainable sneaker company Allbirds rebranded to Smartbird, which is now a company that buys AI hardware and leases it to customers. The stock gained almost 600% in a single day upon the pivot but has since shed all of those gains.

However, Smartbird is a small player that's easy to forget in a burgeoning industry. Micron is a much larger AI hardware company that is valued above $1 trillion. Its revenue more than quadrupled year-over-year in its fiscal 2026 third quarter. Investors will be hard-pressed to find that type of growth anywhere else, but that's not the most exciting part about Micron's results.

Micron has been securing multi-year customer deals that "significantly enhance the durability and predictability of Micron's strong financial performance." It's not just Micron. Sandisk also announced that it has been securing multi-year commitments that include financial guarantees from customers.

These long-term deals minimize the risk of a cyclical bust, which is normal for chipmakers. AI demand can break that cycle, especially as demand heats up over multiple years.

Physical AI can be bigger than current AI tools

AI models and agents are the main focus right now. Models like ChatGPT, Claude, and Gemini require tremendous amounts of compute to process every query. That bodes well for AI data center operators and constructors. It also means that components that are required for each data center will gain demand.

However, the push to physical AI is just starting, and it can accelerate rapidly once it gains momentum. The two main physical AI catalysts right now are humanoid robots and self-driving vehicles. Autonomous cars have become more common in cities. Alphabet's Waymo is the market leader in the industry, and it has served more than 20 million rides. Waymo also claims that its vehicles are more than 10 times safer than an average human driver.

Tesla is still working on its Optimus humanoid robots, which can perform various tasks. China hosted its second annual World Humanoid Robot Games, which included a robot that beat Usain Bolt's 100-meter sprint world record.

The technology hasn't been perfected yet, but these competitions hint at what is possible within the next 5-10 years. AI data centers, memory chips, and other key components power these robots. The more robots countries produce, and consumers purchase, the stronger AI demand will become.

It's not just the hyperscalers

A major bearish argument is that hyperscalers do most of the spending. Analysts look carefully when tech giants like Microsoft and Amazon report earnings because of the capital expenditures figure. If these companies say they will cut back on AI spending, the theory is that AI stocks will crash.

First, that's not happening anytime soon. Amazon raised its annual capital expenditures forecast from $200 billion to $220 billion, citing higher memory costs. The company doesn't care that Micron and others are charging more for their chips. Amazon is still committed to making those orders. That type of demand doesn't go away quickly.

AI data center providers like Iren aren't just working with hyperscalers. The company recently emphasized its deals with leading AI developers rather than hyperscalers. Tech giants still do most of the spending, but the technology is becoming more accessible and affordable for smaller start-ups. That will push the demand for compute higher, resulting in all of the AI inputs becoming more valuable.

That doesn't sound like a bubble to me.

Marc Guberti has positions in Iren. The Motley Fool has positions in and recommends Alphabet, Amazon, Micron Technology, Microsoft, and Tesla. The Motley Fool has a disclosure policy.

Micron and Nvidia continue to make headlines, but one tiny AI stock has drastically outperformed them both in terms of growth in 2026. Netlist (OTC: NLST) has more than quintupled year to date, and its rally looks far from over.

Its hardware sales have been surging in recent quarters, and its recent legal wins point to the end of a decade-long battle against tech giants.

Image source: Getty Images.

The hardware component

Netlist earned $109.8 million in its second quarter, a 163% year-over-year increase. Net income also flipped from a $6.1 million net loss in Q2 2025 to $1.4 million in net profits in the recent quarter.

Netlist makes most of its revenue by reselling hardware, but it is also developing CXL solutions that could become a major growth driver in the future. Fortune Business Insights projects a 54.48% compound annual growth rate for CXL memory products through 2034. Netlist is already making money from its DDR5 memory controllers, showing that its hardware revenue isn't just from reselling.

Despite this fundamental growth and the recent stock rally, Netlist actually trades at a fairly cheap valuation. Its price-to-sales ratio of 5 is less than half of Micron's valuation, and their forward P/E ratios are nearly identical.

The groundbreaking settlement with Samsung

Netlist's hardware component is an underrated part of the business that could become a key driver in the future. The near-term catalysts that can help Netlist rally even more are its massive legal wins, which could end more than a decade of drawn-out proceedings.

Netlist has asserted that multiple tech giants have infringed its patents for key memory products that form the backbone of AI infrastructure. Its first patent infringement lawsuit unfolded in 2009 against Alphabet, and that case has not been resolved yet.

The list grew over the years, and Netlist did chalk up some wins, including one that led to a five-year deal with SK Hynix in 2021. That deal secured royalties and memory products for Netlist and permitted SK Hynix to use Netlist's patents.

The lawsuits have gained more traction amid the memory chip boom, as higher sales are increasing the total damages Netlist can claim, and could yield higher royalties in future deals.

That was the thesis for multiple years, and Netlist finally delivered a landmark five-year deal with Samsung (OTC: SSNLF) related to Netlist's vast patent portfolio. Samsung can now use the patents, but Netlist gets $239 million up front, plus up to $32.9 million in quarterly royalties through 2031. Samsung will have to renew the deal to preserve its access to Netlist's patent portfolio, which has become critical amid the AI build-out.

Netlist also has the right to purchase up to $300 million in Samsung DRAM and NAND memory products per year under the deal. The company can either use these products or resell them at a higher price.

Samsung is the first domino

The legal proceedings went on for so long in large part because tech companies thought they could force Netlist into bankruptcy. That scenario is now unfeasible. Not only is Netlist already turning profits on its hardware products, but almost all the revenue from the Samsung deal is pure profit. Finally, Netlist no longer has to commit capital to a legal battle against Samsung.

It's also a big legal win that fortifies Netlist's case against other tech giants, and the company isn't wasting any time. One week after announcing the Samsung deal, Netlist went on the offensive by seeking exclusion and cease-and-desist orders against Micron, Supermicro, Hewlett Packard Enterprise, and Lenovo due to patent infringements.

Those orders can prevent these chipmakers from importing memory chips into the United States. Almost all of Micron's chips are produced overseas, and most of its sales go to U.S. hyperscalers. Micron earned $41.5 billion in its fiscal 2026 third quarter and guided for $50 billion in the next quarter. Netlist can block almost all of those sales from being realized unless Micron reaches a deal. Naturally, most companies reach settlements before orders like these take effect.

Netlist has already won patent infringement cases against Micron, including a $445 million award in 2024 that Micron continues to fight. However, Samsung waving the white flag means others will have to follow. Micron is the big prize, but the other three companies named in the exclusion and cease-and-desist orders can also provide lucrative royalties for Netlist.

The company also named Alphabet, Nvidia, and Broadcom in another patent infringement press release. A win against Micron could give the company more leverage when targeting these tech giants and turn high legal expenses into high-margin strategic deals.

The legal-lottery-ticket aspect of the stock continues to build momentum, while its hardware products gain market share.

Marc Guberti has positions in Broadcom and Netlist. The Motley Fool has positions in and recommends Alphabet, Broadcom, Hewlett Packard Enterprise, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.

Investors don't have to look for small, hidden growth stocks to beat the S&P 500 over long stretches. Some of the most well-known companies have been doing that for years, and some of those same picks look like they can extend their rallies.

Buying and holding solid companies with strengthening fundamentals has been a winning formula for long-term investors. These three stocks fit the bill and are worth holding for the next 10 years.

Image source: Getty Images.

Nvidia

Nvidia's (NASDAQ: NVDA) GPUs have become the defining piece of the AI trade. Its chips are essential in data centers that want to keep up with hyperscalers' demands. The stock is up by more than 800% over the past five years, and while the past year hasn't been as fruitful, the stock is still delivering solid returns.

Its returns should accelerate, thanks to its recent earnings report. Nvidia continues to amaze with a 106% year-over-year revenue surge in its fiscal 2027 second quarter. That was an 18% sequential jump, and it's this type of growth that makes a stock a buy-and-hold candidate over many years.

Nvidia CEO Jensen Huang cited a "golden age of new AI labs and start-ups" that are accelerating demand for chips. He also touted physical AI coming online as another major catalyst.

All of this growth is also coming with better margins. Net income grew by 126% year over year, outpacing revenue growth in the process. Nvidia closed out the quarter with a 62% net profit margin as its chips continue to fly off the shelves.

Sandisk

Sandisk (NASDAQ: SNDK) has established itself as a key part of the memory boom. Its 3,000% return over the past year caught most investors by surprise. The positive Nvidia earnings suggest that Sandisk's rally isn't over, but the company's attractive valuation and underlying fundamentals also imply that higher returns are on the way.

The company is actually growing faster than Nvidia while crushing guidance by wide margins. Sandisk earned $8.97 billion in its fiscal 2026 fourth quarter and only guided for up to $8.25 billion in the previous quarter.

The 51% sequential growth rate comes as Sandisk secures multiyear partnerships with its customers. Those deals offer more revenue visibility, with Sandisk mentioning strong financial growth and shareholder returns are expected to carry through fiscal 2030 at a minimum.

Just like Nvidia, Sandisk is also achieving this growth while boosting net profit margins. Net income was up by 91% sequentially. It closed the quarter with a 77% net profit margin.

Amazon

Amazon (NASDAQ: AMZN) has been gaining market share in multiple key industries. Its online marketplace still brings in the majority of its sales, but the tech giant has also emerged as the largest cloud computing provider.

This positioning has helped it benefit from the rising demand for artificial intelligence. Amazon Web Services revenue has been accelerating for multiple quarters, including a 37% year-over-year jump in Q2. That was the highest growth rate for Amazon Web Services in more than four years.

The company has also been gaining market share in online advertising, which helps with net profit margins. Advertising revenue was up by 26% year-over-year, and operating income jumped by 43% year over year.

All of this impressive growth comes at a time when Amazon trades more like a value stock than a growth stock. It is only valued at a 21 P/E ratio, while it commanded a P/E ratio in the 30s earlier in the year. Solid fundamental growth and a sluggish start to the year explain the low valuation.

As Amazon gains market share in its key industries while expanding into AI through agentic AI and chips, the company has a good shot at outperforming the S&P 500 in the long run.

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

Cybersecurity has been a hot industry for several years, with Grand View Research projecting an 11.9% compound annual growth rate (CAGR) through 2033. However, artificial intelligence (AI) is heating up the need for cybersecurity.

Each AI agent and model needs cybersecurity. Furthermore, hackers can use AI to hack more targets, and cybersecurity companies use AI to deter those attackers.

Cloudflare (NYSE: NET) and Palo Alto Networks (NASDAQ: PANW) are at the forefront of this opportunity. They both generate annual recurring revenue from leading companies, but there are a few things to consider when comparing these stocks.

Image source: Getty Images.

Palo Alto has better margins and is more mature

Palo Alto Networks is the most established cybersecurity platform. It earned $3 billion in its fiscal 2026 third quarter, ended April 30, while Cloudflare only generated $696.1 million in the second quarter. It is also profitable, while Cloudflare is still burning through cash. Although its fiscal 2026 third quarter wasn't profitable, that was mainly due to merger and acquisition (M&A) expenses. It had been profitable in the first and second quarters of its fiscal 2026.

Cloudflare continues to report operating losses. A generally accepted accounting principles (GAAP) loss equivalent to 30% of revenue in the second quarter was higher than usual due to one-time severance costs. Q1 does not reflect severance and yielded an operating loss equal to 10% of total revenue.

Cloudflare is growing faster

Cloudflare's strength in this comparison is the fact that it's growing faster without leaning heavily into acquisitions. For instance, Cloudflare delivered 36% year-over-year revenue growth in this quarter, compared to Palo Alto Networks' 31% growth rate.

However, the advantage skews more toward Cloudflare when reading the fine print. Palo Alto Networks' revenue growth is partially fueled by its recent acquisitions of CyberArk and Chronosphere, which contributed $388 million of the company's $3 billion in sales in the quarter. That's more than 10% of total revenue that came from acquisitions instead of organic growth.

If Cloudflare can maintain elevated growth rates and scale margins quickly once it becomes profitable, then it has a real shot at outperforming Palo Alto Networks in the long run.

Not all investors are banking on that scenario. Palo Alto Networks has comfortably outpaced Cloudflare in year-to-date returns, and valuation differences may explain why. Palo Alto Networks trades at a high 25 price-to-sales ratio, but that level is pretty low compared to Cloudflare's 41 P/S ratio. Higher growth rates also come with higher expectations, and a lot of future growth is already priced into Cloudflare shares.

Which stock is the better buy?

Cloudflare and Palo Alto Networks provide critical cybersecurity solutions to the world's largest companies. As the AI build-out intensifies, these companies will experience heightened demand for cybersecurity solutions.

Palo Alto Networks is the better-known name in the industry and is more suitable for investors who want to incur less risk. If Cloudflare achieves profitability and quickly scales it, the company may be a better buy.

Although Cloudflare is growing faster, its growth rate will eventually decelerate. That has been the common pattern for many maturing cybersecurity and tech companies. This risk also affects Palo Alto Networks, but it has a far more reasonable valuation than Cloudflare.

Even though Palo Alto Networks has already outpaced Cloudflare, it's likely that the trend will continue. The recent acquisitions have boosted Palo Alto Networks' market share in the cybersecurity industry.

Palo Alto Networks also has projected sequential growth on its side. The company guided for $3.35 billion in fiscal Q4 revenue at its midpoint, which implies a 12% sequential gain. Cloudflare's guidance pointed to $736.5 million at the midpoint, which only suggests a 6% quarter-over-quarter boost.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Cloudflare. The Motley Fool recommends Palo Alto Networks. The Motley Fool has a disclosure policy.

Google Cloud has been one of the most important parts of Alphabet's (NASDAQ: GOOG) (NASDAQ: GOOGL) business. Although online advertising still makes up the majority of total revenue, Google Cloud's revenue and profits have been accelerating quickly.

Those facts are well known among bullish investors, but long-term cloud computing trends and the acceleration of cloud revenue growth rates suggest that the market may still be undervaluing this opportunity.

Image source: Getty Images.

How Google Cloud revenue has accelerated in recent quarters

Google Cloud's growth rates have caught investors and executives by surprise. Alphabet has mentioned "a meaningful acceleration in growth" for the past two quarters when discussing Google Cloud results.

In Q2 2025, Google Cloud's top line rose 32% year over year. Then, the segment posted year-over-year growth rates of 34% and 48% in Q3 and Q4, respectively.

The fourth quarter marked the start of a meaningful acceleration, but that verbiage only made it into press releases starting in 2026's first quarter. That's when Google Cloud's growth rate surged to 63% year over year, followed by 82% growth in Q2 2026.

Not only has Google Cloud's growth rate been outpacing Amazon Web Services and Microsoft Azure, but the growth rate surged from 32% to 82% in one year, and there are no signs that a deceleration is coming. Unsurprisingly, this has lifted Alphabet's overall revenue.

Google Cloud's operating income more than tripled year over year as well, and it made up 21.6% of the company's total profits. It's not far-fetched to expect that Google Cloud could produce half of the company's total operating income within the next two to three years if this kind of growth continues.

Cloud computing momentum should continue thanks to AI

During the Q2 earnings call, Alphabet CEO Sundar Pichai told investors that its artificial intelligence (AI) investments are "redefining what's possible across every part of our business." And in the Q1 press release, he described the technology as "lighting up every part of the business."

AI workloads and large language models like ChatGPT and Grok have substantially increased the demand for compute. Not only does that increase demand for Google Cloud's services, but it also gives Alphabet the flexibility to charge higher premiums for available compute.

Artificial intelligence will be a long-term trend that will bring forth the mainstream use of self-driving vehicles and humanoid robots. The largest companies and enterprises are scrambling to gain market share, and they're willing to invest what is necessary to get the extra compute they need. This environment explains why Alphabet has posted tremendous growth from its cloud segment, and it suggests that better results may be ahead.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.

Western Digital (NASDAQ: WDC) and Seagate Technology (NASDAQ: STX) have both outpaced the S&P 500 by a wide margin this year, driven by their data storage products. Solid-state and hard-disk drives have become critical hardware for the artificial intelligence build-out, and both companies specialize in those products.

While both growth stocks have performed well, if you're trying to pick which to invest in now, there are a few key factors to weigh.

Image source: Getty Images.

Their growth rates are similar

Western Digital and Seagate Technology are delivering similar top-line results, and that has been the trend for many years. In its most recent report -- for its fiscal 2026 fourth quarter -- Western Digital posted 44% year-over-year revenue growth.

Seagate Technology's most recent results also came from its fiscal 2026 fourth quarter, when it delivered $3.6 billion in revenue. That was a 48% year-over-year improvement.

This neck-and-neck trend also plays out if you expand the earnings snapshot. For instance, Western Digital's revenue has a five-year compound annual growth rate of negative 5.3% compared to Seagate Technology's 2.7%.

Both of their revenues were down significantly a few years ago due to the cyclical nature of data storage needs. AI has created a multiyear boom as hyperscalers continue to ramp up their capital expenditures. A major part of the investment thesis for these companies rests on the belief that the artificial intelligence trend will remain hot for multiple years.

Their gross profit margins are similar as well

Not only are both companies growing at similar rates and operating in the same industry, but their gross profit margins are also similar. Western Digital posted a 54.1% gross margin in its fiscal 2026 fourth quarter, while Seagate Technology had a 52.3% gross margin.

Some investors are concerned that these companies won't be able to maintain those high gross margins due to their industry's cyclical nature. However, that risk applies equally to both companies.

It's extraordinary how similar their numbers are. Both companies have even forecast exactly $4.1 billion, plus or minus $100 million, for their fiscal 2027 first-quarter revenue.

Each company also hinted at continued momentum throughout fiscal 2027. Western Digital CEO Irving Tan said that management had "continued confidence in the durability of demand and with increasing visibility into our business." Seagate CEO Dave Mosley mentioned "durable long-term demand for mass capacity storage" and seeing the momentum "continuing into 2027."

Revenue growth rates and gross profit margins look the same, but there are still people who prefer one stock over the other. For instance, Western Digital is up by 287% this year, compared to Seagate Technology's 575% jump over the same period. Naturally, differences must exist.

Valuations are the deciding factor

Meaningful differences start to appear when you look at their valuations. Western Digital only trades at a 22 forward P/E ratio, while Seagate Technology is valued at a 24 forward P/E ratio.

Seagate Technology has outpaced Western Digital in year-to-date gains, resulting in the latter trading at a more attractive valuation for new buyers. Those higher gains have also left Seagate Technology more exposed to another AI stock correction.

It's hard to choose between them because they're so similar. Even Seagate Technology's $193 billion market cap is barely higher than Western Digital's $166 billion market cap.

Western Digital has a slightly more attractive valuation, while Seagate Technology has slightly higher revenue growth. Seagate Technology will maintain a higher revenue growth rate in its fiscal 2027 first quarter if both companies earn $4.1 billion. However, Western Digital barely wins out in terms of gross margin.

When almost everything about two companies is so similar, valuation should be the decisive factor. And on that score, Western Digital barely emerges on top.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Western Digital. The Motley Fool has a disclosure policy.

Salesforce (NYSE: CRM) stock is enjoying a resurgence. It's up by 28% over the past month as "SaaSpocalypse" fears subside and agentic artificial intelligence initiatives catapult the company's revenue higher.

However, even after its big rally, Salesforce remains attractively valued. Here's how the SaaS stock could climb further.

Image source: Getty Images.

A low valuation collides with accelerating revenue growth

Salesforce now trades at a price-to-earnings (P/E) ratio of 24, which is lower than the average ratio of the S&P 500. Less than a year ago, the customer relationship management platform company commanded a P/E ratio above 40.

It isn't often that a stock's valuation drops as the company's fundamentals improve, but that has been the case with Salesforce. In its fiscal 2027 first quarter, which ended April 30, it delivered 13% year-over-year revenue growth, and CEO Marc Benioff cited agentic AI as "the biggest growth opportunity for our customers, and for Salesforce."

This commentary shatters the idea that the growing use of AI will make Salesforce and similar software platforms obsolete. In fact, AI is helping Salesforce gain market share, serve more customers, and retain its existing customers. Salesforce stock recently climbed above its pre-SaaSpocalypse levels. Its business has strengthened since the correction took shape, which suggests the stock still has more room to run.

High revenue visibility and agentic AI growth reveal future tailwinds

Salesforce operates on an annual recurring revenue model. That makes its future growth predictable as long as customers continue to pay for their monthly subscriptions and upgrade their plans as their needs change. At last report, the company was sitting on $33.6 billion in current remaining performance obligations, which was a 14% year-over-year increase.

Its AgentForce offering is less than two years old and recently crossed $1 billion in annual recurring revenue. This segment, combined with Data 360, reached $3.4 billion in annual recurring revenue, representing year-over-year growth of more than 200%.

The company isn't just seeing high adoption of its agentic AI platform, but also tremendous activity. Salesforce has processed more than 28.6 trillion tokens to date, and that figure was up 152% sequentially in its Q1. Higher token activity suggests Salesforce's AI agent platform will continue to gain momentum. Grand View Research projects a 37.6% compound annual growth rate for enterprise AI through 2030, which could lift Salesforce's results further.

Salesforce will release its fiscal 2027 second-quarter numbers later in August, and management has guided for 10% to 11% year-over-year revenue growth.

These growth rates are respectable, especially considering Salesforce's historically low valuation. The company also saw a 37% year-over-year increase in net income in its fiscal 2027 first quarter, demonstrating that it can boost profit margins while elevating the top line.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Salesforce. The Motley Fool has a disclosure policy.

Qualcomm (NASDAQ: QCOM) has lagged other semiconductor companies this year. It's down by about 7.1% year to date, while the iShares Semiconductor ETF has surged by more than 68%.

That's a big difference, but this underperformance and upcoming projects may give Qualcomm what it needs to break out in 2027. Qualcomm's pivot to AI chips has received a warm reception from key players, and it should translate into tangible revenue growth next year.

Image source: Getty Images.

Sluggish results have driven a low valuation

Qualcomm trades at a P/E ratio of only 18. There hasn't been much reason to expect a premium valuation since results haven't been enticing in recent quarters.

For instance, Qualcomm posted a 4% year-over-year revenue decline in its fiscal 2026 third quarter, ended June 28, with net income dropping by 25% year over year. Those results explain why Qualcomm still has a low P/E ratio relative to other chipmakers like Broadcom and Advanced Micro Devices.

Qualcomm's valuation will remain this low if it continues to produce these types of financial results. On the surface, there doesn't seem to be much reason to be excited. However, the results included some remarks about non-handset revenue growing to $40 billion by fiscal 2029. Artificial intelligence is set to drive that momentum.

Super growth from AI can immediately change the narrative

Changes are taking place beneath the surface, but the financial impact may show up all at once in 2027. Qualcomm CEO Cristiano Amon told investors that the company expects non-handset revenue to accelerate from a 24% growth rate in fiscal 2026 to more than 60% in fiscal 2027.

There's already some traction toward this goal. Qualcomm and Meta Platforms recently agreed to a long-term deal for data center CPUs. Landing Meta Platforms as an AI chip customer can provide an immediate windfall and validate the company's new technology.

If the deal proves to be successful and boosts demand for Qualcomm's chips, the company may have to raise fiscal 2029 guidance again. Given the high-growth nature of AI, that scenario is very possible.

Non-handset revenue made up 40% of Qualcomm's fiscal 2026 third-quarter revenue. As this segment grows faster, it will make up a larger slice of total revenue and make Qualcomm less dependent on handset revenue.

That has to happen soon, since the contract between Apple and Qualcomm ends in March 2027. Apple has been using its own chips for recent smartphones and is eager to part ways with Qualcomm.

The pivot to AI is well timed and can help Qualcomm navigate a weakening handset market. While handset sales should continue to decline, its non-handset revenue streams may pick up momentum at the right time. Once that bullish opportunity is realized, it can fuel a breakout for Qualcomm shares.

Marc Guberti has positions in Apple and Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Broadcom, Meta Platforms, Qualcomm, and iShares Trust-iShares Semiconductor ETF. The Motley Fool has a disclosure policy.

The tech sector has been one of the most lucrative places for long-term investors to put their money in recent years. The internet, e-commerce, cloud computing, and, more recently, artificial intelligence have been some of the central innovations fueling growth in the sector.

The S&P 500's performance has become heavily tied to tech stocks. The "Magnificent Seven" stocks make up more than one-third of the S&P 500's total value, and that group doesn't even include other trillion-dollar tech companies like Broadcom and Micron.

However, some investors want even greater exposure to tech than a broad-market fund would offer. For such investors, these three tech-focused exchange-traded funds (ETFs) can get the job done.

Image source: Getty Images.

Roundhill Memory ETF

The Roundhill Memory ETF (NYSEMKT: DRAM) puts its focus on memory-chip makers. These companies have benefited massively from the AI build-out, since AI processors and data center servers need copious amounts of memory to function with maximum efficiency.

The ETF has gained more than 100% since its April debut. Samsung, Micron, and SK Hynix -- the world's three largest memory makers -- are its top three holdings, and they account for more than 70% of the fund's total assets. Smaller memory chip makers round out the portfolio's 24 holdings.

While some investors shy away from stocks and ETFs after they have experienced big rallies, that may not be the best choice when it comes to the Roundhill Memory ETF. Well-known tech sector analyst Dan Ives laid out a bullish scenario in a recent CNBC appearance, citing rising memory prices and demand far outstripping supply.

"Memory players, right now it's their world and everyone else is paying rent," Ives said.

The S&P 500 does offer exposure to memory-chip makers, but the Roundhill Memory ETF holds only those chipmakers. The fund has a lofty 0.65% expense ratio and a 1.10% SEC yield.

iShares Semiconductor ETF

The iShares Semiconductor ETF (NASDAQ: SOXX) offers broader exposure to chipmakers such as Nvidia, Advanced Micro Devices, and Broadcom, as well as memory players and others.

This tech ETF has more than 30 holdings, with its top 10 holdings making up more than 60% of assets. That portfolio has produced an annualized 29.6% return over the past five years, and the continued AI build-out looks likely to be an excellent tailwind for its continued outperformance.

Semiconductors are the backbone of the AI boom. Hyperscalers must accumulate chips from Nvidia, Broadcom, and other companies to meet the world's demand for computing power. That makes it easier for these companies to deliver high revenue growth rates.

While chipmakers are the main focus of this fund, more than 20% of its capital is allocated toward foundries and semiconductor equipment companies. Applied Materials, Taiwan Semiconductor Manufacturing, and Lam Research show up among the fund's top 10 positions. It has a 0.33% expense ratio and a 0.29% yield.

Vanguard Information Technology Index Fund

The Vanguard Information Technology Index Fund (NYSEMKT: VGT) isn't limited to the chip space. Although some of the top AI stocks mentioned above show up in its portfolio, different names also appear in the top 10, including Apple, Microsoft, and Cisco.

It's the most diversified tech ETF of the bunch, with more than 300 holdings. Its top 10 picks account for a little more than 60% of its total assets, with the top three -- Nvidia, Apple, and Microsoft -- contributing more than 40% of the portfolio's value.

One of the biggest strengths of Vanguard ETFs is their low expense ratios, and this fund doesn't disappoint. Its minuscule 0.09% expense ratio is wiped away by its 0.35% SEC yield. Its annualized 24.3% return over the past decade shows that long-term investors have been making out well with this ETF.

While the other two ETFs focus on chipmakers, the Vanguard Information Technology Index Fund offers exposure to other key tech themes, such as social media, smartphones, cybersecurity, and software.

Marc Guberti has positions in Apple and Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Applied Materials, Broadcom, Cisco Systems, Lam Research, Micron Technology, Microsoft, Nvidia, Taiwan Semiconductor Manufacturing, and iShares Trust-iShares Semiconductor ETF. The Motley Fool has a disclosure policy.

Broadcom (NASDAQ: AVGO) stock has dropped by more than 10% in less than two weeks, and Marvell Technologies (NASDAQ: MRVL) is to blame. Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) decided to expand its artificial intelligence (AI) chip design partnership with Marvell, creating concerns that Broadcom could be edged out or face pricing pressure.

However, investors shouldn't rush to sell their Broadcom shares. While the widening of the relationship between Marvell and Alphabet shows that the AI chipmaking landscape is becoming more competitive, the whole pie is growing, and Broadcom remains the leader in custom AI chips.

Image source: Getty Images.

Broadcom is the Nvidia of ASICs

Although describing a company as "the Nvidia (NASDAQ: NVDA) of its industry" has become a common way to hype up a stock, it's true in Broadcom's case. This metaphor can also provide more clarity as news about Alphabet expanding its partnership with Marvell drives headlines.

Nvidia is the leading maker of graphics processing units (GPUs) -- flexible and powerful parallel processors.

Broadcom is the leading designer of application-specific integrated circuits (ASICs) -- chips that are narrowly designed to handle a single type of AI workload. Both chipmakers have market caps of more than $1 trillion and surging revenue growth fueled by the AI build-out. Customers who already love their chips are demanding more of them.

Nvidia isn't the only GPU chipmaker -- AMD (NASDAQ: AMD) also competes in the space, though it's in a far-distant second place. Nvidia continues to grow its sales faster than AMD, and its market cap is almost seven times larger. Furthermore, Nvidia makes more revenue in one quarter than AMD generates in roughly two years.

AMD is a formidable company, but the gap between it and Nvidia in GPUs is massive. Marvell occupies a similar position relative to Broadcom, which is still growing faster and generates more revenue in a single quarter than Marvell does in two years.

Alphabet can work with multiple chipmakers

Alphabet still buys plenty of Nvidia GPUs, and it's leaning on Broadcom for its custom-made chips, which it calls Tensor Processing Units (TPUs). Google's parent company will likely keep doing business with both chipmakers for many years since there's no point in fixing something that isn't broken.

The expansion of its Marvell collaboration shows a willingness to experiment, and it's also a way to diversify when chip supply gets tight. For instance, Meta Platforms buys GPUs from Nvidia and AMD. An expansion of its relationship with AMD would not mean Meta Platforms is likely to suddenly stop buying Nvidia chips. The same premise applies to Alphabet.

Interestingly, earlier this year, Meta Platforms committed to a long-term chip supply deal with AMD only a few days after committing to a long-term deal with Nvidia. As demand for AI soars, Alphabet will need more AI chips to fill its data centers. It's advantageous for the company to have multiple suppliers for ASICs rather than relying exclusively on Broadcom, but that doesn't mean it will reduce its orders of Broadcom's chips.

Broadcom's guidance still implies substantial growth for its AI chip business

Headlines grab the market's attention momentarily, but companies' fundamentals shine over time. Broadcom delivered impressive results for its fiscal 2026 second quarter. Overall revenue increased by 48% year over year, and management's guidance for its AI chip business excited investors. In that context, this piece of Marvell news doesn't look like much of a threat.

Broadcom reported 143% year-over-year revenue growth in its AI semiconductor segment, which now accounts for almost half of total sales. That growth beat guidance set earlier in the year. The idea of beating guidance is quite compelling since Broadcom CEO Hock Tan expects AI semiconductor revenue to more than triple year over year in its fiscal 2026 third quarter.

Overall revenue is expected to reach $29.4 billion in that quarter, representing a sequential jump of more than 30%. It also represents an 84% year-over-year jump. Broadcom is down by more than 20% since announcing its fiscal Q2 results. The mismatch between the stock price's recent movement and the company's strengthening fundamentals may present a buying opportunity, especially with the Marvell news intensifying the dip.

Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Broadcom, Marvell Technology, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.

The artificial intelligence (AI) building boom is far more than just chips. Data centers need to store those chips, and each of those facilities has requirements centering around power, liquid cooling, and other components.

Analog Devices (NASDAQ: ADI) specializes in energy management hardware that connects power to data centers. The company's hardware also safely distributes electricity to multiple servers to avoid overheating.

This positioning has helped the 61-year-old company become a hot AI stock, and recent fundamentals suggest that momentum will continue.

Image source: Getty Images.

A record outlook highlights AI gains

Analog Devices reported robust fiscal 2026 third-quarter results (ended Aug. 1). Revenue soared by 40% year over year, with the Data Center and Industrial segment fueling most of that growth. Chief Executive Officer Vincent Roche cited "deep customer collaboration" and rising demand when discussing results.

However, the most bullish indicator came when the company announced guidance for its fiscal fourth quarter. A midpoint of $4.3 billion in revenue implies another quarter of 40% year-over-year revenue growth.

Analog Devices acts as an intermediary for the two hottest parts of the AI boom: chips and power. That suggests revenue growth will continue beyond fiscal 2026, especially when considering the projections for the AI industry. According to Grand View Research, the AI market is expected to achieve a 31% compound annual growth rate through 2033.

AI growth without the capex issues

The company is primed for the AI boom, but it doesn't face the same capital expenditure (capex) issues that plague hyperscalers. Tech giants are committing billions of dollars toward chips, data center storage, and other components.

Neoclouds like Nebius have been raising substantial capital to build AI data centers to keep up with demand. These efforts can produce parabolic revenue growth, but they also require a lot of up-front capital and debt.

Analog Devices doesn't face soaring expenses. The company returned $1.7 billion to shareholders through dividends and share repurchases in its third quarter. Net income more than doubled year over year, reaching $1.34 billion. That resulted in a 33% net profit margin.

The trend of rising profit margins should continue. Net operating expenses only rose about 13% year over year in its third quarter, reaching $1.09 billion. Its net operating expense came to $3.2 billion for the first nine months of its fiscal 2026, which is also only a 13% year-over-year increase.

The company's analog chip production is more basic than graphics processing units (GPUs) and memory chips. Equipment that was made a decade ago can still produce analog chips, while equipment for GPUs and memory chips must be constantly updated and modernized, which results in much higher capex.

The valuation is promising

Analog Devices' operating expense should rise at a relatively modest rate while sales surge. That implies wider profit margins in the future, but even with this forecast, the growth stock still manages to trade at an attractive valuation.

It's valued at only a 22.5 forward price-to-earnings ratio (P/E), and its 0.56 price/earnings-to-growth ratio (PEG) also hints at an undervalued price point. The company's valuations were much higher just a quarter ago.

The analog chips trade doesn't have as much attention as memory chips and GPUs. While those two industries are growing faster than analog, companies like Analog Devices don't have to worry about making soaring capital expenditures.

The company already has announced that its profits will continue to outpace revenue growth. Its forecast for the fourth quarter implies $3.86 in adjusted earnings per share (EPS) at the midpoint. Management reported $2.26 adjusted EPS in its fiscal 2025 fourth quarter, so the midpoint projection represents a 71% year-over-year increase.

Don't expect Analog Devices to post skyrocketing revenue numbers like Micron. However, it doesn't have to reach those lofty standards to meaningfully expand profit margins and outpace the S&P 500.

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

SoFi (NASDAQ: SOFI) and Sezzle (NASDAQ: SEZL) are two of the better-known emerging fintech players. SoFi has been around longer, but Sezzle's explosive returns during the past five years have put it on the map.

SoFi aims to offer traditional banking services at a discount due to its online model, while Sezzle is a buy now, pay later (BNPL) platform that is looking to diversify. Here's what investors should know if they only want to invest in these stocks.

Image source: Getty Images.

Sezzle is growing faster

Most growth investors like to start by looking at year-over-year trends for revenue and net income. If these numbers increase at an accelerated rate, it can pave the way for higher stock returns.

Although both companies are growing nicely, Sezzle is the clear winner. Its Q2 results revealed 52% year-over-year revenue growth, compared to SoFi's 43% growth rate.

It isn't just a one-quarter fluke, either. Sezzle has a five-year revenue compound annual growth rate (CAGR) of 50%, while SoFi has a 39% CAGR during that stretch. The numbers are similar when looking at the past three years as well.

Growth seems to be picking up for Sezzle; it reached 854,000 active subscribers in the second quarter, a 76% year-over-year increase. SoFi is also gaining subscribers at a nice rate, but its 35% year-over-year member growth rate isn't as impressive.

SoFi is more diversified

SoFi offers a wide range of financial services. You can open a bank account, take out a loan, get credit cards, invest in stocks, and access other financial resources. Sezzle has been diversifying, but almost all of its revenue still comes from its BNPL model.

Sezzle makes money from merchant fees and subscription plans that give members more perks. The subscription plans let Sezzle offer more flexibility to navigate consumer markets, but any meaningful slowdown in the BNPL industry will hurt Sezzle. The company doesn't have backup businesses like SoFi, which managed to perform well and diversify nicely when student loan payments were paused by the federal government during the pandemic.

Being a one-trick pony isn't necessarily a bad thing. Meta Platforms has become one of the world's most valuable publicly traded companies almost exclusively because of ads on its social media sites. Meta is trying to diversify, but ads are still the defining category.

It's the same setup for Sezzle, but the company has been working toward becoming an all-in-one financial platform.

Sezzle is currently seeking a federal bank charter so it won't be caught off guard if states tighten rules around BNPL. States aren't trying to ban BNPL, but new regulations can limit future growth. For instance, New York passed the BNPL Act, which caps interest rates at 16%.

Sezzle has the better valuation

Sezzle is less diversified than SoFi, but it's attracting many consumers to its BNPL platform. Just as SoFi figured out how to turn a student loan business into a fintech platform, Sezzle can use its initial BNPL successes as a launchpad for future businesses.

SoFi is ahead of Sezzle in that regard, but if you look at current valuations, Sezzle is more attractive. It trades at a price-to-earnings (P/E) ratio of 26 compared to SoFi's P/E ratio of almost 39. Sezzle's lower valuation goes nicely with higher financial growth rates.

It primarily comes down to whether you prioritize diversification or high revenue growth. Sezzle is growing faster, but SoFi's diversification will be extremely valuable if the BNPL industry slows down.

Also, Sezzle only projected 35% year-over-year revenue growth in full-year 2026, implying a meaningful slowdown in the second half. While Sezzle has a history of beating and raising expectations, it's worth monitoring growth rates to see if they taper off quickly. This explains why Sezzle, which shed more than 20% of its value in August, is still up by more than 80% year to date.

SoFi may be safer, but investors willing to take on more risk in exchange for faster growth may want to consider Sezzle. If the company beats and raises its forecast after reporting Q3 earnings, that might reignite the stock's momentum.

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

The S&P 500 is up by more than 10% this year, and its growth has outpaced Microsoft (NASDAQ: MSFT), but I don't think that trend will last too much longer. Microsoft's 20% return over the past month shows that more investors are spotting the opportunity.

Its earnings results were the major catalyst behind the surge, and there were a few details in the report that make me think Microsoft is a more promising investment now than the broad-market S&P 500.

Image source: Getty Images.

Cloud computing revenue continues to grow

Most of Microsoft's growth is coming from its cloud computing unit. Revenues from that part of the business were up by 27% year over year in Microsoft's fiscal 2026 fourth quarter.

This segment has maintained high growth rates for many quarters, and I believe that trend will continue. Artificial intelligence (AI) has boosted enterprise demand for cloud platforms. Competitors like Amazon (NASDAQ: AMZN) and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) have reported strong demand for their cloud platforms that continues to accelerate.

Cloud computing operates on a recurring revenue model, and Microsoft's established customers will have to upgrade their plans as their needs evolve. It's extremely cumbersome to switch from one cloud platform to another, and it's not worth the effort if the differences between Microsoft, Amazon, and Alphabet are marginal.

Microsoft continues to enhance its cloud offering to boost retention and attract new customers. Microsoft Cloud provides a broad model catalog of more than 11,000 models. This selection aids customers that want "the right model for each task, based on quality, latency, cost, and compliance," per the earnings call transcript.

Other business segments are also doing nicely

I still view cloud computing as the major story for Microsoft, and continued growth in this segment will help the tech stock outperform the S&P 500 in the future. It accounted for roughly two-thirds of Microsoft's revenue in its fiscal 2026 Q4, but the businesses that generated the remaining third of sales still show some upside potential too.

Artificial intelligence has also translated into higher growth rates for Microsoft's other businesses. LinkedIn and online advertising revenue were up by 12% and 10% year over year, respectively.

Microsoft 365 commercial cloud revenue also rose 16% year over year. The company's "more personal computing" segment, which includes online ads, Xbox, and Windows OEM and devices, was down by 4% year over year. While I would prefer if every segment were delivering revenue growth, this part of Microsoft's business only represented 14.3% of total sales.

Microsoft stock may be suffering from the company's success. While some growth investors are chasing smaller AI stocks in the hopes of more substantial gains, Microsoft steadily delivers better fundamentals each quarter.

Overall revenue and operating income were both up by 18% year over year in the most recent quarter. Those numbers beat most companies in the S&P 500, and to top it off, Microsoft has a lower price-to-earnings (P/E) ratio than the index. These factors explain why I view Microsoft as a better opportunity than the market's most popular benchmark.

The S&P 500 has a lot of dead weight

It's not just that Microsoft is a great stock. I also believe investors should look deeper into any index fund or exchange-traded fund they want to buy. For instance, the S&P 500 has recently derived a large portion of its gains from the "Magnificent Seven" stocks, but a closer look reveals many stocks are flat or down this year.

More than 150 S&P 500 holdings are down year to date, while fewer than half of the stocks in this index have a 10% return or higher.

Admittedly, Microsoft is in neither of those categories. It's up year to date, but not by much. However, Microsoft's stock price movements have not kept pace with its improving fundamentals. Meanwhile, some S&P 500 stocks are overextended and more vulnerable to future corrections.

Tech stocks like Microsoft often do the heavy lifting for the S&P 500, and the stock price should eventually catch up with Microsoft's fundamental growth. That's why I like Microsoft better than the S&P 500.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.

Amazon (NASDAQ: AMZN) is again ramping up its artificial intelligence (AI) spending. The tech giant told investors that it now expects to spend $220 billion in 2026 -- $20 billion more than its prior capex plan -- with higher memory costs cited as a reason for the increase.

That news came as part of an earnings report that saw Amazon break out of a sluggish trance. It's now up by more than 10% year to date and is outperforming the S&P 500, but will that spike last? Here's how this $220 billion capital expenditure commitment affects shareholders.

Image source: Getty Images.

Higher costs are translating into additional sales growth

Higher capex can cut into a company's profit margins, but that isn't the case if revenue growth outpaces capex growth. That has been the case for Amazon. In the second quarter, it delivered 20% year-over-year revenue growth, a result driven in large part by Amazon Web Services (AWS) hitting its highest growth rate in more than four years.

Its cloud platform has seen meaningful revenue growth acceleration as AI demand heats up. While investors certainly wish Amazon didn't have to deal with rising memory chip costs, its expenditures are yielding tangible returns.

CEO Andy Jassy also touted how its AI and chips businesses have both exceeded $25 billion annual revenue run rates. Even with rising costs, operating income came to $27.5 billion in Q2, a 43.2% year-over-year increase. AWS did most of the lifting -- its operating income surged from $10.2 billion in the prior-year period to $16.6 billion.

These numbers should continue to climb as Amazon expands its cloud capacity. If necessary, Amazon can also pass some of its costs onto customers. Furthermore, customers may have to upgrade their plans as their AI needs evolve.

High capital expenditures increase the barriers to entry for competitors

Although $220 billion is a lot of money to spend, it also highlights how difficult it is to compete with Amazon and its nearest peers. More than 60% of the cloud computing market is controlled by Amazon, Microsoft (NASDAQ: MSFT), and Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL).

Those three hyperscalers' cloud platforms are heavily competing with each other. Other companies are also vying for market share, but they are mostly competing for scraps. Oracle (NYSE: ORCL) is in fourth place with a 4% market share, making it less than one-third the size of Google Cloud.

Amazon still has a comfortable lead over Microsoft and Google in the cloud industry. This type of insulation explains why AWS' revenue and operating income have been surging amid the AI build-out. Only a small number of companies can fulfill enterprise demand, and AWS has emerged as the most reliable option.

Higher capex will reconfirm AWS' leading position and widen the gap between competitors, essentially creating a triopoly between Amazon, Microsoft, and Google. That setup will give all three companies more pricing power as they continue to invest in cloud capacity.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Oracle. The Motley Fool has a disclosure policy.

Applied Digital (NASDAQ: APLD) and TeraWulf (NASDAQ: WULF) are two of the top AI stocks riding the data center wave. Both neocloud companies develop and operate facilities that serve hyperscalers, but their stock returns have been a little different this year.

TeraWulf is up by 36%, while Applied Digital has gained just 11%. Is that gap just a fluke, or is it a sign of things to come? Here's what investors should consider.

Image source: Getty Images

Applied Digital has the advantage with gigawatts

Gigawatts are the name of the game when it comes to analyzing neocloud and colocation providers that offer IT capacity to hyperscalers. The more gigawatts a company has, the more revenue it can make.

Applied Digital has secured 1.4 gigawatts of contracted critical IT load, which comes to roughly $36 billion in total contracted lease revenue. Most of these contracts have 15-year terms, including two deals for 300 megawatts at the company's Delta Forge 1 and Polaris Forge 3 sites.

TeraWulf only has 839 megawatts of leased capacity. Most of that came from a 20-year deal with Anthropic for $19 billion that covers 401 megawatts.

Neither of these companies is able to deliver all of this capacity yet. TeraWulf told investors that revenue from the Anthropic deal will start to materialize in the second half of 2027, while revenue generation across all 401 megawatts is expected by early 2028.

Applied Digital also has the bigger pipeline

Not only does Applied Digital have more contracted power, but it also has the bigger pipeline. Secured deals make it easier for neocloud and colocation providers to secure financing to build out their infrastructure, while pipelines increase the number of gigawatts, which can result in more lucrative contracts in the future. Further price improvements seem likely as demand for compute capacity continues to expand rapidly.

Applied Digital has an active pipeline of roughly 3 gigawatts, while TeraWulf's is about 2.1 gigawatts. These figures do not include power or land for which they are still in the early stages of discussion and due diligence, so the size of the gap between them could change quickly. Earlier in the year, TeraWulf announced the acquisition of a Kentucky site that exceeded 1 gigawatt. Another deal like that for Terawulf that could completely close the gap, while a similar deal for Applied Digital would meaningfully expand it.

All of those secured gigawatts can only be transformed into revenue-producing assets if the neoclouds can secure lease deals for their services. That part isn't a problem since demand for compute is so high, but both companies have to ensure they are getting good terms for their capacity.

TeraWulf is aiming to boost its contracted capacity by 250 megawatts to 500 megawatts each year. That would give it between 1 gigawatt and 2 gigawatts of additional contracted power by 2030, which would put its total between 2 gigawatts and 3 gigawatts. Applied Digital has outlined a path to 3 gigawatts of contracted power by 2031, assuming it can lease at least 500 megawatts per year.

The companies have similar market caps

Applied Digital has a larger gigawatt pipeline and more capacity under contract, so one might be surprised that their market caps are very similar. Applied Digital's is $7.8 billion, compared to Terawulf's $7.7 billion.

Applied Digital's valuation lead should be larger, especially since its revenue and net income are also higher than Terawulf's. It also has a higher revenue growth rate than Terawulf as more contract revenue gets recognized.

Both companies are at the center of the AI boom and have long-term deals fueling their growth and access to competitive financing. However, Applied Digital has more going for it right now. More contracted power, a deeper gigawatt pipeline, higher revenue, and lower losses highlight the bullish thesis when comparing these two growth stocks.

TeraWulf could have been the better pick if their valuations were miles apart, but the fact that Applied Digital's market cap is barely more than TeraWulf's makes Applied Digital the better pick.

Marc Guberti 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.

Meta Platforms (NASDAQ: META) CEO Mark Zuckerberg released a 6,500-word manifesto detailing how the company will make agentic artificial intelligence (AI) a mainstream resource.

"Everyone will have an exceptionally capable personal agent that understands you, your goals, and everything you care about," Zuckerberg said in his open letter.

Superintelligence can revolutionize industries and give consumers access to more valuable tools, but what about investors? Here's how the company's efforts to double down on its AI buildout will affect shareholders.

Image source: Getty Images.

Superintelligence can diversify Meta Platforms' revenue

It's no secret that Meta Platforms makes almost all of its revenue from online advertising. It represented 97.6% of total revenue in the second quarter, with "Other revenue" and Reality Labs making up the remaining sliver.

Meta Platforms has been trying to diversify beyond online advertising for several years. Other tech rivals like Amazon and Alphabet have diversified into multiple industries, with online advertising still playing a key role.

Meta Platforms fumbled with the metaverse, and subscription revenue hasn't been moving the needle much. AI agents can initiate the revenue diversification Meta Platforms has been seeking for years. A push into neocloud services, which Zuckerberg floated earlier this year, can also aid the company in unlocking new income streams.

This development can make the company less reliant on advertising, which is still a fast-growing segment. The stock only trades at a price-to-earnings (P/E) ratio of 20, which is a low valuation just for the online advertising component. Any meaningful commercial progress with the superintelligence buildout can trigger a big rally, especially if online advertising revenue growth rates remain elevated.

Meta Platforms is still losing a lot of money on AI

Meta Platforms is still doing fine. Revenue jumped by 28% year over year in the second quarter. Operating income dipped by 8% year over year, but it may be a small price to pay if diversification efforts pay off.

"If" is the big problem here. The Metaverse debacle was a few years ago, but high capital expenditures without the payoff can bring that memory back. Reality Labs produced a $4.6 billion operating loss in the second quarter, while online advertising operating income slightly decreased year-over-year.

Although Meta Platforms doesn't face many competitors in the AI landscape, a few hyperscalers can quickly secure a large portion of the market. For instance, Amazon, Microsoft, and Alphabet control more than 60% of the cloud computing market. Oracle, the fourth-largest cloud provider, only has a 4% market share. A similar setup with AI agents that doesn't include Meta Platforms at or near the top can make it harder to justify increased spending.

Big investments in AI are necessary for the company to keep up with other tech leaders and finally diversify beyond online advertising. Meta Platforms is correctly acting upon this opportunity, but it must translate this spending into commercial success while pivoting back to positive operating income growth rates to reignite the stock.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle. The Motley Fool has a disclosure policy.

Artificial intelligence (AI) stocks have been at the epicenter of the stock market's growth in recent years. Nvidia initially led the way thanks to the soaring demand for its powerful AI chips, but plenty of new opportunities have emerged since the trend kicked off. Makers of smaller components of chips and other players in AI infrastructure have presented compelling opportunities for investors, and some companies have already translated AI into meaningful growth for their businesses.

Even at this stage of the AI trend, there are some stocks tied to it that look poised to beat the S&P 500 by a wide margin. Indeed, I think these three could double by the end of 2027.

Image source: Getty Images

Iren

Neocloud company Iren (NASDAQ: IREN) has been left behind by the stock market so far in 2026. Its 5% year-to-date return pales in comparison to the performance of peer Nebius, which has almost tripled year to date. They are similar companies in the neocloud industry, but Nebius has signed more long-term computing capacity deals with hyperscalers.

Iren has had less dealmaking activity, and its recent shareholder dilution hasn't helped matters. However, management is starting to turn its existing contracts into revenue while waiting patiently for opportunities to secure new deals with higher annual recurring revenues per megawatt.

For instance, this month, Iren delivered Horizon 1, a direct-to-chip liquid-cooled AI cloud deployment, to Microsoft. That lease will bring in roughly $500 million in annual recurring revenue for the neocloud. Once the remaining three Horizon sites are delivered, Iren will be looking at almost $2 billion in annual recurring revenue from that hyperscaler alone.

Then, the company will finally have the revenue growth profile of a neocloud play rather than that of a fading crypto miner. Nebius has already made the transition to realizing revenue from some of its contracts, which is where Iren has fallen behind.

Next year, the company will start to realize even more revenue from its customers. And the sponsorship deal it inked with the Golden State Warriors professional basketball team should put it on the map with smaller AI enterprises and developers, which is the customer base Iren would prefer to pursue. The same bullish catalysts that fueled Nebius' outperformance this year should show up for Iren in 2027 and beyond.

Sandisk

Sandisk (NASDAQ: SNDK) may seem like a strange stock to recommend since it is already up by more than 500% year to date. It's also up by roughly 4,000% over the past year, so predicting that the NAND flash memory maker will double yet again before the end of 2027 may sound excessive.

However, Sandisk truly has the fundamentals to back up another rally, especially as demand for memory chips remains massive. Elon Musk said that the shortage of memory chips is the biggest bottleneck constraining the pace of the AI build-out, which implies they are a bigger deal than AI processors right now.

Nvidia is still reporting parabolic demand growth for its chips, but Sandisk is simply doing better, by a lot. It delivered 372% year-over-year revenue growth in its fiscal 2026 fourth quarter, with sales up by 51% sequentially. Net income surged by 91% sequentially, producing a 77% net profit margin.

Momentum in the memory space doesn't look likely to slow down anytime soon. The midpoint of management's guidance is for $10.55 billion in fiscal 2027 first-quarter revenue, which would be an 18% sequential growth rate. Sandisk's financial numbers and guidance have been far more impressive than Nvidia's, and it's even outpacing memory peer Micron on revenue and net income growth.

Management's investor day presentation highlighted numerous multiyear sales deals that extend to its fiscal 2030, offering meaningful revenue visibility and high growth for an extended period of time. Its price-to-earnings ratio of 22 serves as the icing on the cake, since that's a lower valuation than most tech stocks.

Zeta Global

While Iren and Sandisk provide key pieces of AI infrastructure, Zeta Global (NYSE: ZETA) is a software player that's actually translating its AI investments into revenue. The company operates an AI-powered marketing cloud platform that generates high annual recurring revenue from marketers and businesses that rely on its software.

The company has invested heavily into agentic AI, and those efforts have helped Zeta achieve an impressive track record of outperforming expectations: In Q2, it delivered its 20th consecutive beat-and-raise quarter. Revenue surged by 44% year over year in the second quarter, which prompted management to boost its full-year guidance.

CEO David A. Steinberg told investors that the company is "still in the early stages" of what its platform can do for businesses as AI continues to evolve. Increasing AI adoption was cited as a major reason for the beat-and-raise quarter.

Zeta Global already works with more than half of Fortune 500 companies, and as its platform adds more features, its annual recurring revenue from these customers should continue to grow. The company has a solid revenue foundation to build upon as it gains more market share in the agentic AI industry.

Marc Guberti has positions in Iren. The Motley Fool has positions in and recommends Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

Palantir Technologies (NASDAQ: PLTR) rebounded nicely after posting strong earnings. Its 33% gain over the past month puts it just into the green compared to a year ago. Although the artificial intelligence (AI) company is growing at a tremendous rate, valuations remain a core question in the bullish thesis.

Here's what investors should consider before entering the growth stock at current levels.

Image source: Getty Images.

AI sovereignty demand is heating up

Nations do not want to rely on other nations for their AI tools. They want full control over their resources, and Palantir is at the center of this objective. Palantir CEO and co-founder Alex Karp told investors that AI sovereignty demand "has now been unleashed" and has made the company feel "very optimistic about the future."

Grand View Research projects a 20.5% CAGR for the sovereign AI market through 2033. However, the company outpaces that growth rate by a wide margin. For instance, the U.S. government is Palantir's largest customer. Palantir earned $809 million from the government in Q2, which was a 90% year-over-year improvement. It also represented 18% sequential growth and came to more than 40% of total revenue.

As the U.S. government invests more heavily in AI, sovereign intelligence will become more valuable. Other countries are following suit, with Palantir as the highly touted option for this technology. Since the government accounts for a large portion of Palantir's total business, continued investments in sovereign AI provide a meaningful tailwind for Palantir's long-term fundamentals.

The commercial segment is growing even faster than government revenue

Although the U.S. government is still Palantir's largest customer, its commercial segment is growing much faster. U.S. commercial revenue surged by 149% year over year and made up $764 million of total sales. The gap between U.S. commercial and government revenue is narrowing as more businesses embrace AI.

A 28% sequential growth rate indicates that momentum is continuing and translating into higher profits. Palantir's net income more than tripled year over year to reach $1.1 billion, resulting in a net profit margin above 50%. Guidance implies that revenue growth will continue. The midpoint of guidance is set at $2.162 billion, representing a 12% quarter-over-quarter increase.

That's just realized revenue. Palantir has been closing record deals left and right that offer multiyear revenue visibility. For instance, the company closed a record-setting $2.13 billion of U.S. commercial deals. Not all of that revenue was realized this quarter, but it will show up in future quarters.

Although Palantir trades at a high valuation, its status as a linchpin in AI for governments and enterprises can help it maintain current levels. The company is growing rapidly, and if you can keep a five- to 10-year horizon, it looks like a good deal.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Palantir Technologies. The Motley Fool has a disclosure policy.

Buying growth stocks gives investors the potential to outperform the S&P 500, but some of these picks are better than others. While every sector has a stock that beats the S&P 500, the tech industry is filled with top performers. These three growth stocks have been steadily gaining market share and are worthy candidates if you have $5,000 to invest.

Image source: Getty Images.

Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »

Robinhood

Robinhood (NASDAQ: HOOD) hasn't done too well with a 15% year-to-date decline, but recent earnings results show that the fintech leader is due for a rebound.

A 32% year-over-year increase in Q2 revenue doesn't capture the full story. First, that revenue increase came as crypto revenue dropped by 38% year over year, declining to $100 million in the process. That's a little less than 10% of Robinhood's total revenue, but it used to make up a larger slice of the pie.

Crypto has been a bit disappointing this year, with Bitcoin (CRYPTO: BTC) down by 22%. However, the price has mostly stabilized since February, so future declines in this segment will be less consequential. Furthermore, a future crypto rally would suddenly turn crypto trading into a tailwind instead of a headwind for Robinhood.

The fact that Robinhood can still produce high revenue growth rates is a testament to how well the rest of the business is performing. Prediction market revenue rose more than 10-fold to $156 million and continues to accelerate. Robinhood was also selected as the primary broker for Trump Accounts, which introduces a new income source and boosts the company's authority compared to other brokerage accounts.

Amazon

Amazon (NASDAQ: AMZN) has always been a popular pick for growth investors, but rising sales for its cloud computing division have changed the long-term outlook. Amazon Web Services sales increased by 37% year over year, which was its fastest growth rate in more than four years. This acceleration is due to the artificial intelligence (AI) build-out, and it shows no signs of slowing anytime soon.

The renewed strength of AWS fueled 20% year-over-year revenue growth in the second quarter. AWS's AI business more than doubled year-over-year to reach a $25 billion annual revenue run rate. Its AI chips business also more than doubled year over year.

These are smaller parts of the business that can become much larger due to strategic partnerships and rising demand for AI infrastructure. However, Amazon has multiple businesses expanding in key industries that already produce meaningful sales and profits. For instance, its online advertising revenue increased by 26% year over year in the second quarter. Online store sales rose by 15% year over year.

Amazon combines a durable, growing business model with moonshot opportunities, like agentic AI and chips. That combination has helped Amazon outpace the S&P 500 with a 15% year-to-date gain.

ServiceNow

ServiceNow (NYSE: NOW) makes it easy for enterprises to create and scale AI agents. The company generates high annual recurring revenue from about 8,800 customers, including 90% of the Fortune 500.

The company regularly beats its forecasts and has posted an annualized 24% revenue growth rate for the past five years. ServiceNow remained consistent in the second quarter, posting a 24% year-over-year boost in total revenue.

ServiceNow Chief Executive Officer Bill McDermott told investors in the Q2 press release that agentic deployments of ServiceNow AI increased ninefold in just nine months. That type of engagement has helped establish the company's AI Control Tower as the market standard. ServiceNow can command higher sales growth as agentic AI demand gains momentum and its top enterprise customers upgrade their plans.

That trend has been taking shape for years. The earnings presentation revealed that ServiceNow has 658 customers with annual contract values that exceed $5 million. It's a 23% year-over-year increase. The average annual contract values of those customers also inched higher to $15.2 million, marking a 6% year-over-year boost.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Bitcoin, and ServiceNow. The Motley Fool has a disclosure policy.

Nebius (NASDAQ: NBIS) has been steadily raising its capacity guidance for the end of 2026. The company told investors in February that it expected to have 3 gigawatts of contracted power by the end of 2026. That number jumped to 4 gigawatts in May, and when the company released second-quarter results in August, it told investors to expect 5 gigawatts by the end of the year.

This steady growth comes as the company adds new sites throughout North America and Europe. It also suggests that the stock's rally isn't close to over, even though its price has almost tripled year to date.

Image source: Getty Images.

A larger-gigawatt pipeline leads to more revenue

Nebius operates in one of the hottest industries right now. It's the largest of the neocloud providers -- a group of companies that's playing a critical role in the artificial intelligence (AI) boom. Tech giants like Meta Platforms (NASDAQ: META) and Microsoft (NASDAQ: MSFT) have already turned to Nebius to help them meet their AI capacity needs.

Meta Platforms has made multiple cloud compute deals this year, in addition to one last year. Its biggest deal came in at $27 billion over the next five years. It's split between a five-year, $12 billion agreement and a second five-year, $15 billion deal. Nebius says it will start to deliver this capacity in early 2027.

It's normal for tech giants to secure hundreds of megawatts in a single deal, and Nebius anticipates having roughly 5 gigawatts of contracted power by the end of 2026. (1 gigawatt equals 1,000 megawatts.) It's entirely possible that Nebius will raise its contracted power capacity guidance again before the end of the year, based on its history.

The ceiling for Nebius' potential revenue will get higher as it secures more megawatts and builds additional data centers. That potential for the business to scale up has been showing up in its recent results. Nebius delivered $582.3 million in Q2 revenue, which was a 454% year-over-year increase. It may continue to deliver similar growth rates for another year as it secures more deals and delivers on existing contracts.

Those same data centers are expensive to build

Although the potential for parabolic revenue growth will excite many investors, it costs a lot of money to build AI data centers, obtain energy, and buy hardware such as Nvidia's (NASDAQ: NVDA) powerful processors. That's part of the reason Nebius issued $4 billion in private convertible notes earlier this year, and some bears point to the company's debt load as a major concern.

Nebius will have to continue borrowing money to build enough data centers to offer 5 gigawatts of AI capacity to hyperscalers. As long as its operating income remains negative, Nebius will have to rely on that type of funding. There is, however, a path out of borrowing money as it realizes revenue from its deals.

The newest Meta Platforms deal alone will provide Nebius with more than $5 billion in annual recurring revenue once it is set up. That's more than the $3 billion in annual recurring revenue that Nebius currently generates. The company expects to have up to $9 billion in annual recurring revenue by the end of the year.

The investment thesis always viewed financing as a way to bridge the gap between Nebius' AI data center ambitions and its net operating losses.

Prepayments make it easier to build the data centers

Even though Nebius won't realize recurring revenue from its investments until it delivers AI capacity to its customers, the company has been securing high prepayments. In its Q2 shareholder letter, it revealed that 70% of deals had partial prepayment, with that prepayment often covering 50% to 60% of associated capital expenditures.

Thus, Nebius gets immediate cash infusions from its contracts, and the ability to negotiate more lucrative deals once those contracts expire. A key note in the shareholder letter hinted at Nebius' leverage as demand for AI cloud capacity surges.

"We could sell our entire 2027 capacity on these terms today. We are deliberately not doing so because we see higher value in retaining some capacity for immediate customer needs," the company said in its shareholder letter.

A slowdown in deal-making indicates that Nebius thinks it can secure better terms by waiting a little longer. It also means capital constraints are not an immediate concern as it builds its gigawatt pipeline and approaches revenue recognition on multiple deals.

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

The AI chip trade has been one of the most profitable investment opportunities over the past decade, and the leaders continue to gain market share. Broadcom (NASDAQ: AVGO) and AMD (NASDAQ: AMD) have both outpaced the S&P 500 (SNPINDEX: ^GSPC) year to date.

These companies specialize in different products. While Broadcom makes most of its money from ASICs, which are custom-made chips for tech giants, AMD specializes in GPUs and CPUs.

Here's what investors should know when comparing both stocks.

Image source: Getty Images.

Both companies have been delivering exceptional results

It's not easy to choose between growth stocks like Broadcom and AMD, since both are gaining significant market share while strengthening their fundamentals. AMD delivered 50% year-over-year revenue growth in the second quarter (ended June 27), while Broadcom's sales were up by 48% year over year in its fiscal 2026 second quarter (ended May 3).

Although AMD has a slight edge, Broadcom's guidance suggests it will win in future quarters. AI semiconductor sales accounted for slightly less than half of Broadcom's revenue and more than doubled year over year. The ASICs leader anticipates its AI semiconductor revenue will more than triple year over year when it reports fiscal 2026 third-quarter results. Broadcom CFO Kirsten Spears told investors to expect 84% year-over-year revenue growth in that quarter.

Similarly, AMD more than doubled its data center revenue year over year, where its AI products are sold. That part of the business accounts for 58% of AMD's revenue, and its growth rate is expected to accelerate in the second half of the year. The midpoint of AMD's guidance implies 41% year-over-year revenue growth next quarter.

CPU demand may surge as the AI build-out reaches its next chapter

CPUs are the brains of AI infrastructure, on which GPUs rely to process and retain information. They have always been a key part of AI infrastructure, but the push to agentic AI is making CPUs even more important. It's getting to the point where there may need to be one CPU per GPU, whereas it's been one CPU per eight GPUs for training models.

Red Hat, an IBM company, stated that the ratio will change to four CPUs per GPU in certain agentic deployments. Hyperscalers investing in agentic AI will need to purchase many CPUs to meet modern ratios. While the 1-to-1 and 4-to-1 ratios don't have to be in favor of CPUs throughout AI data centers, those are the ratios for agentic AI builds.

This news benefits AMD in particular, since it also specializes in CPUs. Broadcom does not offer CPUs at this time, so it will miss this opportunity from a CPU perspective. Grand View Research projects a 46.2% CAGR for the enterprise agentic AI market, which bodes well for AMD.

Broadcom trades at a better valuation

Although both companies have compelling growth stories, valuations still matter. The gap between them is considerable. Broadcom trades at a 70 P/E ratio compared to AMD's 120 P/E ratio. Broadcom also trades at a 0.47 PEG ratio, while AMD trades at 1.01.

These metrics imply that Broadcom is the less risky stock at current levels. While AMD has a case for CPU expansion to accelerate revenue growth in the long run, Broadcom is still chugging along. Furthermore, Broadcom's guidance implied a much higher revenue growth rate than AMD's.

Broadcom even has a higher net profit margin than AMD. Its 42% net profit margin was more than twice AMD's 19.9%. Both stocks are compelling, and investors should monitor developments in rising CPU sales if they prefer AMD. However, Broadcom looks more promising at current levels.

Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Advanced Micro Devices, Broadcom, and International Business Machines. The Motley Fool has a disclosure policy.

Iren (NASDAQ: IREN) shattered two bearish storylines upon announcing that its Horizon 1 data center project was operational and had been delivered to its tenant, Microsoft (NASDAQ: MSFT). It's one of four 50-megawatt sites that were part of a landmark deal the neocloud company struck last year.

One issue that has been driving bearish concerns about Iren has been its use of debt financing, but that headwind may start to fade thanks to this deal. Furthermore, Iren once again proves it can meet deadlines and turn its artificial intelligence (AI) capacity into meaningful revenue growth.

Image source: Getty Images.

Iren's reliance on financing may soon come to an end

Iren has raised billions of dollars in recent years, primarily through the sale of its corporate bonds, to fund the build-outs of its AI data centers. Investors knew that taking on heavy debt was the cost of business, since Iren isn't making much money yet relative to what's actually needed to build the data centers it's leasing to clients.

However, as Iren turns more of its existing assets into realized revenue, it may be less reliant on financing in the future. The Horizon 1 deal will bring in roughly $500 million in annual recurring revenue for the next five years.

Iren CEO Dan Roberts said the company is working to deliver Horizon sites 2, 3, and 4 later this year. Once all of those sites are ready, the Horizon sites will produce a combined $1.94 billion annually over the next five years.

Granted, those figures do not account for a 20% prepayment on the site. That turns the $9.7 billion, five-year deal into $7.76 billion over five years, which averages to roughly $1.55 billion per year.

Those revenues alone won't cover all of Iren's data center build-out costs, but they will make Iren less reliant on debt financing. However, Microsoft isn't its only customer. The company shared in July that it had signed $2.8 billion in new customer contracts, and management raised its 2026 annual recurring revenue target to over $4 billion. Notably, prepayments for those deals were as high as 45%.

While such prepayments do cut into the annual recurring revenues received during the initial phases of those contracts, they do provide extra capital that Iren can use to build more data centers and obtain more resources without tapping into debt.

Iren is earning $1.94 billion per year from 200 megawatts

Those are the terms for the Microsoft deal, and it represents a small slice of Iren's capacity. It has 5.8 gigawatts of total capacity that is under development, so it can support 28 additional contracts like the Microsoft one.

Granted, the company has already been securing customers for some of its megawatts, so it doesn't have all of them available to offer. Furthermore, some of its data center sites will take years to complete. Iren is aiming for 480 megawatts of gross AI cloud capacity by the end of this year and expects to almost triple that figure by the end of 2027.

Iren does not need revenue from all 5.8 gigawatts to become less reliant on financing. The company earned only $144.8 million in its fiscal 2026 third quarter. Its projected $4 billion in annual recurring revenue indicates that at least one quarter in 2027 will produce $1 billion in total sales.

Once the growth arrives, Iren will eventually be in a position to expand its margins and fund its data centers with its own cash flow. Investors shouldn't expect that to happen this year, but it may start to take shape in 2027 or 2028.

The value of compute continues to rise

Not only is Iren starting to make money from its Microsoft deal, but its remaining inventory also continues to gain value. Rival neocloud Nebius (NASDAQ: NBIS) held its first-ever capacity auction, and the winning customer paid a 15% premium compared to any price Nebius had charged before.

Nebius also commanded prices of $40 million to $50 million per megawatt in recent deals, despite an average yield of just above $20 million per megawatt.

These results show that the AI capacity Iren is building is growing in value. That makes Roberts and the Iren team look a lot smarter for not rushing to make deals. Higher annual contract values will help with margins, and can provide Iren with a realistic path to reduce its reliance on financing for future AI expansion projects.

Marc Guberti has positions in Iren. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.

Meta Platforms (NASDAQ: META) Chief Executive Officer Mark Zuckerberg recently released a manifesto that outlines how the company will harness artificial intelligence (AI) and where he believes the industry is heading. It contained details on national security, job growth, and the balance of power.

There also happened to be a golden nugget for investors who are looking for ways to make money in AI and assess whether stocks can continue to go up.

Zuckerberg believes everyone will have "an exceptionally capable personal agent," and that statement means that these three stocks should continue to rally.

Image source: Getty Images.

Micron

AI agents need vast amounts of memory to record each user's preferences and respond to each query within seconds. Zuckerberg's statement about everyone having access to agentic AI means that Meta Platforms will have to invest heavily in Micron (NASDAQ: MU) chips.

Although this news is beneficial for the entire memory sector, Micron has established itself as a stand-out company with its high bandwidth memory chips.

Micron anticipates roughly $50 billion in fiscal 2026 fourth-quarter sales, which would be more than 20% sequential growth. The company has been crushing its forecasts in recent quarters while delivering net profit margins above 70%.

Some investors have shied away from memory chipmakers in recent weeks due to concerns about the sector's boom-and-bust cyclicality. However, Zuckerberg's manifesto implies a multi-year investment in memory chips and AI infrastructure. With that context, and the fact that competitors won't just sit back and let Meta Platforms take all of the agentic AI market share, Micron looks quite compelling with its 5.5 forward price-to-earnings (P/E) ratio.

Advanced Micro Devices

Any top AI chipmaker could have earned mention here. However, Advanced Micro Devices (NASDAQ: AMD) is worth extra emphasis, since it makes graphics processing units (GPUs) and central processing units (CPUs).

GPUs use the chips that turned Nvidia (NASDAQ: NVDA) into the world's most valuable publicly traded company. Advanced Micro Devices makes them too, but the company also specializes in CPUs, which act as the "brains" for GPUs.

Agentic AI will require more CPUs for each GPU than the current ratios that have worked for existing AI infrastructure. That translates into more long-term demand for Advanced Micro's GPUs and CPUs.

The company's revenue has accelerated in recent quarters, with 50% year-over-year growth headlining superb second-quarter results. Data center revenue made up 58% of total sales, and Advanced Micro Devices Chief Financial Officer Jean Hu told investors to expect data center sales to accelerate in the second half of the year.

Meta Platforms and Advanced Micro Devices deepened their partnership earlier this year, with GPUs and CPUs as key components. Zuckerberg touted the partnership as a key step to "deliver personal superintelligence," which connects directly with AI agents.

CrowdStrike

Zuckerberg's manifesto mentioned cybersecurity multiple times and pointed to open source systems as a way to patch vulnerabilities.

"Over time, I expect that widely deployed AI models with strong cybersecurity capabilities will lead to systems that are more secure, not less," Zuckerberg said in his manifesto.

CrowdStrike (NASDAQ: CRWD) deserves the spotlight for this one. Last year, it established a partnership with Meta Platforms "for evaluating how AI systems perform in real-world security operations."

The companies jointly introduced CyberSOCEval, a rulebook that determines which AI tools and resources are effective for cyber defense. That type of foundation explains why CrowdStrike outperformed the S&P 500 with an 88% year-to-date gain (as of Aug. 12).

The cybersecurity provider also delivered 32% year-over-year net new annual recurring revenue growth in its fiscal 2027 first quarter. Those results indicate momentum is building for CrowdStrike's cybersecurity solutions.

"CrowdStrike is AI security infrastructure, critical to successful AI adoption," CrowdStrike CEO George Kurtz told investors when discussing recent results. Its close partnership with Meta Platforms suggests that it will be one of the winners as Zuckerberg's company expands its agentic AI pursuits.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, CrowdStrike, Meta Platforms, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.

Pokémon cards, vinyl toys, and sports jerseys are some of the hot collectibles that have taken the internet by storm in recent years. Some people spend thousands of dollars on collectible items, while others watch from the sidelines, wondering how much money their old stuff could sell for.

eBay (NASDAQ: EBAY) has carved a large slice of the collectibles market for itself and looks poised to build on its position. A focus on collectibles is one reason eBay stock has outperformed the S&P 500 and the Nasdaq Composite year to date, a trend that may continue for the rest of 2026.

Image source: Getty Images.

Collectibles are driving eBay Live momentum

The international expansion of eBay Live is relatively new, but it has already translated into higher user engagement and rising sales. eBay Live is a livestreaming component of eBay that helps people find quality products, and sales of collectibles were a major growth driver.

eBay touted its "unique inventory of curated collectibles and memorabilia" when explaining how eBay Live impacted its business, with events like the World Cup attracting more shoppers. The livestreaming platform's gross merchandise volume grew eightfold year over year across its seven markets.

The end result for the second quarter was 15% year-over-year revenue growth. eBay also generated $552 million in net profit, a 51% increase. Collectibles are playing a role that should expand in future years. Grand View Research projects a 6.9% compound annual growth rate for the collectibles market through 2033.

The e-commerce company doesn't tell investors what fraction of its sales on its platform come from collectibles. However, collectibles are a part of eBay's "focus categories" segment, which exceeded 40% of gross merchandise volume for the first time in Q2. eBay cited "strength across collectibles, eBay Motors, Fashion, and Refurbished Goods" in that quarter's earnings presentation.

Empowering sellers to make smarter decisions with their rare items

Not only does eBay have a lead in the collectibles market, but it's also adding multiple features to preserve its advantage. Its authenticity guarantee was expanded to U.K. trading cards valued at above 500 British pounds. That move, along with the decision to broaden eligibility for its PSA grading option for U.S. trading cards, helps keep fake collectibles off the platform and boosts buyers' trust.

The company also introduced card ladder indexes that help sellers determine the fair value for specific players, characters, sports, and collectible card game genres over time. These tools can help sellers understand the optimal prices for what they own, preventing them from leaving money on the table. And the more that sellers can sell their collectibles for, the more that eBay collects in fees.

eBay also has a collectible segment called Goldin that has become the go-to space for record-setting sales. A Michael Jordan card sold for $4.3 million on the platform, and Wayne Gretzky's Stanley Cup-winning jersey sold for $2.8 million. Such high-figure transactions will make Goldin more attractive to collectors who want to sell high-end products.

The decision to lean into the collectibles market has been quite lucrative for eBay, and will continue to provide a multiyear tailwind that should benefit shareholders.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends eBay. The Motley Fool has a disclosure policy.

Amid a rising stock market, Uber (NYSE: UBER) is down by about 8% year to date, but the company's fundamentals reflect a different reality. It is the leader in the ride-hailing industry, and it continues to gain market share. Furthermore, its valuation has become more compelling due to the prolonged slide it has been experiencing since last autumn.

A stock's price should not continue to drop as the company's underlying fundamentals improve. Eventually, a rally should take shape, and Uber has a few catalysts that could bring it back into the green this year.

Image source: Getty Images.

New users are flocking to Uber

In the press release announcing Uber's Q2 results, CEO Dara Khosrowshahi said that the platform had "added more first-time users over the past 12 months than in any period over the past five years." More users translated into higher revenue growth rates, but good retention rates can give the company's recent revenue gains a solid foundation.

The company's monthly active platform consumers rose by 16% year over year, which means people who use the app are requesting rides throughout the year. That growth also came with an 18% year-over-year increase in trips.

Although Uber got its start with ride-hailing services, its food delivery business has become a major catalyst. In fact, the delivery segment drove most of the revenue growth. It was up by 28% year over year in the second quarter, while the transportation component of the app only posted 1% growth. Deliveries now make up more than one-third of total sales.

Rising profits and a falling stock price translate into a low valuation

The revenue growth has also come with rising profit margins. After being unprofitable for more than a decade, Uber started to turn a profit in 2023, and its net income has continued to climb.

Its non-GAAP (adjusted) net income, which does not reflect gains from its equity investments, was up by 29% in Q2. Its $1.6 billion in non-GAAP net income resulted in an 11.6% profit margin.

To top it all off, Uber trades at a P/E ratio of just under 17 today. Its food delivery competitor DoorDash (NASDAQ: DASH) commands a P/E ratio of around 110. Although DoorDash is growing at a faster rate than Uber, the latter is delivering higher margins. Uber may also see a long-term revenue boost once autonomous vehicles become more common on its platform.

Although Uber doesn't deserve a 110 P/E ratio, and investors can make an argument about DoorDash being overvalued, the stock's current valuation suggests that a rally may be imminent. Uber is riding long-term tailwinds that should support elevated revenue and net income in future quarters.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends DoorDash. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

Michael Burry of The Big Short fame recently announced that he had opened a short position on Nebius (NASDAQ: NBIS), which is set to report earnings this week. While the artificial intelligence (AI) build-out is a major catalyst, Nebius' high valuation and massive debt load have kept some investors away from the stock. But by making his negativity about the stock public, Burry has created more tension for shares.

Although Burry was depicted as a genius in print and on the big screen for anticipating the subprime mortgage crisis, he hasn't gotten every investment call right. This may be one of his misses.

Image source: Getty Images.

Nebius is in the right place at the right time

The rising use of artificial intelligence is being supported both by hyperscalers like Microsoft (NASDAQ: MSFT) and neoclouds like Nebius that can supply AI data centers, chips, and power. Previously existing data centers are limited in what they can do to support AI workloads, and while tech giants have been scrambling to build their own, specialists like Nebius have been finding customers for their compute power, too.

Meta Platforms (NASDAQ: META) is building a 5-gigawatt facility in Louisiana that will cost more than $50 billion. Microsoft is also working on its Fairwater AI data center, which is expected to be drawing 3.3 gigawatts of electricity by late 2027 -- more than is used to power the city of Los Angeles.

Nebius is already deep into the process of developing multiple AI data centers, and it's generating revenue from some of its facilities. As the company brings more of its compute capacity online, it will realize more revenue from long-term deals it has signed with Meta Platforms, Microsoft, and other tech leaders.

News from the memory chip market indicates that the data center build-out's momentum is not expected to slow down anytime soon. SK Hynix (NASDAQ: SKHY) recently announced that it is investing $38 billion to build two new memory chip plants due to high and rising demand from the AI data center market. The pace at which new data centers are being built indicates that demand remains robust for compute power of the type that Nebius provides.

Addressing the neocloud's debt

One of the main issues that understandably concerns potential investors in Nebius is how much money the company has borrowed to fund its own data center construction. The company's long-term debt more than doubled sequentially from $4.1 billion in Q4 2025 to $8.4 billion in Q1 2026. That figure does not include the company's $1 billion in long-term operating lease liabilities.

Yet its revenues surged by 684% year over year in the first quarter, reaching $399 million. Nebius is delivering substantial top-line growth, but it's still reporting net operating losses. Investors must consider what type of growth rates they think would be necessary to justify the current stock price in the context of the company's debt load.

On the bright side, all of that debt has left it with $9.3 billion in cash on its books -- that figure, too, more than doubled sequentially. How effectively Nebius uses that cash will heavily determine whether its big bet on debt financing pays off. The expansive nature of the AI build-out suggests a positive outcome for the company is likely in the long run. While short-sellers might profit due to short-term volatility, the long-term picture for this neocloud is still solid.

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

Jeff Bezos just went on a bit of a selling spree: He unloaded more than $4 billion worth of Amazon (NASDAQ: AMZN) shares last week. That sale took some investors by surprise and hurt the stock after the company delivered a solid second-quarter earnings report, but Bezos had planned it more than eight months in advance.

In that light, the transaction doesn't appear to indicate how Bezos views Amazon's latest results or its outlook. While the timing might have been frustrating for investors who hoped Amazon would rise above $300 per share, the resulting conditions represent a compelling buying opportunity.

Image source: Getty Images.

Amazon is growing in multiple industries

Amazon's overall revenue increased by 20% year over year in the second quarter, with Amazon Web Services being a big part of that story. Cloud platforms from tech giants have seen meaningful sequential revenue acceleration, and AWS delivered 37% year-over-year growth.

Cloud revenue now makes up more than 20% of Amazon's top line, but the hyperscaler is also seeing compelling growth rates in other industries. High-margin online advertising revenue was up by 26% year over year, and online store sales were up by 15% year over year.

Every business segment Amazon listed showed year-over-year growth, with most in the double-digit percentages. Amazon's ability to gain market share in multiple industries should continue thanks to its strengths in artificial intelligence. Those advantages could translate into better fundamentals in future quarters and serve as the foundation for a rally toward $300 per share.

Artificial intelligence is creating new business opportunities

Not only is Amazon gaining ground with its established businesses, it's also tapping into new opportunities. The tech giant has an AI business and a chip business that each surpassed $25 billion in annual revenue run rates.

Those amount to small slices of its total revenue today, but if those two segments' growth rates continue to accelerate, they can become major sales drivers in the future. Amazon already has enticing fundamentals, so its high-growth-potential opportunities are nice bonuses, but not critical to support the stock's current valuation.

Humanoid robots are also on Amazon's radar in the wake of its acquisition of Fauna Robotics in March. The company also owns autonomous vehicle company Zoox. Its self-driving vehicles are only operating in Las Vegas and San Francisco, so it has a lot of catching up to do if it's going to compete in that arena. Alphabet's Waymo is the clear market leader, but capturing even a small piece of the self-driving vehicle industry could be lucrative for Amazon.

Amazon is also in the process of developing AI smart glasses to rival those being sold by Meta Platforms. A new wave of innovative products and services will arrive due to AI, and Amazon is at the center of those opportunities.

It doesn't have to be the largest company in each of those industries to be a winning investment. Google Cloud has a smaller slice of the cloud infrastructure market than Amazon Web Services, and it is still a critical growth catalyst for Alphabet. Humanoid robots, AI chips, agentic AI, and self-driving vehicles are some of the most compelling long-term opportunities in the tech world today, and Amazon is involved in all of them.

Its growth could accelerate in upcoming quarters, and if it does, it will make the current share price look like a bargain.

Marc Guberti has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool has a disclosure policy.

Sandisk (NASDAQ: SNDK) is one of the only growth stocks that can more than quadruple and still be undervalued. Superb fiscal 2026 fourth-quarter results and broader memory chip trends suggest that Sandisk can reclaim its all-time high of just above $2,350 per share.

The stock would almost have to double from its current price to reach that level. Although it may sound difficult to imagine that type of growth, given Sandisk's recent returns, it's entirely feasible.

Image source: Getty Images.

Sandisk has the growth numbers of a giant

It's no secret that Sandisk is posting high revenue growth rates, but it truly is on a different level from other chipmakers and tech leaders. Sandisk told investors in its fiscal 2026 third quarter to expect up to $8.25 billion in revenue for its fiscal 2026 fourth quarter, which ended July 3. When the Q4 press release arrived, Sandisk reported $8.97 billion in revenue.

That's a 51% sequential improvement, and guidance for its fiscal 2027 first quarter implies up to $10.8 billion in revenue. That suggests a 20% sequential growth rate.

That growth is moving full steam ahead with superb profit margins. Generally accepted accounting principles (GAAP) net income reached $6.9 billion, which exceeded the company's fiscal 2026 third-quarter revenue.

All of these numbers are incredible. Not even Micron (NASDAQ: MU) is growing this quickly. Sandisk CEO David Goeckeler emphasized in the earnings release that the company is positioned to "generate growing and durable free cash flow." That doesn't sound like a business that is slowing down anytime soon.

Sandisk's valuation cannot stay this low forever

Continuing this fundamental overview of the stock, Sandisk's recent pullback has put its forward price-to-earnings ratio below 20. That provides a higher margin of safety for new investors, and it also makes Sandisk cheaper than most tech giants.

Amazon trades at a 30 forward P/E ratio, while Nvidia and Broadcom have forward P/E ratios of 23 and 21, respectively. None of them is growing as quickly as Sandisk, even though all three are well-positioned for rising AI demand.

Investors bid Sandisk up to a little above $2,350 because they were excited about the fiscal 2026 fourth-quarter guidance. Now, the stock has taken a massive haircut after the company blew past its quarterly expectations and set ambitious first-quarter targets.

The memory chip boom isn't fading anytime soon

The only possible way to view Sandisk in a bearish light is if you believe memory chip prices will eventually crash due to an inventory glut, especially if hyperscalers cut back on AI spending. However, there are no signs that point to that unlikely scenario.

Space Exploration Technologies expects to deliver up to 20 gigawatts of compute capacity by the end of 2027. Meta Platforms intends to build tens of gigawatts this decade and hundreds of gigawatts over time. That's just two hyperscalers, and they all need a lot of memory chips to reach their lofty goals.

Capital expenditure targets for tech companies continue to climb, and high revenue growth for various cloud platforms suggests that AI spending will continue to ramp up. If there were a real risk of a slowdown in capital expenditure, some caution would be warranted.

However, chipmakers and hyperscalers are both pointing to continued growth. Sandisk and its fellow chipmakers forecast meaningful growth in their upcoming quarters. It's not just memory chipmakers, either. Nvidia and Broadcom both projected solid growth rates for their upcoming quarters. Tech giants continue to accelerate market share gains with the help of AI.

Sandisk's recent pullback has more to do with its one-year return than its fundamentals. Many investors think it is natural for a stock to enter a deep correction after surging in a short amount of time. That consensus is misguided for Sandisk, and the chipmaker may be due for an all-time high by the end of the year.

Marc Guberti has positions in Broadcom. The Motley Fool has positions in and recommends Amazon, Broadcom, Meta Platforms, Micron Technology, and Nvidia. The Motley Fool has a disclosure policy.