With a total return of 57% over the last three years, the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) has been a boon for income-focused investors who value stability and diversification. Those who already own the fund should probably hold on to it for those two reasons.

That said, no investment exists in a vacuum. And potential new investors have a lot of other options to choose from. Let's dig deeper into the pros and cons of SCHD to decide what the next five years might have in store.

Dividends are your best friend

According to research from S&P Global, dividends accounted for a whopping 31% of the S&P 500's total return since 1926, making them a vital part of any long-term investment strategy. This might sound surprising considering blue chip stock yields tend to be relatively small. But these payouts benefit from compounding as they are reinvested into more shares that continue growing and paying more dividends.

And while returning cash directly to investors creates more tax exposure than other strategies like stock buybacks, investors can mitigate the impact by using a tax-advantaged account (such as a Roth IRA). Furthermore, the new cash can be invested in different assets to boost portfolio diversification.

SCHD provides a solid foundation for a dividend investing strategy. The fund aims to track the total return of the Dow Jones U.S. Dividend 100 index, which is a collection of high-yielding companies with a track record of consistent payouts. Most of the portfolio is weighted toward consistently profitable parts of the U.S. economy, like healthcare and consumer goods, including household names like Coca-Cola, Merck, and Home Depot.

The size of the index gives it built-in diversification, while its screening based on financial stability metrics helps minimize volatility. But the main point is the dividend. Right now, SCHD offers a yield of 2.99%, and its payout has grown at an annual rate of 7.53% over the last five years.

Image source: Getty Images.

What will the next five years have in store?

SCHD's portfolio companies are so mature and diversified across many industries that investors should expect them to track with the health of the overall U.S. economy. Essentially, if gross domestic product continues to grow and consumers continue to spend, the companies of the Dividend 100 Index will continue to enjoy the incremental earnings growth that allows them to expand and increase their dividend payouts.

But the long-term outlook isn't all peaches and cream. With a portfolio weighting of just 8.2% to technology companies, SCHD will not capture the full benefit of megatrends like generative AI, which has helped the Nasdaq-100 deliver a total return of 92% over the last five years (SCHD returned a comparably modest 57%). That said, there could be a silver lining to the situation.

While AI-related companies are booming right now, there is no guarantee that this will always be the case -- especially as concerns about spiraling data center spending and Chinese competition mount. SCHD gives more safety-focused investors a way to earn a good return while minimizing their exposure to a potential bubble that could hurt tech-heavy indexes.

Is SCHD a buy?

The Schwab U.S. Dividend Equity ETF looks like a strong buy for investors who are willing to forgo a little growth potential in favor of stability and compounding income. Over the next five years, it looks likely to maintain its track record of capital appreciation and dividend payout growth.

That said, the Trump administration remains a wildcard for anyone looking to buy U.S. stocks right now. And a combination of hard-to-predict trade policy, rising bond yields, and inflation could persuade some investors to sit on the sidelines until lower prices potentially become available.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Home Depot, Merck, and S&P Global. The Motley Fool has a disclosure policy.

On Aug. 25, Dick's Sporting Goods (NYSE: DKS) experienced the biggest one-day decline in its history -- dropping by an eye-popping 30% as Wall Street rapidly lost confidence in the stock. Shareholders are worried about several compounding problems ranging from Dick's recent Foot Locker acquisition to changing consumer preferences.

Let's dig deeper to decide if Dick's recent declines are a chance for long-term investors to buy the dip or a signal to stay far away from the stock.

Why is Dick's in trouble?

Dick's latest challenges were revealed in its second-quarter earnings report. On the surface, things might have looked quite good. Net sales jumped 53.2% year over year to $5.59 billion. But this was driven by the recent acquisition of footwear specialist Foot Locker.

While the deal immediately boosted revenue, it cost $2.4 billion, saddling the combined company with new debt and equity dilution as Dick's management issued new shares to raise the cash needed for the transaction. And while management claimed the acquisition would unlock between $100 million and $125 million in cost synergies as the two companies combined their supply chains, these have yet to materialize.

Dick's second-quarter operating margin fell from 12.4% to 7.9% year over year while earnings per share (EPS) collapsed by almost 26% to $3.50 due to a combination of lower earnings and a higher share count.

Expect the pain to continue for this year

While it's too early to know if Dick's Foot Locker acquisition was a mistake, it is already clear that the timing was abysmal. According to executive chairman Ed Stack, the footwear industry is going through a "hangover" as consumers get increasingly skittish about paying full price for name-brand shoes and warehouse inventories start to pile up.

In response, major brands have resorted to aggressive discounting and promotional sales, leading to lower prices across the industry and putting pressure on Dick's as it attempts to maintain its full-price strategy. Stack believes these headwinds will continue for the rest of the year, and in response, management has lowered EPS guidance from between $13.27 and $14.27 to between $10.94 and $11.94 for full-year 2026.

Image source: Getty Images.

That said, there are some silver linings to the situation. For starters, Dick's is more than just a footwear company. Its legacy stores sell everything from athletic equipment to outdoor gear, which gives it enough diversification to weather a downturn in any specific segment. In fact, same-store sales at Dick's-branded locations jumped 4.9% in the quarter.

Furthermore, as a retailer, Dicks essentially serves as a middleman between consumers and manufacturers in the footwear industry. And if consumers decide to permanently shift away from top brands like Nike, Adidas, and Puma, the company can respond by adjusting its product mix.

What will the next five years have in store?

Over the next five years, Dick's Sporting Goods looks likely to continue enjoying solid growth in its core Dick's-branded locations as it expands its store count and digital ecosystems. The future of its Foot Locker subsidiary is more complicated. But ultimately, the current challenges look like a temporary market reshuffling instead of a permanent downturn in the footwear market. And a rebound looks likely over the coming years.

Meanwhile, the recent declines have given Dick's stock a forward price-to-earnings (P/E) multiple of just 9.3, which looks remarkably affordable compared to the S&P 500's average estimate of 21. The company also sweetens the deal by offering a dividend yield of 3.7%, and it has increased its payout for a whopping 11 years in a row.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nike. The Motley Fool has a disclosure policy.

With shares up by roughly 1,200% over the last five years, Micron Technology (NASDAQ: MU) is a standout performer in the generative artificial intelligence (AI) megatrend. But the company's rocketship rally has come under threat. And shares are down around 23% from their all-time high of $1,213 reached on June 25th as investors grow nervous about competition and the sustainability of its high margins.

Let's dig deeper into Micron's pros and cons to decide whether the dip is a long-term buying opportunity or a sign of more trouble to come.

Image source: Getty Images.

A 47-year-old growth stock

Usually, large corporations find their raison d'etre early in their life cycles. But Micron has been a late bloomer. The company has spent most of the last few decades providing memory hardware for consumer markets, such as personal computers and smartphones, where it has endured brutal competition and low margins. Shares barely budged in the two decades between the dot-com bubble and the COVID-19 pandemic.

However, the arrival of generative AI gave the company a new lease on life as data center operators quickly realized that high bandwidth memory had become one of the primary bottlenecks in creating more powerful large language models (LLMs).

Hardware shortages ensued, allowing Micron to enjoy the biggest operational boom in its history. Third-quarter revenue soared by an eye-popping 346% year over year to $41.5 billion, driven by higher prices and volumes across Micron's product portfolio. And the company now boasts a gross margin of 85%.

Is this time different?

Micron now boasts sky-high growth and margins, which are typically the catalyst for a stock to trade at an inflated valuation as investors bet that its current profits will be much bigger in the future. However, Micron stock turns this familiar dynamic on its head. With a forward price-to-earnings (P/E) multiple of just 6, the stock trades for a shocking discount.

The only real explanation for this is that investors don't expect the current boom to last very long. And there are very good reasons to be skeptical. Unlike an Nvidia chip (which relies on proprietary CUDA software) or a branded social media platform, Micron's memory business doesn't have a very strong economic moat to protect it from competition.

Memory chips tend to be commoditized, meaning specific chips aren't well differentiated from one another, and customers generally respond only to price. Historically, this has led to a repeating boom-and-bust cycle in the industry as supply eventually catches up to demand and suppliers enter a destructive race to the bottom to maintain market share.

Micron's CEO thinks this time will be different because of the sheer scale of AI-related demand. That said, it's hard to see this as true, given the massive amount of new production capacity that will come online over the coming years.

Micron is investing an eye-popping $250 billion in research and U.S. manufacturing capacity. And Micron's rivals aren't sitting still either, with China's YMTC aiming to become the world's top NAND memory producer by the end of 2027. The soaring levels of memory production could eventually overwhelm even AI-related demand over the next few years, leading to falling prices across the industry.

Is the dip a buying opportunity?

Micron has been one of the most rewarding tech investments of the last few years. And the stock's rock-bottom valuation suggests a big crash is unlikely (most of the potential future bad news is already priced in).

That said, investors who buy Micron stock now are late to the party. Shares probably won't sustain their explosive multi-bagger growth as memory supplies continue to increase and management continues to pour cash into capital expenditures that could take several years to pay off. It might make more sense to hunt for the next best thing rather than buy the dip.

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

SpaceX (NASDAQ: SPCX) may be a rocketship company, but its stock price performance has been more like an amusement park ride for its early investors. Elon Musk's brainchild hit the market at $135 per share in June 2026 -- quickly surging to an all-time high of $225.64 within days before dropping back to its IPO price as of the time of writing.

The company's operating results have also changed rapidly as booming AI-infrastructure-driven growth makes its sky-high valuation more palatable. Let's dig deeper into the pros and cons of SpaceX to decide what a $1,000 investment might be worth by next year.

Second-quarter earnings changed the narrative

Before its IPO, it was hard to see why Wall Street was so excited about SpaceX. According to data from private market research company Sacra, revenue growth had decelerated from a rate of 100% year over year in 2022 to just 18% year over year by 2025. And the recent acquisition of xAI looked like a desperate attempt to distract investors from this alarming slowdown in the company's core space industrial operations.

That said, SpaceX's second-quarter earnings turned this thesis on its head. The results were nothing short of explosive, with revenue growth rebounding to 92% year over year to $7.8 billion, driven mainly by the company's AI segment, which involves revenue related to its vast array of cutting-edge computing infrastructure and frontier AI model Grok.

Furthermore, the momentum looks set to continue in the near term as SpaceX continues to accumulate vast quantities of data center infrastructure to rent out to other tech companies. Recent deals include an agreement with Anthropic to provide up to 300 megawatts of compute capacity from the SpaceX Colossus facility in Tennessee. The two companies are also working together to study the feasibility of orbiting (space-based data centers) in the future, but this looks highly speculative.

Google has also agreed to pay SpaceX an eye-popping $920 million per month for access to 110,000 Nvidia graphics processing units (GPUs) along with other AI infrastructure between October of this year through June 2029, with the potential for either party to terminate if desired.

Can the boom last for the long haul?

Image source: Getty Images.

SpaceX has created a compelling niche for itself in the AI industry by leveraging its massive colossus data centers to serve shortages in the market for computer infrastructure. But while second-quarter earnings indicate that this is a huge near-term growth opportunity, there is no guarantee that business will remain so elevated over the long haul.

The first concern is the economic moat. For decades, SpaceX has centered itself around its cutting-edge rockets and satellite internet technology that few companies can hope to rival. However, AI infrastructure is a much newer and more competitive opportunity, and it is unclear whether SpaceX has any lasting advantages over its competitors. Orbiting data centers look decades away (if they are even possible) and could be beset by space debris, extreme temperatures, and maintenance issues.

On Earth, SpaceX will compete with established hyperscalers that boast enormous amounts of capital, infrastructure, and expertise. And it will be very expensive to keep up. Investors are already getting nervous about the company's soaring capital expenditures (which totaled $18.4 billion in the second quarter alone). And this spending will have to rise if SpaceX wants to reach the levels of companies like Amazon, which expects to spend $220 billion in 2026 alone (roughly $55 billion per quarter).

What will a $1,000 invested in SpaceX be worth by 2027?

SpaceX's soaring AI business helps alleviate earlier fears that the company's days of explosive growth were behind it. That said, with a price-to-sales (P/S) multiple of 64, the company will need to maintain this extremely high growth rate for years to justify its current price tag. And that's far from guaranteed.

So what will a $1,000 position in SpaceX be worth by the end of 2027? Probably around the same as it is now until investors get more reassured about the company's long-term economic moat in the AI infrastructure opportunity. The stock remains a hold until more information becomes available.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.

Historically, the S&P 500 has been one of the world's greatest wealth-generating machines, returning an average annual return of over 10% since its launch in 1957. But it has been far from smooth sailing. And if you bought shares at the wrong times (such as the peak of the dot-com bubble in 2000 or before the great financial crisis of 2007-2008), it would take several years to recover the value of your original investment.

Is 2026 another bad time to buy? While it's impossible to know for sure, several historical parallels offer clues about what might happen next.

Image source: Getty Images.

Stocks are historically pricey

The cyclically adjusted price-to-earnings (CAPE) ratio is a stock market valuation metric that compares the S&P 500's current price with its inflation-adjusted earnings over the past decade. The long duration of the comparison helps smooth out the impacts of the business cycle, allowing investors to identify periods when shares are unusually pricey.

Right now, the market has a CAPE ratio of 42.5, a level not seen since it peaked at 44.2 in 1999 during the dot-com bubble. And there are some sharp parallels between the two time periods.

Just as in the late 1990s (when the internet was becoming mainstream), the world is experiencing a technology megatrend: Generative artificial intelligence (AI), which promises to revolutionize the way we live and do business. In both scenarios, the "pick and shovel" providers that supply hardware and physical infrastructure capture the lion's share of early profits while frontier software remains speculative.

Will this time be different?

Stock market crashes occur because people assume the current bubble will be different from the last bubble. That said, the current generative AI boom differs starkly from the dot-com craze over 25 years ago. Unlike the late-1990s rally, which was driven by unprofitable companies with shaky business models, today's boom has been led by large and successful technology companies like Nvidia.

The chipmaker earned an eye-popping net income of $58.3 billion in the first quarter alone. And other AI infrastructure leaders, such as Micron Technology and Sandisk, have also enjoyed explosive operational improvements that help justify the recent growth in their stock prices.

That said, demand for AI infrastructure depends on its end users believing they can use it to create profitable consumer-facing services in the future. And an elephant in the room could bring the party to a screeching halt: China.

The world's second-largest economy is rapidly gaining ground on American frontier models while also offering lower prices. If this trend continues, we could see gross margins begin to erode as the industry races to the bottom, similar to what happened when Chinese competition hit other emerging technologies, such as electric vehicles.

Chinese companies are also entering the infrastructure market, with the Hefei-based chipmaker CXMT rising to become the country's largest company, with a market capitalization of 3.3 trillion yuan, or $487.7 billion. CXMT plans to pour its resources into mass-producing advanced memory for AI data centers. And this could eventually lead to a glut in the market that hurts the prospects for its booming U.S. rivals.

What should investors do?

While the signs are increasingly pointing to market overvaluation, this doesn't necessarily mean investors should sell all their stocks or short the S&P 500. Timing the market is difficult. And even when you get things right, government and monetary policy actions (such as lowering interest rates or passing stimulus packages) can quickly turn things around.

Long-term investors should view a potential market crash as a buying opportunity to scoop up quality stocks for a discount. The period before the crash can be used to accumulate cash or lower-risk assets such as bonds and preferred stocks, to help diversify your portfolio.

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

The much-anticipated initial public offering (IPO) of Space Exploration Technologies (NASDAQ: SPCX) and its aftermath have been a roller-coaster ride for investors. While shares initially surged, they are now down by 41% from the all-time high of roughly $226 they reached in mid-June, and below where they opened on their first day of trading. But is the stock on track for more downside or a long-term rebound? What might the next five years have in store?

Space is no longer the key growth driver

When it was still a privately held company, SpaceX became known for its industry-leading rocket-launch business. It developed some of the world's largest and most powerful rockets, capable of transporting high-value payloads and even humans to space. It also developed a leading satellite-based broadband internet solution called Starlink that brought wireless connectivity to the most remote areas on Earth.

Both of these businesses are still important. In the second quarter, the space and connectivity segments combined represented just over 67% of SpaceX's total revenue. However, the company's burgeoning AI business is likely to be the bigger story over the next few years.

In February, SpaceX purchased CEO Elon Musk's social media and AI company xAI in an all-stock transaction that valued it at $250 billion. The deal gave the combined entity access to xAI's frontier large language model, Grok, and to the company's enormous hardware resources. These include the Colossus supercomputing facilities, which boast over 1 million Nvidia H100 graphics processing unit (GPU) equivalents.

Is AI an opportunity or a mistake?

SpaceX's pivot to AI gives it substantial new revenue opportunities. The benefits of this are already beginning to show. For example, Q2 revenue soared 92% year over year to $7.81 billion, helped by an eye-popping 248% increase in sales from the company's AI segment as clients clamor for access to its hardware.

SpaceX has signed a series of high-profile deals, including one that will see Anthropic renting out the computing capacity of roughly 325,000 Nvidia GPUs from its Colossus data centers for $1.25 billion each month. The company has a similar deal with Alphabet's Google worth $920 million per month. In the best-case scenario, these contracts could net SpaceX an eye-popping $26 billion in annual revenue, practically ensuring high-double-digit percentage top-line growth for the next few quarters.

Image source: Getty Images.

SpaceX's leadership also has plans to keep the company dominant over the longer term. It is working alongside Musk's electric vehicle maker, Tesla, to build a massive semiconductor manufacturing facility called Terafab, which is expected to eventually produce 1 terawatt (TW) of AI compute capacity per year (more than the current global supply), with the chips to be divided between the two companies.

While that ambitious chip manufacturing plan sounds great, it won't come cheap. The capital investments SpaceX and Tesla will need to put into the first phase of Terafab are expected to be $16.8 billion. Furthermore, a regulatory filing in May revealed that the total capex required could soar to $119 billion if all the planned additional ​phases are completed. This represents more than a tenth of a trillion dollars in capital that could have been used for other projects or returned to investors via stock buybacks or dividends. The success or failure of this project will have an immense effect on the company's stock performance.

What will the next five years look like?

Over the next five years, SpaceX looks likely to continue experiencing breakneck top-line growth as it scales up its AI infrastructure business. That said, the boom almost certainly won't last forever, because the companies that are currently spending the largest sums on computing power are already shifting toward designing their own chips. Rising competition in the AI processor space will likely bring down growth and margins across the industry.

While SpaceX's price-to-sales (P/S) ratio has plunged from roughly 116 in June to 61 today, it still looks very elevated compared to the S&P 500's average P/S ratio of 3.8. Investors might want to wait for more information before considering a long-term position in the stock.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Tesla. The Motley Fool has a disclosure policy.

If you had put $25,000 into Micron Technology (NASDAQ: MU) stock at the start of 2025 and held on, you would have a stake worth $261,000 today. That gain of 943% reflects the company's booming revenue and earnings amid big tech's scramble to purchase memory hardware to build artificial intelligence (AI) data centers.

However, despite Micron's excellent growth, its shares have recently come under pressure as more investors question the sustainability of the current memory boom. As of Monday afternoon, the shares were down by about 28% from their peak. But is this dip a buying opportunity or a sign to stay far away?

Image source: Getty Images.

Micron's results are still spectacular

AI data centers require huge amounts of computer hardware to run and train large language models (LLMs). And as graphics processing units (GPUs) and AI accelerators from companies like Nvidia continued to improve over the last few years, they exposed a shortage of memory devices powerful enough to keep up.

Micron has helped address this problem by designing and manufacturing an array of high-performance computer memory and storage devices, including high bandwidth memory (HBM), which offers significantly higher data transfer speeds than traditional memory solutions. This reduces processing bottlenecks and makes AI models much more efficient.

That said, while HBM has proved to be crucial hardware for the burgeoning AI industry, the manufacturers are unable to provide a level of supply that matches demand. The deep shortfall between the volumes they can currently produce and the amount that hyperscalers and others require has led to explosive price growth. The result: soaring sales, profits, and margins for the few companies that can produce HBM at scale. Micron's fiscal third-quarter earnings show how much it's benefiting from this situation.

Revenue soared roughly 74% year over year to a record of $41.5 billion, driven mostly by explosive growth in the company's data center and cloud segments, which benefit directly from AI-related activity. Moreover, the rising demand for memory hardware for AI has resulted in shortages of other types of memory used in a wide array of products. That has allowed Micron to charge higher prices for all of its offerings.

Segments less dependent on AI, like automotive and mobile, are also enjoying substantial improvements in growth and gross margins. These trends look likely to continue. Management says it expects the supply of memory hardware to remain tight through 2027.

There are some big reasons to be nervous

While Micron's explosive growth looks likely to continue for the next few years, there is little reason to assume the current state of supply shortages will be the new normal. For starters, the company is actively working to end the current supply shortage by expanding its own production capacity. In the most recent quarter, this involved committing $7.1 billion toward capital expenditures, with much of it going to expanding manufacturing capacity in the U.S. and Asia.

Even though Micron might theoretically benefit from the memory hardware shortages lasting as long as possible, it is also incentivized to ramp up its production to avoid ceding market share to its key rivals, Samsung Electronics and SK Hynix, which are likewise working to expand their capacity. More production capacity will eventually put downward pressure on the industry's elevated margins. And it could even lead to a supply glut if AI-related demand drops off faster than expected.

China is another long-term challenge. The country has a track record of rapidly expanding its manufacturing capabilities in strategic industries, and memory could be one of its next targets.

Late last month, the Chinese memory maker CXMT went public, and its shares quickly surged, turning it into mainland China's largest listed company with a market cap of 3.3 trillion yuan (roughly $490 billion). CXMT plans to use the capital it has raised to invest in the mass production of HBM. And while it will mostly focus on supplying the Chinese market, these efforts will add more supply globally, potentially bringing down prices.

Can Micron turn $25,000 into a million?

Investors looking for millionaire-maker returns should probably pivot away from Micron for now. While the company continues to enjoy tremendous growth, rising memory production capacity looks likely to lead to a glut in the market over the medium-to-long term. Expect its performance to start tracking toward the market average.

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

It's been a little over five months since the global movie and streaming giant Netflix (NASDAQ: NFLX) walked away from an $82.7 billion bid to acquire Warner Bros. Discovery's film and studio assets, paving the way for its rival Paramount Skydance to buy the entire company.

Since then, Netflix's stock has come under pressure as investors rethink the company's growth prospects as it shifts out of its previous rapid expansion phase toward a more mature business model. But what might the next five years have in store for Netflix and its shareholders?

Is buying growth better than slowing growth?

Netflix's stock price initially surged after management decided to cede the fight for Warner Bros. to Paramount Skydance. Investors had been worried about the financial risks Netflix would be taking on if it managed to seal the deal -- specifically, the prospect of taking on billions in additional debt to finance the buyout and the challenges of combining two large and complex businesses into a cohesive whole.

However, with the benefit of hindsight, it's easy to see why management thought the megamerger was a good idea before a competing bid from Paramount made the price too steep to justify: Netflix is running out of organic growth, and that has been causing its stock to rapidly lose its premium valuation.

The company's second-quarter earnings highlight this troubling trend.

Revenue rose by just 13% year over year to $12.6 billion, a deceleration from the top-line growth rate of 16% that Netflix enjoyed in the corresponding quarter of 2025. More importantly, engagement growth is also soft, with viewing hours up by just 2% in the first half of the year. This suggests most of Netflix's revenue growth is now coming from squeezing more money out of existing users instead of attracting and engaging new ones -- a symptom of the heavy competition in the streaming space.

Netflix is becoming a mature business

No company can expand at a breakneck pace forever. But the transition from being a growth business to a mature business doesn't necessarily have to be a train wreck, and Netflix has several key advantages that can help smooth the way. For starters, it enjoys immense size and brand recognition, which will help it generate substantial shareholder value, even as engagement growth begins to plateau.

Even small increases in pricing across over 325 million subscribers can translate to meaningful revenue and profit growth. And Netflix is still at the early stages of monetizing its most exciting strategy: advertising.

Image source: Getty Images.

Management expects to deliver $3 billion in total advertising revenue in 2026, which would be double the figure it reported last year. The fact that this business has been able to scale up so rapidly is evidence of the natural advantages provided by Netflix's scale. And this might only be the beginning: Analysts at the World Advertising Research Center project that Netflix's ad revenue will hit $8 billion by 2030 as it continues to improve its technology and expand its global advertiser base.

Investors also shouldn't overlook Netflix's international opportunities. While the company has already penetrated over half of American households, it has much more room to grow in regions like Asia, especially as it invests in localized, native language content. The company has already created over 200 originals in India, and its deep pockets and global experience will likely help it stand out from the local competition.

What will the next five years have in store?

Netflix is a mature company. And because it is already so large, even huge opportunities like digital advertising and international expansion will only contribute modest growth to its top line. That said, shares trade at a reasonable forward price-to-earnings (P/E) multiple of 23, which is just slightly higher than the S&P 500's average forward P/E of 21. And if shares continue to decline, Netflix could soon become an attractive value pick for long-term investors.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Netflix and Warner Bros. Discovery. The Motley Fool has a disclosure policy.

For technology investors, generative artificial intelligence (AI) has been a once-in-a-lifetime opportunity to lock in massive equity returns in a relatively short period of time. Sandisk (NASDAQ: SNDK) has been one of the best examples of this phenomenon. Despite recent declines, shares are still up by an eye-popping 2,800% over the last 12 months -- enough to turn a $10,000 investment into roughly $290,000.

That said, past performance doesn't guarantee future results, and there are signs that Sandisk is entering a new phase. Let's explore how the outlook for AI infrastructure spending and rising competition could influence the stock's performance over the next five years and beyond.

Why did Sandisk stock soar?

OpenAI launched its groundbreaking AI large language model (LLM), ChatGPT, in late 2022. Savvy investors quickly realized that most of the early gains would be captured by companies providing the computing infrastructure that makes running and training such algorithms possible.

Nvidia and other AI chipmakers emerged as early winners. However, by late 2025, their products were advanced enough to expose a new bottleneck in the supply of computer memory hardware powerful enough to keep up. The revenue and margins of memory producers surged, and investors poured into the industry leaders, sending their stock prices parabolic.

Sandisk serves the opportunity through its focus on solid-state drives (SSDs), which stand out from older storage technologies like hard disk drives (HDDs) because they use flash memory instead of moving mechanical components. This allows for faster speeds, greater reliability, and lower data consumption. For data centers that can be the size of a dozen football fields, these advantages can add up to huge cost savings and a clearer pathway to operational profitability, even if upfront costs are higher.

Can the boom last?

Sandisk's recent operational results have been nothing short of breathtaking. Fourth-quarter revenue surged 175% year over year to $20.2 billion, driven by insatiable data center demand (up 437%). Hyperscalers are buying the company's high-end storage solutions practically as fast as they can be produced, allowing the company to enjoy exceptional growth while also charging much higher prices than normal.

The company's gross margin now stands at 84.6%, a level so high that it is typically seen in software companies that don't even sell physical products. The positive momentum looks likely to continue in the short term, with industry players like South Korea's SK Hynix expecting shortages to last until 2030. Furthermore, U.S. tech giants continue to increase the amount of resources they are committing to AI development, with analysts at Goldman Sachs expecting capital expenditures to top $1 trillion in 2027.

Image source: Getty Images.

Where will Sandisk stock be in five years?

Over the coming years, Sandisk looks very unlikely to go back to where it was before. Even if AI data center build-outs eventually slow down, these massive complexes could also boost long-term demand for the company's NAND flash as hardware ages and needs to be replaced. LLMs will also naturally become larger and more demanding of memory.

That said, Sandisk also faces some major risks. For starters, extremely high margins tend to attract competition and substitution. With gross margins exceeding 80%, the company is in the danger zone.

Historically, one of the biggest threats to hardware margins has been China. Chinese memory producers like ChangXin Memory Technologies and Yangtze Memory Technologies could eventually scale up their manufacturing capacity enough to become real threats to U.S. and South Korean leaders. Investors shouldn't underestimate this threat because the country has a track record of leveraging state resources to support industries it deems strategic. The rapid rise of Chinese electric vehicles is an excellent example of how fast it can happen.

With a price-to-earnings (P/E) multiple of just 19, Sandisk's valuation seems to price in most of these challenges. But pessimism remains high, and investors looking for millionaire-maker returns may want to wait for an even lower price before considering a long-term position in the stock. The risks seem to outweigh the potential rewards right now.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group and Nvidia. The Motley Fool has a disclosure policy.

Investors are always on the hunt for the next big thing, and the space industry could be worth watching. According to analysts at Citigroup, the opportunity could be worth a whopping $1 trillion by 2040 -- potentially generating life-changing returns for investors who get in early.

Rocket Lab (NASDAQ: RKLB) has emerged as an early favorite on Wall Street, with shares up about 600% during the past five years. But does it have what it takes to maintain the bull run? Let's dig deeper into the stock's pros and cons to decide what the next five years could have in store.

Why Rocket Lab?

Over the long term, growth in the space industry could involve a variety of exotic (and arguably far-fetched) business models ranging from asteroid mining to orbiting data centers. But for now, most of the commercial activity centers around well-established technologies like satellites and other types of equipment used to support Earth-based services like broadband internet, GPS navigation, and scientific research.

Rocket Lab serves this opportunity by providing launch services for public and private sector organizations that want to send payloads to space. Its Electron rocket has already lifted more than 262 satellites into lower Earth orbit (LEO), serving high-profile clients like NASA. The company also aims to become an end-to-end space company, offering diverse space-related solutions ranging from manufacturing, satellite components, and mission management.

First-quarter earnings show impressive progress with revenue jumping almost 64% year over year to $200.3 million -- driven mostly by its burgeoning space solutions business. The company can maintain its elevated growth rate through recent acquisitions like Mynaric AG, which provides laser optical communications terminals, and Motive Space Systems, which specializes in space robotics. Both deals look likely to synergize with Rocket Lab's existing operations and expand the breadth of services it can offer its clients.

Image source: Getty Images.

The Neutron rocket could be a game changer

While space solutions represent Rocket Lab's bread-and-butter revenue stream, its launch services business could be a make-or-break opportunity. While the company's Electron rocket has built a niche for itself in small specialized missions, its payload capacity of just 300 kilograms (660 pounds) to lower Earth orbit puts it way below the levels offered by rivals like the SpaceX Falcon Heavy, which can transport payloads of 63,000 kg.

Rocket Lab aims to solve this problem with a new launch vehicle called the Neutron, which is expected to boast a capacity of 13,000 kg, bringing it closer to the industry leaders. The economies of scale advantages could help boost revenue while lowering mission cost per payload. And the company plans to use the new rockets to expand its capabilities in opportunities like satellite constellations, which involve deploying large numbers of satellites for navigation and other space-based services.

The company expects the Neutron's inaugural flight to be in the 2026 fourth quarter. But investors should take this timeline with a big grain of salt because management has a track record of delays since the platform's original scheduled launch date in 2024.

Where will Rocket Lab stock be in 5 years?

During the next five years, investors should expect Rocket Lab's space services business to continue growing at a rapid clip, especially through acquisitions. Still, the business is still deeply in the red with a Q1 operating loss of roughly $56 million (compared to $59 million in the prior-year period), and consistent profitability looks far away.

Although the Neutron launch could be a huge near-term catalyst for the stock, investors who buy the shares now are rolling the dice, hoping there won't be further delays. And with shares trading at a price-to-sales (P/S) multiple of 53, there is plenty of room for downside if the bet goes wrong. Rocket Lab is a company to watch, but investors might want to wait for more information before considering a position.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.

With the S&P 500 up roughly 8% year to date as of Tuesday morning, President Donald Trump's second year back in office has been pretty good for stocks. And that's despite the high levels of uncertainty surrounding his erratic trade policies, military activities, and attempts to interfere with the Federal Reserve's independence.

The resilience can be partially credited to the boom in generative artificial intelligence (AI), which has many of America's largest companies pouring hundreds of billions into data center construction, sending chip and memory stocks soaring. But this won't last forever. Let's discuss some reasons why the current market rally could soon go into reverse.

Image source: Getty Images.

Valuations are at historic highs

Trump's booming stock market might be on borrowed time. And one of the biggest clues is the cyclically adjusted price-to-earnings (CAPE) ratio, a metric that compares stock valuations over 10 years to account for the business cycle. Right now, it stands at an eyewatering 41, which is higher than the peak of 32.6 reached during the Great Depression and second only to the all-time high of 44 reached during the dot-com bubble.

That situation has plenty of parallels with today. Back then, the tech industry was rapidly adopting a technology that had just burst into the mainstream, called the internet. And infrastructure companies boomed as demand for networking equipment rose. Meanwhile, a slew of highly speculative consumer-facing internet companies went public at high valuations, despite not demonstrating meaningful revenue or profit growth.

Eventually, the bubble burst, and the tech-heavy Nasdaq Composite index plummeted by 77% from its peak.

Data center spending looks unsustainable

Today, generative AI is filling the same role the internet played 20 years ago. And while the technology promises to be transformational, there are signs that the current level of investment is getting ahead of itself.

Wall Street expects hyperscalers to pour an eye-popping $700 billion into AI-related capital expenditures this year, and that number is expected to rise. The problem is that spending is beginning to exceed their operating cash flow, forcing them to look to external financing sources, like the debt market. This will make the stocks riskier because debt has to be repaid -- regardless of whether the capital investments it funded actually pay off.

The data center build-out could also start to hurt profit margins by introducing interest expense (from debt) and soaring depreciation expense as computing hardware ages and becomes obsolete.

Inflation and interest rates

While an individual company's performance largely depends on its revenue and earnings growth, market indexes are much more influenced by macroeconomic factors like inflation and interest rates. These two are intertwined because when inflation rises, the Federal Reserve often responds by increasing its benchmark interest rate.

This strategy helps keep consumer prices under control. But it can also drag down stock performance by making equities less attractive compared to risk-free assets like Treasury bonds. Unfortunately, the data increasingly suggests higher rates may be on the horizon.

The Consumer Price Index (CPI) report for June puts the annual inflation rate at 4.2%, which is well above the Federal Reserve's target of 2%. And while Trump's potential deal to end the war in Iran and reopen the Strait of Hormuz could help bring energy costs down, experts believe it could take years to repair the damage done to energy infrastructure in the region, adding structural inflation to the economy that will be difficult to shake.

While the Fed has elected to keep rates steady for now, the ongoing macroeconomic pressures could force rate hikes later this year or in 2027.

What should investors do?

It is impossible to reliably time the market. But with so many negative macroeconmic trends converging at the same time, a market crash (which represents a drop of 10% to 20%) could happen within the next few years. And it could be triggered by an eventual cooling of AI-related spending.

The good news is that while market drawdowns can be stressful, U.S. markets have always bounced back stronger than ever over the long term. Investors can prepare for a future crash by avoiding speculative, overvalued tech stocks and seeking stable, resilient businesses that can succeed no matter what happens in the economy. It also makes sense to keep cash on hand to potentially bet on the inevitable rebound.

Will Ebiefung 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.

Over the last five years, Nvidia (NASDAQ: NVDA) has been the quintessential millionaire-maker stock -- returning roughly 950% compared to the S&P 500's relatively modest gain of 74%. The company's powerful graphics processing units (GPUs) are the workhorses of the generative artificial intelligence (AI) industry. And its advantages in scale and technology have helped it stay ahead of the competition.

That said, Nvidia's stock price growth is beginning to stall as investors balk at its huge size and pivot to other sides of the AI infrastructure opportunity. Let's dig deeper to see if the company has what it takes to break out of its slump and continue generating market-beating returns.

Business is still booming

The generative AI megatrend shows no signs of slowing anytime soon. In fact, it may be heating up. Analysts at Evercore and Bank of America expect big tech's AI-related capital spending to exceed $1 trillion in 2027 -- up from around $800 billion to $900 billion this year. Most of this money is going to advanced hardware needed to run massive data centers.

Nvidia's chips remain highly relevant, which is reflected in the company's first-quarter earnings results. Revenue jumped 85% year over year to $81.6 billion, which is an incredible number for a business that is already so large. And as in previous quarters, overall growth was driven by growth in the company's data center segment, which recently announced exciting new offerings such as the Vera Rubin Platform, designed to facilitate the rise of agentic AI by removing processing bottlenecks.

Many industry watchers believe agentic AI represents the next phase of the technology. Unlike earlier AI systems, it is designed to independently plan and make decisions with limited human oversight, making it ideal for helping automate a variety of industries. And if the technology takes off as expected, it could help Nvidia maintain its elevated growth rate.

Management is returning value to shareholders

Nvidia's success isn't limited to its top line. The company's technological edge gives it strong pricing power and operating leverage. Net income soared 211% year over year to $58.3 billion, and management is getting increasingly serious about returning much of it directly to shareholders.

As of May, Nvidia has increased its cash dividend from just $0.01 per share to $0.25 per share (a yield of around 0.5%). More importantly, management authorized an additional $80 billion in stock repurchases on top of the $38.5 billion remaining from its previous program.

Image source: Getty Images.

Investors tend to love buybacks because they reduce the number of a company's shares outstanding, giving every investor a higher claim on the company's future earnings and cash flow. They tend to encourage stock price growth and, unlike dividends, they aren't taxed as regular income, which can make a tremendous difference over the long term.

Nvidia's huge push toward buybacks marks a sharp divergence from other technology giants like Amazon, Microsoft, and Micron Technology, which are instead plowing cash back into AI-related capital expenditures like data centers or expanded production capacity. Nvidia's strategy is arguably less risky because it relies on internally generated cash instead of debt or dilution like some of the alternatives in the tech industry.

Is Nvidia a millionaire-maker stock?

With a market cap of $4.72 trillion, Nvidia isn't a millionaire-maker stock anymore because, even in the best-case scenario, rapid multibagger growth seems unrealistic from such a high level. The company's sky-high margins will also eventually come down as customers substitute in-house solutions for Nvidia products and rivals catch up technologically.

That said, with a forward price-to-earnings (P/E) multiple of just 22.7, most of these challenges are already priced into Nvidia's valuation. And management's aggressive buyback policy will benefit shareholders over the long haul. Investors should view Nvidia stock as a value-oriented pick in the AI industry instead of a big growth opportunity.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Micron Technology, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.

On June 12, Elon Musk's iconic space industrial giant, Space Exploration Technologies (NASDAQ: SPCX), also known as SpaceX, went public at $135 per share -- representing an initial market cap of $1.77 trillion. Over the following days, shares continued to grow before the stock settled at a price tag of roughly $185 at the time of writing.

The excitement probably has something to do with Musk's success with previous business ventures like PayPal and Tesla. That said, good vibes and Musk's (mostly) good track record are not enough to explain SpaceX becoming the sixth-most-valuable company in the world. With this in mind, let's dig deeper into the pros and cons of SpaceX to find out why its soaring shares could rapidly fall back down to earth by the end of the year.

What is SpaceX?

On the surface, SpaceX is an extremely attractive business. According to analysts at McKinsey & Company, the global space industry could soar to $1.8 trillion by 2035. And SpaceX is able to tap into this opportunity through various angles, including rocket launches to transport payloads to space, broadband internet, and other satellite-based services.

The company has established a technological lead with its large reusable rockets. And its internet service, Starlink, already boasts over 12 million customers across 160 countries. It also plays a role in military contracting, most notably helping the Ukrainian armed forces maintain connectivity and unjammable communication systems during their war with Russia.

That said, a good company won't necessarily make a good investment if its valuation is out of whack. And right now, SpaceX trades for an otherworldly price-to-sales (P/S) ratio of 125 compared to the S&P 500's average of 3.7. Tesla's relatively high P/S of 14 looks cheap in comparison.

What is the growth story?

Usually, an elevated P/S ratio suggests the market believes a company will soon generate explosive, high-margin revenue growth that will translate to outsize profits. And while SpaceX's launch service and internet businesses are attractive, they don't seem capable of delivering enough expansion to justify such a high valuation by themselves.

SpaceX's total sales grew by 33% year over year to $18.7 billion in 2025, which is far from the triple-digit growth rate that would justify a P/S ratio of 125. Clearly, the stock's valuation now has very little to do with its established and profitable space business. Instead, SpaceX has become a highly speculative bet on generative artificial intelligence (AI).

The company believes AI is a $22.7 trillion long-term opportunity. But investors should be skeptical. For starters, SpaceX's AI division (which is mainly comprised of the recently acquired xAI subsidiary) doesn't seem particularly impressive compared to the competition.

Image source: Getty Images.

According to data from Sensor Tower, the company's flagship large language model (LLM), Grok, has a market share below 5%. This number is far behind industry leaders ChatGPT and Gemini, which boast market shares of 46.4% and 27.7%.

While the LLM market is notoriously speculative, it offers the potential for high-margin growth through licensing APIs or potentially creating an artificial "super intelligence" that would help justify SpaceX's inflated valuation. SpaceX is instead focusing on the much less glamorous AI infrastructure opportunity, which involves renting out data center capacity to other businesses.

This month, the company signed a deal with Alphabet, which will involve offering computing capacity for $920 million monthly. But while this is great in the short term, hyperscalers will ultimately seek to build out their own data center capacity instead of relying on third parties indefinitely. SpaceX will also be saddled with depreciation and other operating costs that will put pressure on long-term margins and profitability.

Shares could decline by 50% or more

While SpaceX is a good business, its valuation is detached from reality. And it's only a matter of time before the hype fades and investors start looking at the numbers. Shares could decline by 50% or more before the end of the year. And potential investors should stay far away.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, PayPal, and Tesla. The Motley Fool recommends the following options: short June 2026 $50 calls on PayPal. The Motley Fool has a disclosure policy.

For technology investors, generative artificial intelligence (AI) has been the gift that just keeps giving. Money continues to pour into the sector as Wall Street and Silicon Valley both race to maximize their exposure to what could be a transformational long-term megatrend.

Sandisk (NASDAQ: SNDK) has been one of this year's biggest winners, with shares up by an eyepopping 600% since January. Let's dig deeper into the pros and cons of the company to decide if it is still a good buy, or if investors should consider taking some profits off the table.

Image source: Getty Images.

What is Sandisk, and why is it booming?

While Sandisk is a bit of a household name, it only became publicly available as a stand-alone entity in early February when its parent company, Western Digital, divested ownership. The separation allows each company to focus on its specific niche within the market.

Both companies provide computer memory and storage, but Western Digital specializes in hard disk drives (HDDs), while Sandisk is a leader in solid state drives (SSDs). Unlike HDDs, which use moving parts to store data, SSDs operate with no mechanical components, making them faster, more reliable, and extremely energy-efficient. That last characteristic is crucial for AI data center clients that need to handle massive amounts of information while trying to minimize their costs of operation.

The performance of the two stocks has diverged sharply over the last 12 months. This highlights how SSDs are much better suited to serving the rapidly growing AI infrastructure market.

SNDK data by YCharts.

Business is booming, but what comes next?

Sandisk's incredible stock price growth isn't based on hype alone. The company's fiscal third-quarter revenue soared by an eyewatering 251% year over year to $5.95 million, while gross margins rose 55.9 points to 78.4% -- a number higher than many software companies that don't even sell physical products. The combination of soaring growth and margins has caused operating income to explode by 319% to $4.11 billion.

Investors can expect Sandisk's momentum to continue in the near term because generative AI models continue to get larger and more demanding. Furthermore, hyperscalers remain committed to their data center buildouts, with analysts at Goldman Sachs projecting that total capital spending could reach $1.1 trillion in 2027.

Furthermore, some industry leaders believe memory shortages could last until 2030. If this is true, producers like Sandisk could continue enjoying the elevated margins by keeping prices high.

That said, the medium- to longer-term situation remains much more difficult to predict. It seems hard to believe that big tech companies will continue to spend sums that often exceed their cash flow on what remains a somewhat speculative technology. It could only be a matter of time before shareholders start pressuring management teams to show more restraint. That could eventually deflate the AI bubble.

Sandisk is also exposed to the cyclicality of the memory industry, which tends to experience booms and busts much like a commodity. Previous surges in memory demand (such as the PC boom in the 1990s or the smartphone boom in the 2010s) ended in sharp crashes as supply caught up to demand and prices cratered. Investors shouldn't expect the current AI-driven boom to change this long-established pattern.

Is Sandisk stock still a buy?

While Sandisk will continue to enjoy elevated revenue and profit growth amid the AI data center boom, this won't last forever, and the risks of a correction are starting to rise. Investors who already own the stock should probably consider taking some profits off the table. Investors who missed the big rally should probably look elsewhere for value.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Goldman Sachs Group. The Motley Fool has a disclosure policy.

On June 3, Micron Technologies (NASDAQ: MU) hit an all-time high of $1,079. The move capped off months of explosive gains as investors started pivoting away from chipmakers like Nvidia in favor of the memory hardware producers poised to benefit from the changing dynamics of artificial intelligence (AI) infrastructure demand.

While graphics processing units (GPUs) are still important, data center clients are recognizing they need huge amounts of storage to keep up with the requirements of increasingly complex AI models. Let's dig deeper to see how much longer this trend might last and decide if Micron stock can maintain its explosive rally or will eventually slow down.

Image source: Getty Images.

The memory shortage is still in full swing

As of June 2026, the global memory hardware shortage remains in effect, as data center clients continue to buy high-bandwidth memory (HBM) and advanced DRAM practically as fast as it can be produced. Suppliers like Micron are shifting production capacity toward these parts of the market, leading to shortages of less advanced hardware.

The memory crunch is affecting many parts of the economy. This month, groups representing automakers and retailers sent a letter to the U.S. Treasury and Commerce departments warning of "significant and sustained near-term price increases" for a variety of consumer goods. But while they see the issue as a challenge for their supply chains, it has become a historic windfall for Micron and other industry leaders.

Second-quarter revenue soared a blistering 196% year over year to $23.86 billion, driven by strength across Micron's operating segments. Meanwhile, gross margins rose from 36.8% to 74.7% -- a level typically seen in software companies that don't even sell physical products. The combination of soaring revenue and margins drove the company's profits to explode 770% to $13.78 billion.

Instead of returning the windfall to investors in dividends or buybacks, Micron plans to invest in itself through a $200 billion build-out to expand its manufacturing capacity in the U.S.

Is a macroeconomic time bomb on the horizon?

This month, the Consumer Price Index (CPI) inflation reading rose to 4.2%, which represents the highest level in three years. This situation is linked with the ongoing war in Iran, which has spiked energy costs. But the memory shortage could soon start helping push consumer prices even higher, leading to another inflation crisis for an economy that never fully recovered from the first one after the COVID-19 pandemic.

While Micron is in a good position right now, the macroeconomic situation is becoming so strained that it might not escape unscathed. The first challenge will be interest rates, which may have to rise to keep inflation under control. Higher rates make capital and borrowing more expensive, which reduces the amount of money investors are willing to bet on growth stocks. These fears are likely behind the recent dip in Micron and other tech stocks following the latest jobs and inflation data.

The second big risk is demand destruction, which occurs when prices get so high that consumers start delaying purchases or seeking substitutes. While it may take a long time for this to affect Micron's well-capitalized data center clients, it could happen much sooner in other memory markets, like smartphones, personal computers, and cars, especially as regular people are already being squeezed by inflation.

It's time to take profits

Investors who bought Micron stock 12 months ago have now made a return of almost 700%. And while continued growth is possible amid the ongoing chip shortage, the potential risks are starting to outweigh the rewards as concerns about inflation and rising rates begin to mount. Investors should consider taking profits and sitting on the sidelines until there is more clarity on the worsening macroeconomic situation.

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

Elon Musk's space industrial giant, SpaceX, is expected to launch its much-anticipated initial public offering (IPO) this week. But while the stock isn't available yet, that hasn't stopped eager investors from bidding up the valuations of other space-related companies.

Redwire (NYSE: RDW) is a great example, with its share up by a whopping 105% so far this year. Let's dig deeper to find out if this rally is the start of a long-term bull run or just a temporary hype-driven boom.

What is Redwire?

Unlike SpaceX, Redwire is far from a household name. The company got its start just six years ago when the private equity company AE Industrial Partners combined two of its holdings (Adcole Space and Deep Space Systems) into one entity.

Performance has been choppy in the years following the stock's direct listing through a merger with a special purpose acquisition company (SPAC). That said, Redwire has recently started booming amid several important macroeconomic and company-specific tailwinds.

For starters, Redwire is in a good position to capitalize on the growing push toward militarization and next-generation combat capabilities. This megatend arguably started with the Russian invasion of Ukraine in early 2022 and intensified with the ongoing U.S. war with Iran. Redwire serves this market through its defense tech segment, which focuses on delivering autonomous combat drones and various types of navigation and optical hardware to support surveillance and intelligence gathering.

The company was able to quickly ramp up this business through the $925 million acquisition of Edge Autonomy, a UAV specialist with established relationships with the US Department of Defense and allied governments, which already use its Penguin drone for reconnaissance missions.

Space infrastructure represents the other side of Redwire's business. Here, management plans to capitalize on the growing trend of government organizations like NASA outsourcing more of their hardware needs to commercial businesses rather than building everything in-house. The company's imaging and navigation technology was included in NASA's Orion spacecraft for the historic Artemis II mission, a crewed lunar flyby designed to research the moon.

Business is booming

Redwire's financial results look encouraging, with first-quarter revenue rising roughly 58% year over year to $97 million. This growth was mainly driven by the company's defense tech segment, which saw sales more than quadruple to $44.3 million. That said, $44.3 million is a relatively small number in the defense contracting world. And investors should expect this segment to continue growing at an elevated pace due to the highly militarized geopolitical environment.

Image source: Getty Images.

Redwire's bottom-line situation is a little more uncertain. Like many next-generation technology companies, it is struggling to demonstrate a clear pathway to profitability. Research and selling general and administrative expenses are soaring -- likely because of recent acquisitions, which bring in new, highly paid managers, engineers, and specialists. And the heavy outflows caused operating losses to rise almost fourfold to $69.7 million.

When companies are unable to fund their operations with internal cash flow, they must turn to outside sources of capital, such as equity raises.

On June 9, shares dipped sharply by over 15% after management announced plans to issue and sell $500 million in new stock to help fund operations. While equity dilution is often necessary for a company's growth and survival, it increases the number of shares outstanding, which reduces current investors' claims on future earnings.

Is Redwire a millionaire-maker stock?

On the surface, Redwire has all the ingredients for a millionaire-maker stock. It's small (with a market cap of $4.26 billion) and is helping pioneer disruptive technology with major clients such as NASA and the Department of Defense. That said, Redwire's reliance on equity dilution brings risk and volatility. And investors may want to wait until it demonstrates a pathway to profitability before considering a position.

Will Ebiefung 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.

Stock market investors often have to make a trade-off between stability and growth. That's because the fastest-growing companies often have riskier business models, which leads to more volatility. That said, Walmart (NASDAQ: WMT) has recently begun turning this axiom on its head.

Shares in the blue-chip retailer have risen by an impressive 401% over the past 10 years, far outpacing the S&P 500's return of just 251%. And while the company has practically no exposure to glamorous growth opportunities such as generative AI, its massive scale and booming e-commerce business have helped keep its stock relevant.

Let's dig deeper to decide whether Walmart still has millionaire-maker potential.

Image source: Getty Images.

The bluest of blue chip stocks

It's hard to think of a more stable and established American business than Walmart. Since its founding in 1962, the big-box retailer has leveraged its immense scale and distribution networks to offer unparalleled selection and low prices to consumers all over the country.

And while investors may be tempted to overlook the grocery business because of its extremely low profit margins, often hovering between 1% and 3%, Walmart makes it attractive by spreading a tiny bit of profit across tens of billions of items, creating a winning recipe that keeps both customers and shareholders coming back for more. The company's business model is also relatively safe because groceries are consumer staple items that tend to maintain demand, even in economic downturns.

Walmart's safety is a big selling point at this time of economic uncertainty related to the war in Iran and rising fuel costs. In March, analysts at Goldman Sachs put the 12-month recession probability at 30%.

But while the bad news seems to dominate the headlines, America's macroeconomic situation remains extremely unpredictable. In March, U.S. payroll jobs data beat expectations, adding 172,000 jobs and bringing the unemployment rate to just 4.3%. The economy therefore appears to be expanding instead of contracting. But Walmart can thrive in either scenario.

What about the growth opportunities?

Because Walmart is a mature company in a highly established industry, investors shouldn't expect it to deliver eye-popping growth. The bigger a business is, the more effort is required to move the needle. And over the long term, most of Walmart's expansion is likely to come from slow, reliable trends such as GDP, population growth, and even inflation. That said, management is taking some successful steps to speed things up a little.

One of the most promising opportunities is in e-commerce, where years of heavy investment are beginning to pay off by creating a business that has become a serious player with a U.S. market share of 9.2%. Walmart's e-commerce segment grew 26% year over year in the first quarter, helping the company's overall top line grow 7.3% to $177.8 billion in the period.

Despite being somewhat late to the party, Walmart already has a massive economic moat in e-commerce because of its logistics network and a web of thousands of brick-and-mortar stores that serve as delivery hubs for nearby communities. The company's membership platform, Walmart+, also helps ensure consumer loyalty through a variety of perks and loss leaders, similar to the strategy Amazon Prime employs.

And while none of these efforts will transform Walmart into a hypergrowth tech stock, they help the company maintain its dominant market share in retail and ensure it doesn't stagnate despite its maturity.

Is Walmart a millionaire-maker stock?

With a forward price-to-earnings (P/E) multiple of 41, Walmart stock is quite expensive compared with the S&P 500 average of 22, so it probably won't make you a millionaire anytime soon. That said, the company deserves a premium because of its quality and safe business. And over the long haul, investors should expect it to continue outperforming the index, especially as growth drivers such as e-commerce continue to scale up.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Walmart. The Motley Fool has a disclosure policy.

For tech sector investors, generative artificial intelligence (AI) has been the gift that keeps on giving, and chipmaker Advanced Micro Devices (NASDAQ: AMD) has been among the biggest winners. But after seeing its shares soar by more than 300% over the last 12 months, can the stock maintain its bull run for much longer?

Let's dig deeper to see what the coming months might have in store for this top AI hardware company.

The data center boom is in full swing

Large language models (LLMs) are generally trained and operated through vast data centers that house thousands of graphics processing units (GPUs) and specialized AI accelerator chips produced by companies like Advanced Micro Devices. And demand shows no signs of slowing.

Industry leaders seem totally convinced that AI will transform the world. For example, Amazon's CEO Andy Jassy calls the technology a "once-in-a-generation" opportunity. And the hyperscalers are putting their money where their mouths are, with CNBC reporting that total spending could hit $700 billion this year. The situation has led to high demand and relatively tight supply, which is supercharging AMD's operational results.

First-quarter revenue jumped 38% year over year to $10.25 billion, driven by strength in the company's data center segment, which rose 57% to $5.8 billion. AMD has seen success with its AMD EPYC processors, which are central processing units (CPUs) that help power cloud computing infrastructure. And investors should expect momentum to continue with the ongoing ramp-up of its Instinct GPUs, which help with AI model training and inference.

The company's gross margins rose by a modest 300 basis points to 53%, and operating income rose 83% to $1.48 billion.

What about the alternatives?

AMD's diversification is a strong selling point relative to its rivals. Unlike Nvidia, which gets over 90% of its sales from its data center segment, AMD's data center segment contributes a relatively modest 57% to its top line. Furthermore, within this segment, the company sells a healthy mix of GPUs, CPUs, and other networking equipment, reducing its reliance on any specific product category or group of customers.

That said, AMD's business model isn't without its challenges. The company's first-quarter gross margin of 53% is significantly lower than Nvidia's 74.9%. And the company's less profitable product mix could cause it to lag behind its rival.

Image source: Getty Images.

AMD also faces macro uncertainties related to the AI industry as a whole. Four years after the launch of OpenAI's ChatGPT, LLMs remain an interesting novelty, but far from the life-changing productivity enhancer many tech executives continue to promise.

And many of the companies pioneering the technology have yet to achieve profitability, with analysts at Deutsche Bank expecting OpenAI alone to expend $140 billion in combined operational losses and capital expenditures by 2029.

While AMD's position as an infrastructure provider shields it from the risks and uncertainties faced by consumer-facing software providers, a slowdown in LLM development could eventually reduce demand for its data center hardware and significantly hurt the company's stock price.

Is AMD stock still a buy?

With a forward price-to-earnings (P/E) multiple of 74 (compared to the Nasdaq-100's average estimate of just 27), AMD stock looks far too expensive to buy right now. While the company's diversification is attractive, this comes at the cost of significantly lower gross margins than other options in the AI infrastructure opportunity, such as Nvidia.

While AI stocks have generated life-changing returns for early investors, the opportunity seems to be getting long in the tooth. And it might make sense for investors to wait on the sidelines for more information to determine whether current data center spending levels are sustainable over the long term. There is a growing possibility that they aren't.

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

With shares up by an eye-popping 981% over the past 12 months, Western Digital (NASDAQ: WDC) is one of Wall Street's latest darlings in the generative artificial intelligence (AI) megatrend. The company is benefiting from the surging demand for its high-capacity computer memory and storage hardware needed to help clients train and operate large language models (LLMs).

The factors that led to Western Digital's explosive rally are still in play. But it's hard to not get nervous when looking at a stock chart that has gone practically vertical. Let's explore the pros and cons of the company to decide if it is still a good buy or if investors should take profits and run.

What is Western Digital?

Since its founding in 1970, California-based Western Digital has grown to become a major supplier of consumer and enterprise data storage solutions like hard disk drives (HDDs) and solid state drives (SSDs).

But while these products are useful, this part of the tech sector has historically been much less glamorous and attractive to investors.

In fact, Western Digital stock generated practically no sustained growth between August 1997 (at the height of the PC boom) and April 2025. That's almost three decades of essentially dead money at a time when software and internet companies like Apple, Amazon, and Microsoft were delivering life-changing returns to their shareholders.

The stock's fortunes abruptly changed in late 2025 when investors started realizing that memory and storage were becoming the primary bottlenecks in the race to create bigger and better AI models.

While companies like Nvidia dominated the headlines with their processing chips, the constant improvements in their hardware also created a need for storage solutions powerful enough to keep up. Data center clients are racing to purchase this hardware practically as fast as it can be produced, leading to memory hardware shortages and rapidly rising prices. Western Digital is a major beneficiary of this trend.

The rally is rooted in fundamentals

Western Digital's recent rally isn't driven by hype alone. The company's fiscal third-quarter earnings show impressive operational momentum. Revenue jumped 45% year over year to $3.34 billion, driven by data center demand for HDDs and other types of data storage infrastructure. Perhaps most importantly, the company's gross margin is also rising, jumping from 39.8% to 50.2% over the last 12 months.

Bigger margins mean better operating leverage, which measures how well sales increases translate to improvements in the bottom line. When both sales and margins rise at the same time, profits tend to explode. Western Digital's net income jumped 516% year over year to $3.2 billion -- a move big enough to explain why its stock chart has gone parabolic.

Image source: Getty Images.

But Western Digital's situation isn't all positive. With a forward price-to-earnings (P/E) multiple of 31, the stock's current valuation seems to already price in the profitability growth. Furthermore, the recent divestiture of SanDisk reduces Western Digital's exposure to the faster-growing NAND flash memory market, which may be more attractive for data center clients because of its superior speed and lower power consumption relative to older technologies like HDDs.

Is Western Digital still a buy?

For tech investors, missing out on the memory stock boom may be especially painful because of how predictable it was. It was intuitive that rapidly improving AI processors would eventually need better memory, and there were already rumblings of shortages in early 2025, well before companies like Western Digital started their rocketship rallies.

That said, it might pay to ignore the fear of missing out (FOMO) for now and hunt for the next undiscovered growth opportunity that might emerge over the next few years. Investors who already own Western Digital stock should consider taking some profits off the table because the company already looks fairly valued.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, Nvidia, and Western Digital. The Motley Fool has a disclosure policy.

2026 has been a challenging year for XRP (CRYPTO: XRP) investors. The digital asset's price has fallen 28% year to date, mirroring similar weakness seen in Bitcoin, Ethereum, and other industry leaders. That said, the cryptocurrency market has historically rewarded patience. And there are compelling reasons to be optimistic about XRP's future as its development team gains traction in mainstream finance.

From XRP's current price of $1.34, a move to $5 would represent a gain of 273% over four years -- a compound annual growth rate (CAGR) of 39%. Let's explore some reasons why the token might be able to pull it off.

Image source: Getty Images.

Why is the cryptocurrency market down?

Cryptocurrency started 17 years ago with the launch of Bitcoin. And over that time, investors have noticed patterns in the market's long-term performance. One of the clearest trends is cyclicity. Cryptocurrency prices tend to boom and bust, with extended rallies typically being followed by punishing price declines.

In late 2024, Trump's presidential campaign sparked a historic cryptocurrency rally that sent XRP's price up by almost 600% at its peak. Investors were optimistic because of the new administration's support for the industry, which included dropping or resolving lawsuits against XRP's developer, Ripple Labs, and other industry leaders. The U.S. has also passed legislation, such as the GENIUS Act, designed to create a framework for the issuance and oversight of dollar-linked stablecoins.

It's hard to pinpoint exactly why prices abruptly declined after so much good news. But it likely has to do with investor psychology. Unlike stocks, cryptocurrencies can't be valued based on earnings or cash flow, so market sentiment plays a huge role in their performance. After the huge rally in 2024, investors may have simply wanted to take profits off the table before prices fell, leading to a negative feedback loop.

Why XRP's next rally could be bigger

According to financial services company Fidelity, crypto cycles usually last for four years from top to top. And this pattern has roughly played out for XRP. The assets' first big peak occurred in 2018, followed by another in 2021 and another in 2025. If this pattern continues, investors can be optimistic for another peak before 2030.

XRP Price data by YCharts.

Four years will be plenty of time for current macroeconomic uncertainties, like the war in Iran, to fade from the picture. It could also give the Federal Reserve room to lower interest rates, which can help the crypto market by increasing liquidity and reducing the appeal of safer interest-bearing assets, which will often become more expensive.

The next XRP rally could significantly exceed previous highs because it will benefit from regulatory changes enacted during the Trump administration. The SEC has also approved a spate of XRP-based spot exchange-traded funds (ETFs) that will allow institutional investors to gain direct access to the asset without having to deal with cryptocurrency-specific complexities around custody, security, and storage.

Watch Ripple Labs

For its part, XRP's developer, Ripple Labs, is also helping set the stage for an XRP rally in the coming years. The organization has been on an acquisition binge, buying a slew of companies in the custody and financial services sectors. Most recently, this has included the purchase of the digital wallet solution Palisades. This deal follows the earlier acquisition of GTreasury, which specializes in cross-border payments.

Ripple's goal seems to be to serve as a bridge between the cryptocurrency industry and traditional finance. And if it works, the developer could be in a good position to expand the utility of the XRP token while also boosting its long-term trust and brand recognition. Investors have a lot to look forward to over the next four years.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin, Ethereum, and XRP. The Motley Fool has a disclosure policy.

With its shares up by 225% over the last 12 months, Poet Technologies (NASDAQ: POET) has been yet another stock market winner in the generative artificial intelligence (AI) infrastructure boom. Investors continue to pour money into the companies that can play roles in supplying the data centers to power this new technology.

That said, Poet's recent rally isn't guaranteed to continue. The company is still struggling to ramp up its business, and the loss of a major client could set its growth story back for years.

What is Poet Technologies?

After the launch of OpenAI's ChatGPT in late 2022, leading technology companies quickly realized they would need to spend billions of dollars to build data centers capable of running and training large language models (LLMs) of their own. Analysts at McKinsey & Company estimate that total global spending on the build-out of AI infrastructure could reach $7 trillion by 2030. That's a huge addressable market for the businesses that supply computing hardware.

Poet doesn't supply the most talked-about types of AI infrastructure, like GPUs or memory chips. Instead, it's a developer of photonic and optical interconnect technology designed to rapidly move data between servers, processors, and other components within an AI or cloud computing data center.

Traditional copper-wire connections transmit data in pulses of electrons. Photonic technology converts that data into pulses of light. That allows photonic systems to transmit higher volumes of data faster, over longer distances, and with lower power consumption. These characteristics make the technology ideal for boosting the efficiency of AI data centers, which operate at extreme scales.

What is the catch?

There is a large and growing market for photonics-based data center solutions. But that doesn't mean Poet's success is guaranteed. In April, the company revealed that semiconductor manufacturer Marvell Technologies had canceled a purchase order (made through its subsidiary Celestial AI) for Poet's photonics solutions.

Marvell said it terminated the deal because of contraventions of confidentiality agreements. However, it is also possible that Marvell aims to move in a different strategic direction. Its recent acquisition of photonics specialist Polariton suggests that the chipmaker may actually be planning to directly compete with Poet in in-house solutions. Poet's fourth-quarter results also highlight some glaring challenges.

While revenue grew from $29,032 to $341,202 year over year, that's still a minuscule amount of sales for a public company with a market cap of $2.3 billion. The sum also pales in comparison to Poet's expenses -- particularly research and development, which totaled $4.62 million in the quarter, and financial advisory fees, which totaled $4.63 million. With all of its various outflows added up, the company posted a net loss of $42.7 million. And it will need to scale up rapidly to demonstrate a pathway to profitability.

Image source: Getty Images.

In the meantime, Poet is issuing new units of stock like they're going out of style. Stock-based compensation totaled $2.24 million in the fourth quarter alone. And in May, the company closed a $400 million investment that involves issuing a combination of new shares and warrants that give the buyer the option to buy shares at a preset price in the future.

These financing activities will allow Poet to stay in operation and fund its research without relying on risky debt. However, the equity dilution could hurt current investors. Consistently high levels of stock issuance can also suggest that management sees shareholders as a resource to be harvested for the sake of the business instead of seeing the business as a tool to maximize its shareholders' wealth.

Where will Poet Technologies be in five years?

Over the next few years, investors should expect Poet's management team to continue diluting shareholders as it seeks to scale up its business model. Success is far from guaranteed, considering the rising competition from Marvell Technologies and other photonics specialists.

Particularly considering all these challenges, Poet's stock is too expensive. And trading at a price-to-sales (P/S) ratio of more than 1,100 compared to the S&P 500's average of 3.7, there is plenty of room for downside over the next five years.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Marvell Technology. The Motley Fool has a disclosure policy.

After languishing in the first few years following its 2020 initial public offering, Palantir Technologies (NASDAQ: PLTR) stock got a shot in the arm from the arrival and proliferation of generative artificial intelligence (AI) in late 2022. Over the last three years, the company has seen its share price jump by 1,040% -- enough to turn an initial investment of $10,000 into an impressive $114,000 position.

That said, Palantir's stock price has been oscillating sideways and generally downward in 2026, and optimism seems to be fading. Let's dig deeper to find out what might be causing this change in market sentiment and consider if the company still has millionaire-maker potential over the long term.

Why Palantir?

Since its founding in 2003, Palantir has evolved into a leader in big data analytics -- the process of sifting through vast volumes of data to uncover actionable insights. The company's software is useful in the private sector, where it helps enterprise clients detect fraud and optimize their supply chains. It also serves military, intelligence, and law enforcement clients with tasks like intelligence analysis and targeting.

The newer iterations of AI provide a tremendous synergy with Palantir's legacy data analytics businesses because large language models (LLMs) are designed to parse large quantities of information -- the more targeted, the better. These algorithms also allow users to interact with complex datasets through natural language prompts, making the process faster and more accessible to operators who lack advanced training.

Palantir has created its own Artificial Intelligence Platform (AIP), designed to integrate third-party models (including ChatGPT and Claude) with its proprietary data analytics infrastructure. This strategy allows it to offer the latest AI capabilities to its clients while bypassing the immense costs of developing and running its own LLMs in-house.

Business is booming

Palantir has cracked the code of successfully offering enterprise AI at scale, and the company's first-quarter results reflect the rapid adoption of its services. Revenue soared by 85% year over year to $1.63 billion, with particular strength in the company's U.S. commercial segment, which jumped by 133%.

Palantir's government contracting business is also doing quite well. This month, the company secured a $300 million contract with the U.S. Department of Agriculture to help manage farmland data. This deal followed other recent agreements with the Israeli Defense Force, the U.S. Department of Defense, and the North Atlantic Treaty Organization to enhance battlefield intelligence capabilities.

Image source: Getty Images.

That said, while these high-profile contracts may boost Palantir's near-term growth and prestige, they aren't without risks. The company has become a lightning rod for criticism of government surveillance and the ethics of using AI tools in war and law enforcement. It is also associated with the increasingly unpopular Trump administration, which could lead to brand damage and related business risks, particularly in future administrations.

Tesla offers a good example of how damaging partisan political exposure can be. The electric vehicle giant's sales sank substantially in recent years, in part due to consumer backlash over CEO Elon Musk's involvement in the 2024 election campaign and the first year of the Trump administration. And while Palantir doesn't sell its services to consumers, business clients can be swayed by pressure from employees, their customers, or the public at large, if that pressure is intense enough.

Palantir is growing into its valuation

The greatest headwind for Palantir stock is its valuation. With a market cap of $343 billion, the stock trades for roughly 161 times its previous 12-month earnings, which is much more than the S&P 500 (SNPINDEX: ^GSPC) average of 26. While the stock deserves some premium due to the company's above-average growth, this is far too high to make sense -- especially given the political risks Palantir could face in the coming years.

While Palantir remains a great business, its stock performance will probably trend mostly sideways until its top and bottom lines grow into the market cap it already boasts. Shares will start to look much more interesting at a price-to-earnings ratio of 50.

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

For investors, generative AI is a gift that keeps on giving. But while popular chipmakers like Nvidia and Broadcom led the infrastructure opportunity over the last few years, computer memory specialists like Sandisk (NASDAQ: SNDK) have convincingly stolen the show.

The company's shares have soared by a blistering 4,000% in just 12 months -- enough to turn a $25,000 position into well over a million. This trend is driven by soaring demand for its hardware to help power data centers. Let's dig deeper to decide if the company is still capable of generating life-changing returns, or if it's a giant bubble ready to pop.

Memory has become AI's primary constraint

When OpenAI's ChatGPT hit the scene in late 2022, tech companies quickly realized that they would have to buy more and better graphics processing units (GPUs) to keep up. These chips are ideal for running and training large language models (LLMs) because of parallel computing -- the ability to process multiple calculations simultaneously.

However, over time, GPU clusters became so powerful that they began to strain the memory capacity needed to help data centers store information and access it quickly. Sandisk helps solve this problem.

Sandisk is known for its enterprise NAND flash solutions, which allow data centers to store data electronically with no moving parts. While these products may have higher upfront costs than less advanced hard disk drives (HDDs), they offer better performance and less energy consumption, which is ideal for the vast scale needed for AI data centers.

Image source: Getty Images.

Business is booming

Analysts at McKinsey & Company estimate that spending on the global AI data center build-out could reach $7 trillion by 2030. Plenty of things could change by then. But a large percentage of that money will almost certainly go toward memory hardware solutions, putting Sandisk in an excellent position for substantial revenue and profit growth.

The company is already benefiting substantially from this megatrend. Fiscal third-quarter revenue soared 233% to $1.47 billion year over year, driven by strength in its data center segment and edge computing, which refers to memory hardware located on devices themselves instead of in data centers.

Perhaps most importantly, the company's gross margin has jumped from just 22.7% to 78.4%, a level so high that it is typically seen in software-as-a-service (SaaS) companies that don't sell physical products. This dynamic has occurred because demand for memory is far outstripping supply, allowing Sandisk to substantially increase its prices.

Operating income jumped from just $2 million to $4.2 billion -- an eye-popping gain that explains much of the stock's recent rally.

Shares are still dirt cheap, but there is a catch

Despite gaining over 4,000% over the last 12 months, Sandisk's shares are still relatively affordable because profits are growing so fast. With a forward price-to-earnings (P/E) of just 23, the stock actually trades at a discount to the Nasdaq-100's estimate of 26, despite profits growing significantly faster than the typical technology company's.

This disparity can be explained by the history of the memory industry, which has a long track record of booming with new tech trends and then busting when supply catches up to demand. Sandisk's stock price suggests that, despite the AI optimism, investors are still worried that the company's elevated growth and margins won't last for the long haul.

There is also the growing possibility that generative AI itself is a bubble, and that the technology won't live up to the wild expectations driving the current levels of data center spending. If this scenario plays out, Sandisk's hyperscaler customers could eventually start cutting back on their memory spending at the same time memory supply increases, leading to a severe glut in the market and falling prices.

While Sandisk's fantastic earnings make it look like a strong buy, risk-averse investors may want to sit on the sidelines for now.

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

With shares up 214% year to date, Micron Technology (NASDAQ: MU) remains one of the biggest winners in the generative artificial intelligence (AI) megatrend -- far outpacing early infrastructure leaders like Nvidia, which is up by a relatively modest 14% over the same time frame.

The reason for the optimism around Micron is simple. Technology companies have realized that access to enough high-bandwidth memory is one of the primary constraints to making better AI models. This has set off a surge in demand for Micron's products, and those of its peers, that has far exceeded their ability to supply with their current fabrication facilities. As a result, memory makers have been able to substantially boost prices. Micron's now enjoying a period of high top-line growth and margins.

But what could come next for the company?

Memory supply is now a primary AI bottleneck

At the start of the AI revolution, the development of generative AI models was constrained largely by the availability of high-end GPUs to train them on -- processors designed by companies like Nvidia. These chips performed the heavy computational lifting involved in running and training the algorithms. However, over time, GPUs became significantly more powerful, and also more widely available. This, combined with the need for those chips to be able to rapidly access the data they were analyzing, led to a sharply increased the need for memory capable of keeping up.

Micron has benefited tremendously from this trend. In its fiscal 2026 second quarter (which ended Feb. 26), revenue soared by 196% year over year to $23.9 billion. And while this result was largely driven by demand for its high-bandwidth memory products for AI data centers, less trendy businesses like its automotive and mobile segments are also riding the wave higher.

Demand for high-bandwidth memory is so high that it is soaking up production capacity that would have otherwise gone to other types of memory, leading to soaring prices and margins across the board. Micron expects next quarter's gross margin to reach a software-esque high of 81%, with earnings per share jumping roughly tenfold year over year to $19.15 at the midpoint.

Can AI break the boom-and-bust cycle?

Micron's valuation is still remarkably low despite its impressive operating momentum. With a forward price-to-earnings (P/E) multiple of just 7.6, shares trade for a dramatic discount to the Nasdaq's average estimate of 26, as well as to the chipmaker Nvidia, which boasts a forward P/E of 24.

The numbers suggest the market is not confident that Micron will be able to break out of the boom-and-bust cycles that have consistently defined the memory hardware industry. And it's easy to see why.

Unlike GPUs or other types of computer hardware, memory tends to be highly commoditized, which means there isn't a big difference between chips created by Micron and those produced by rivals like SK Hynix or Samsung. The big producers typically compete based on price. And sharp increases in demand have historically led all the memory producers into a race to ramp up production. This has usually led to supply gluts, price slumps, and down cycles.

This story played out during previous memory boom cycles, such as the PC boom in the 1990s, as well as the cloud computing and mobile phone booms of the late 2010s. And with Micron planning to invest an eye-popping $200 billion into new U.S. production capacity, it seems inevitable that eventually, supply will catch up to and exceed demand, and the company's growth rate and margins will come back down.

Image source: Getty Images.

What comes next for Micron?

Micron's low valuation suggests the market is already pricing in a future slowdown. So even though the current memory boom cycle looks set to end when supply eventually catches up to demand, a massive crash in the stock price looks unlikely.

That said, investors who are looking for a safe stock to hold for the long term should probably look elsewhere, because Micron seems overly dependent on what remains a highly speculative industry.

As investors, we still don't know whether generative AI will be the world-changing megatrend tech leaders are promising or fall short of expectations. Micron's future will depend on the answer to this question.

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

Elon Musk may seem to have the Midas touch when it comes to business. With his track record of beating the odds and creating successful businesses that can disrupt entire industries, it is tempting for investors to bet on any company that has his name attached to it.

Past success, however, doesn't guarantee future results. And there are several reasons SpaceX might not live up to expectations after its initial public offering (IPO) planned for next month. Let's dig deeper into how unprofitable artificial intelligence (AI) exposure and a highly speculative business strategy could cause the stock to underperform after its public debut.

What is behind the $2 trillion valuation?

SpaceX could become the largest public stock debut in history with an expected valuation of $2 trillion. To put that number in perspective, it would make SpaceX worth more than all but six public companies on the planet. Furthermore, SpaceX's potential market capitalization isn't well supported by its business fundamentals.

This month, SpaceX filed its S-1 with the Securities and Exchange Commission (SEC). This document is required in the pre-IPO process, and it gives the market its first peek inside the financials of the privately held company.

In 2025, SpaceX's revenue jumped 33% year over year to $18.7 billion, which is quite impressive for a company of its size. On the other hand, expenses (particularly for research and development) are also ballooning at an even faster clip, which led to operating income collapsing from a positive $466 million to a loss of $2.6 billion in the period.

Investors shouldn't be too surprised that a rocket company is spending huge amounts on R&D. After all, this is a complex technology with huge regulatory and testing requirements. However, a rising portion of SpaceX's spending is going toward a much more speculative and arguably less beneficial part of its business -- generative AI.

Generative AI could become a money pit

According to the S-1 filing, SpaceX's AI segment generated an operating loss of $6.36 billion in 2025. This figure gets even more alarming when you remember that this happened before the acquisition of xAI in February 2026. The new subsidiary will likely make the cash burn worse because of the need to build and maintain data-center capacity and keep up with rivals like OpenAI and Anthropic.

There are signs that xAI may already be falling behind. Although the company claims capacity and energy are its primary constraints, lack of demand may play an even bigger role. The company is actually renting out excess capacity to rivals, with Anthropic reportedly paying $1.25 billion per month for access to xAI's Colossus data centers.

Image source: Getty Images.

In the near term, this deal sounds like good news for SpaceX because of the enormous revenue opportunity. However, it represents training and inference capacity that won't be going to the company's in-house large language model (LLM) Grok. Furthermore, Anthropic can exit the deal before it expires in 2029. And over time, SpaceX's data centers could struggle to compete with hyperscalers like Amazon, which plans to make $200 billion in AI-related capital expenditures this year alone.

Elon Musk's proposed space-based data centers could eventually give the company an edge by enabling access to abundant solar energy and dramatically reducing cooling costs. But this strategy could run into problems ranging from space debris to maintenance challenges and should not be seen as a realistic business plan with current technology. Despite his entrepreneurial success, Elon Musk has developed a track record of overpromising and underdelivering. And the SpaceX IPO is shaping up to be one of the biggest disappointments yet.

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

Historically, MercadoLibre (NASDAQ: MELI) has been a hot performer. It minted plenty of millionaires between its initial public offering at just $18 per share in 2007 and its all-time high of almost $2,614 reached last year.

That said, the Latin American e-commerce giant has started to lag as concerns about weakening margins start to overshadow its healthy top-line growth. Let's dig deeper into the pros and cons of MercadoLibre stock to determine what the next five years might have in store.

Image source: Getty Images.

Why MercadoLibre?

Although its service is not available in the U.S., MercadoLibre has grown to become a household name across Latin America, with a dominant presence in key markets like Brazil, Argentina, and Mexico, where it offers a vast e-commerce ecosystem built around its third-party marketplace.

On the surface, the company is quite similar to Amazon, but it has managed to outmaneuver its American rival because of its robust fintech subsidiary MercadoPago, which helps people interact in areas with less developed banking system infrastructure and credit card penetration. The platform has been pivotal during Argentina's recurrent economic crises because it allows people to protect their deposits from inflation by accessing investments where they can earn interest.

And as a whole, MercadoLibre has done an excellent job of adapting to the unique concerns of its Latin American userbase, which has given it a deep economic moat and helped it generate impressive top-line growth.

First-quarter earnings were a mixed bag

MercadoLibre's first-quarter earnings highlight a combination of opportunities and challenges. The good news is that top-line growth remains explosive, with revenue soaring 49% year over year to $8.85 billion, driven by continued adoption of its e-commerce services. This is a remarkably high growth rate for such a large company, and it suggests there is plenty of room for MercadoLibre to expand its various businesses across its target markets. For comparison, Amazon grew its sales by a much more modest 17% in its most recent quarter.

That said, top-line growth is usually not enough to impress the market. Investors are more interested in seeing how well those sales will translate to increases in profits. And MercadoLibre is struggling in this regard. Gross margins declined slightly while operating expenses jumped 69% year over year, causing operating income to fall by 25% to $763 million.

In the company's first-quarter earnings call, management explained that part of the margin erosion can be credited to intentional efforts to boost the e-commerce platform's competitiveness. These include things like lowering the thresholds for free shipping, speeding up delivery times, and other customer acquisition efforts. This strategy makes sense at a time when the Latin American e-commerce market is in the cross-hairs of low-cost Chinese players like Temu, which are looking to diversify their operations after the Trump administration's protectionist policies made the U.S. market less attractive.

MercadoLibre is also investing heavily in artificial intelligence (AI), which could help it stay competitive by optimizing logistics routes and offering improved product recommendations on its marketplace.

Where will MercadoLibre stock be in five years?

Over the next five years, MercadoLibre's success will depend on its ability to bolster its economic moat against growing Chinese competition and deepen its integration into customers' daily lives. Management's willingness to forgo short-term profits to ensure long-term market dominance will help make this possible.

The stock's valuation is also attractive. With a forward price-to-earnings (P/E) multiple of 32, MercadoLibre trades for a premium over the S&P 500 average of 22. But this seems like a reasonable price to pay considering its above-average top-line growth could eventually translate into rapid bottom-line improvements when the business becomes more mature. Shares look like a good long-term buy.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and MercadoLibre. The Motley Fool has a disclosure policy.

The last five years have been a bonanza for growth stock investors, with the technology-heavy Nasdaq Composite index up by 96%. That amounts to a 14.4% compound annual growth rate, well exceeding its historical average of around 10%. The outperformance can be mostly credited to soaring data center spending and optimism about generative artificial intelligence (AI).

But can this rally stand the test of time? There are growing signs that the answer might be no. There are solid reasons to believe stocks are overvalued right now. With that in mind, investors will want to take this opportunity to consider strategies they could use to protect their portfolios in the event of a market correction.

Valuation metrics flash warning signs

There are many ways to gauge how expensive the stock market is. But the cyclically adjusted price-to-earnings (CAPE) ratio is arguably one of the most useful, because it is derived using the market's inflation-adjusted earnings over a 10-year period. That smooths out short-term fluctuations and gives investors a more reliable picture of long-term stock valuations.

At the time of writing, the broad-market S&P 500 index trades at a CAPE ratio of 41, which is significantly higher than its century-plus average of 17. Things get even more alarming when you consider that there are only two other times in history when the market has been in this range.

The first was in 1929, when the CAPE ratio hit 32.6. A few months later, stocks began a crash that would take them down 83% and start the Great Depression. The CAPE ratio didn't surpass that peak again until the late 1990s and early 2000s, when it achieved a new all-time high of 44.19 before crashing substantially as the dot-com bubble burst.

Is this time different?

Whenever stocks get pricey, there will be bullish voices arguing that "this time is different." To be fair, they actually have a good point. Generative AI could eventually help companies save on labor costs throughout the economy, potentially juicing long-term profitability.

Furthermore, the CAPE ratio's use of 10-year average earnings can obscure the performance of companies that have seen earnings rise dramatically in the last few years. These stocks often look quite affordable when analyzed with more traditional valuation metrics.

Micron Technology is a great example of this concept. It has a forward price-to-earnings (P/E) ratio of just 7.1, despite seeing net income surge by 163% year over year to $13.8 billion in its most recent quarter. That said, while the soaring growth of AI infrastructure companies can make them look like good values right now, there are questions about the sustainability of the demand powering their businesses.

Image source: Getty Images.

The consumer-focused large language model (LLM) companies that rely on AI infrastructure face significant challenges. Analysts at Deutsche Bank believe that industry leader OpenAI could lose a total of $140 billion from 2024 through 2029. Rising energy costs could lead to even steeper losses. It may only be a matter of time before investors decide the risks outweigh the rewards and stop pouring money into the space.

If the companies that are AI infrastructure consumers start running low on money, eventually the infrastructure providers could be left with slowing growth and expensive assets that will be more difficult to monetize.

See market corrections as opportunities instead of challenges

The market is at an elevated risk for a correction because of its relatively high CAPE ratio and investors' general uncertainty about the sustainability of AI-related spending in the economy. But this doesn't mean it's time to panic. Historically, the U.S. stock market as a whole has always bounced back from crashes, though not every company does. There is no reason to expect the next crash to be any different.

Investors can cushion their portfolios by rotating some money away from AI stocks toward more recession-resistant consumer defensive industries. It might also be a good idea to keep some cash on the sidelines so you can shop for deals if stocks become significantly cheaper at some point in the future.

Will Ebiefung 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.

Micron Technology (NASDAQ: MU) has been one of the biggest winners in the generative artificial intelligence (AI) infrastructure boom, with shares up by over 800% over the last five years. The rally has been driven by growing demand for its high-bandwidth memory chips, which are vital components in AI data centers. At the moment, demand for memory chips well outstrips supply, and given the forecasts for the AI infrastructure build-out and how long it takes to get new foundries up and running, that situation is unlikely to change for quite awhile.

But after its impressive gains of recent years, can Micron stock still turn $1,000 invested today into $10,000 in the future, or is this rally more likely to fizzle out soon? My view: Investors shouldn't get too comfortable.

Why is Micron soaring?

Many analysts believe generative AI could be as transformational as previous megatrends like the internet and mobile phones. And to capitalize on the opportunity, technology giants are spending eye-popping sums of money to accumulate the hardware needed to build data centers that run and train large language models -- and that hardware includes memory chips.

According to Fortune magazine, the four major hyperscalers have committed to spending a combined $700 billion on data centers this year alone. And with high levels of investment expected to continue for the coming years, Micron is well positioned to continue generating outsize growth and profits.

Its fiscal 2026 second-quarter results were explosive. Revenue soared by almost 200% year over year to $23.86 billion, driven by strength across the company's business segments. And while the surge in memory hardware demand has been driven specifically by the types of chips used in AI data centers, a shortfall in overall production capacity has caused prices to rise for all kinds of memory chips, including the ones used for things like smartphones, laptops, and other consumer devices.

As a result, Micron's mobile and client business unit saw stunning momentum too, with revenue jumping 245% to $7.71 billion. More impressively, operating margins jumped from just 1% to 76%, transforming a business that was barely breaking even into a cash cow with margins comparable to those of software companies.

A history of booms and busts

Micron Technology's recent growth is exceeding expectations. That said, investors shouldn't expect this situation to continue forever. The memory hardware industry is known for boom and bust cycles, in part because of how commoditized its products are.

A memory chip created by Micron is not fundamentally different from a chip created by SK Hynix or Samsung -- two of its chief rivals. Moreover, when demand rises and memory producers can raise prices, they all typically race to expand production capacity -- setting the stage for an eventual supply glut and collapsing margins when the new foundries are online and the demand situation reverses. Similar stories played out in previous memory demand cycles, such as the Windows PC boom in the mid-1990s and the smartphone boom in the 2010s.

Image source: Getty Images.

Unfortunately for investors, Micron and its peers seem to be setting the stage for a similar glut to occur in the future. In June 2025, the company announced plans to invest $200 billion into expanding its semiconductor manufacturing capacities and its R&D operations in the U.S.

While this capital expenditure will be spread over several years, it will introduce significantly more high-bandwidth memory to the market over time. As Micron's rivals make their own investments in new capacity, eventually, supply will catch up to and exceed demand, which will naturally cut into chipmakers' pricing power and put pressure on their margins.

There is also the risk that the generative AI sector as a whole is in a bubble. And even if the technology turns out to be extremely useful, that doesn't necessarily mean the current levels of data center spending are sustainable. The situation looks reminiscent of the dot-com bubble in 2000, where internet investments took much longer to pay off than the market expected.

Micron stock is relatively cheap for a reason

With a forward price-to-earnings (P/E) ratio of just 7.8, Micron stock is significantly cheaper than the S&P 500's average of 22. And this is a good sign because it suggests that investors are already pricing in the risk of a future memory demand slowdown. That said, while Micron Technology's stock looks unlikely to crash anytime soon, its days of multibagger growth are probably coming to an end.

Will Ebiefung 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.

Sandisk (NASDAQ: SNDK) is the type of stock that growth-focused investors dream about. If you had bet $10,000 on the company just 12 months ago, you would have $327,200 today -- a return of roughly $3,272% that has been driven by optimism about the surging demand for memory and data storage hardware for artificial intelligence (AI).

But past performance doesn't guarantee future results. And investors who missed the big rally will be curious to know if Sandisk can maintain its explosive momentum. Let's dig deeper into the pros and cons of the company to decide what the next five years might have in store.

Why is Sandisk stock surging?

For regular consumers, Sandisk is probably most recognizable for its USB flash drives, memory cards, and portable SSDs, which help people store things like documents and photos outside of their computers. But in the enterprise space, the company has become a leader in high-performance memory and storage solutions, which are vital for data centers that need to serve surging demand for generative AI-related workloads.

Memory is so important because it stores the vast amount of training and inference data that large language models (LLMs) need to operate. And Sandisk stands out because of its focus on NAND flash technology.

Unlike traditional hard disks, NAND flash is designed to store data electronically, with no moving parts, making it faster and more energy-efficient. While upfront costs can be greater, this can often make better economic sense for data center clients that need to process and store massive volumes of information around the clock.

Business is booming

Right now, the memory industry is caught in a perfect storm of rising demand and short supply, driving explosive growth and margins for the major players. Sandisk is no exception. Third-quarter revenue surged 251% year over year to $5.95 billion, driven mainly by data center demand and edge computing, which often refers to data solutions embedded within devices themselves instead of at a data center.

Perhaps most importantly, the company's gross margin is also exploding -- rising from just 22.7% in the third quarter of 2025 to a whopping 78.4% today. This number puts Sandisk ahead of the AI industry leader Nvidia, which reported a gross margin of 75% in its most recent quarter.

Investors love improving margins because they translate into better operating leverage, a metric that measures how efficiently a company converts top-line growth into profits. And Sandisk's third-quarter earnings per share skyrocketed from a loss of $0.30 to a gain of $23.41, easily explaining the stock's rapid rise as investors quickly reevaluate its intrinsic value. This trend looks set to continue in the near term as AI-related demand remains high and memory shortages keep prices elevated.

Image source: Getty Images.

The stock is still quite cheap -- but why?

Despite its surging stock price, Sandisk's shares remain quite cheap at a forward price-to-earnings (P/E) ratio of 24. For context, the S&P 500 averages 22, but Sandisk is growing significantly faster than the average company and would typically command a much higher premium.

Investors may still be cautious because the memory hardware industry is notoriously cyclical. Periods of booming demand are typically followed by a rapid increase in production capacity, leading to a supply glut and a decline in prices. There is also a risk that the current AI data center demand boom is itself a bubble that won't last much longer.

Over the next five years, these will be real risks for Sandisk. And it might make more sense to look for the next undiscovered growth phenom rather than betting on this company after its price has already risen so rapidly.

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

This summer, Elon Musk's industrial space giant, SpaceX, is expected to launch its intial public offering (IPO) at a valuation of as much as $2 trillion, giving investors access to a profitable industry leader with a track record of success spanning more than two decades.

But investors who plan to buy the stock at such a high price might not get what they expect. During the past few years, SpaceX has been quickly transitioning into a highly speculative AI company that may offer more risks than potential rewards. Let's dig deeper to see why the company's valuation could collapse by as much as 84% as the market develops a more realistic view of its future.

SpaceX's AI pivot is a long shot

Since the launch of OpenAI's ChatGPT, companies around the world have been scrambling to incorporate generative AI into their business models, even when the synergies are not readily apparent.

SpaceX has joined the trend by acquiring Musk's social media and AI company, xAI, in a $250 million deal that gives the space company ownership of X.com (formerly Twitter) and a large language model called Grok. The deal was an amazing windfall for X investors who helped Musk take the company private for just $44 billion in 2022. But it's much less clear how SpaceX's shareholders will benefit from the combination.

Many other companies are investing in AI data centers, including the cloud computing industry leader, Amazon, which has committed $200 billion in capital expenditures to the opportunity this year alone. It's hard to see how SpaceX plans to compete with rivals that enjoy established client relationships, better economies of scale, and have more money.

According to Musk, SpaceX could get around this problem with space-based data centers that could take advantage of limitless solar power to overcome Earth-based energy constraints. But many experts agree this is a long shot, citing concerns about space debris, radiation, and the difficulty of in-person repairs and maintenance.

Why SpaceX may be worth only $320 billion

Image source: Getty Images

SpaceX's AI business is unlikely to create value for shareholders and is more likely to detract from its valuation than add to it. With that in mind, SpaceX is best analyzed based on its legacy space industrial business, which was estimated to generate roughly $8 billion in profit against $15 billion to $16 billion in revenue in 2025.

A price-to-earnings (P/E) ratio of 40 would give SpaceX a modest premium over the S&P 500 average of 36. But it would drop the company's valuation from $2 trillion to just $320 billion, an 84% decline, which indicates plenty of room for a potential crash.

Is the stock guaranteed to crash?

The stock market is now littered with hyped-up IPOs that failed to live up to expectations. Electric-vehicle maker Rivian has fallen by 89% since its launch in 2021, while AI start-up C3.ai has collapsed by 92% since 2020.

Both of these companies promised to help pioneer disruptive new technologies, but their share prices fell back down to earth when reality didn't meet expectations. SpaceX could find itself in a similar boat because of its xAI losses and the possible unfeasibility of its business strategy. To be sure, the stock has something the others don't: Elon Musk.

So far, markets have shown a willingness to afford Musk-linked companies a premium they might not deserve. This is why Tesla trades for a P/E of about 400 despite its struggles with competition and narrowing margins. And similar dynamics could keep SpaceX's valuation elevated for several years until the reality becomes too stark to ignore.

Investors should avoid buying SpaceX stock, but short-selling it may also be risky while Musk-related hype remains so powerful in the market.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.

If one thing is consistent about the Trump administration, it is its unpredictability. After years of criticizing the current Federal Reserve chairman, Jerome Powell, for his arguably restrictive monetary policy, President Donald Trump has nominated someone who might be more hawkish than his predecessor. Let's dig deeper into Kevin Warsh's track record and past remarks to decide how his term might affect stock performance.

1. Warsh is aggressive on inflation

Although the Federal Reserve is independent of the White House, the president can influence its policy orientation by nominating its chairman every four years, subject to Senate confirmation. Trump nominated the current Fed chair, Jerome Powell, in 2017 (he was reappointed by Biden in 2021). And Trump has nominated his successor, Kevin Warsh, with Senate confirmation widely expected on May 15.

Image source: Getty Images.

Warsh formerly worked as a Federal Reserve governor during the financial crisis, and his track record could give investors clues about his economic philosophy and where he could take the institution.

CBS reports that from 2006 to 2011, Warsh took a hawkish stance on monetary policy, which generally prioritizes keeping inflation low, though higher rates and a smaller Fed balance sheet (liquidity added to the system through the purchase of bonds and other assets).

The Fed currently has $6.7 trillion in assets on its balance sheet. And a reduction in these holdings could hurt economic growth and stock performance by tightening financial conditions and removing liquidity from the market.

Warsh has not indicated how small he thinks the Fed's balance sheet should be. But The New York Times reporting suggests he is committed to significant reductions, seeing this strategy as a good way to give officials space to lower short-term interest rates.

2. Warsh is bullish about artificial intelligence

Perhaps the most interesting thing about Warsh is his take on generative artificial intelligence (AI). Despite his track record as a monetary policy hawk, he has recently begun invoking the new technology to justify lower rates.

The logic goes that AI will boost productivity, making it easier for the economy to produce goods and services and thus lowering their costs. It sounds good in theory, but there are some problems with the assumption.

For starters, there is no conclusive proof that generative AI will transform the global economy in the near term. The technology remains speculative, and it could even be inflationary in some cases because data center construction has caused a surge in energy costs and demand for memory chips, which are used in consumer electronics.

Furthermore, there are many other catalysts for inflation to rise in the near term, such as the Trump administration's erratic trade policy and the recent war in Iran, which has already led to a surge in gasoline prices. Investors should get nervous if Warsh uses a potential future AI boom to gloss over what the economy needs right now.

3. We can't predict this administration

Warsh's track record as a Fed governor suggests a hawkish approach to monetary policy, which could hurt stock performance in the near term. But over the long term, it might be a good outcome because it would run contrary to the White House's political goals of juicing growth and making government debt more manageable in the short term.

Such a policy would also reestablish the organization's credibility and bolster the foundations of the U.S. financial system.

The worst-case scenario is that Warsh is a Trojan horse for the White House, willing to introduce the aggressively lax monetary policies Trump unsuccessfully pressured Jerome Powell to adopt. This would not be the administration's first act of misdirection. And the perception that the Fed is losing its independence could hurt a variety of asset classes. Investors may be in a lose-lose situation.

The Motley Fool has a disclosure policy.

Amazon's (NASDAQ: AMZN) founder and first CEO, Jeff Bezos, was instrumental in getting the company off the ground and scaling it into the diversified technology behemoth it is today. His successor, Andy Jassy, has also played a huge role in its success since taking the helm in 2021 by cutting costs and helping secure consistent profitability across its operating segments.

But while Jassy has historically focused on maximizing efficiency, he seems to be taking a page out of Bezos' more maximalist playbook when it comes to the company's generative artificial intelligence (AI) transition.

Jassy calls AI a once-in-a-generation opportunity

In a recent interview on CNBC's Mad Money, Jassy expressed his optimistic projections about the future of generative AI, calling it a "once-in-a-generation opportunity" and claiming "it's going to reinvent every single customer experience we know and altogether new ones we never imagined."

If that forecast proves accurate, it would put generative AI alongside previous megatrends such as the internet and mobile phones, which totally transformed the way people live and do business.

Jassy's optimism helps explain why the company is pouring such huge amounts of money into AI chips and other data center equipment. For 2026, Amazon raised its capital expenditure forecast to $200 billion. That's more than double the $80 billion in operating income the company earned last year. And with capital expenditures potentially remaining elevated for the next few years, it's hard to imagine how this level of spending will pay off for investors within a reasonable time frame.

Jassy used his Mad Money interview to help reassure investors. He said he believes that the high level of spending today could generate outsize returns in the future, with better operating margins and free cash flow.

He compares the company's massive AI investments to the rollout of the company's web hosting and cloud computing unit, Amazon Web Services (AWS), in the 2000s: "We've lived this movie once before in the first wave of AWS, and I think the same story is going to play out, except with much larger revenue and free cash flow downstream."

CEOs aren't always right about new technologies

Image source: Getty Images.

While it's reasonable to expect CEOs to have clearer insights into where their companies are headed than the general population, that doesn't mean they're always right. Just ask Meta Platforms CEO Mark Zuckerberg about how his metaverse investments have turned out. (It hasn't been pretty.) Corporate leaders' proximity to their industries can create biases and wishful thinking.

Ultimately, Amazon's leaders have an incentive to see and present generative AI as a one-in-a-lifetime technology because it would create a larger market for the infrastructure services the company provides through AWS. If you sell lemons, you should hype up lemonade. But it becomes risky when you spend heavily to plant more lemon trees in advance of future demand that might not materialize. That's analogous to what Amazon is doing with its extreme spending on data centers, and investors are right to be a little cautious.

Capital spending can drive future growth. But it also represents money that could have been returned to shareholders through stock buybacks and dividends, both of which tend to boost a stock's price. Over the past five years, Amazon's total return lagged behind that of Apple, which has been more focused on directly returning value to its shareholders.

AAPL Total Return Level data by YCharts.

If Jassy is right about AI, this pattern could reverse over the next five years. But it will take more tangible progress on that front before I get excited.

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

Rivian Automotive (NASDAQ: RIVN) stock has sharply underperformed in 2026, declining by around 28% since the start of the year. And this can be explained by its huge losses and uncertainty about the EV industry as a whole after the Trump administration pulled government support.

That said, with a price tag of just $15, Rivian is now a far cry from its peak of $172 reached in late 2021. And this is sure to attract the attention of deal-hungry investors. Let's dig deeper to decide if the dip is a buying opportunity or a sign to stay far away from the struggling automaker.

The macroeconomic situation remains complex

The U.S. EV market is down but not out. Last year, the U.S. government pulled back incentives such as a $7,500 tax credit for new purchases, and eased tailpipe emission standards for internal combustion engine (ICE) vehicles. Combined, these changes hurt the near-term demand for EVs while also putting long-term pressure on adoption by potentially making gasoline-powered cars more competitive.

The new policy stance coincides with a period of relatively high interest rates (compared to the pre-pandemic period), which makes it harder for consumers to afford the monthly payments on new cars.

However, the macroeconomic situation isn't all bad. The war in Iran has spiked oil futures to $94 at the time of writing -- and this is having a real impact on the prices many Americans pay at the pump. High gas prices will encourage consumers to consider making a permanent switch to EVs to protect their pocketbooks from oil price volatility.

Management pushes for a turnaround

Rivian's first-quarter earnings weren't very exciting. Revenue grew by 11.4% to $1.38 billion amid a modest decline in automotive sales, which was counterbalanced by a jump in software and services revenue as the company's recent partnership with Volkswagen continued to scale up. That said, while software will help Rivian boost growth and diversification, it probably won't be a substitute for actually manufacturing cars.

Rivian will need to scale up its automotive business to at least breakeven if it wants to stay in business. That's because the company's current cash burn looks unsustainable, and things are moving in the wrong direction with operating losses jumping 35% to $881 million.

Management has several strategies to help turn this situation around. The most promising one is the release of new vehicles such as the R2, a midsize SUV with an MSRP of $58,000. The company has already started production and early deliveries of the R2, which could significantly boost volumes by exposing Rivian to the much larger mass market of consumers that couldn't afford its full-sized R1 SUV, which starts at $76,990.

Image source: Getty Images.

Economies of scale are usually one of the best ways for a small company to become profitable because they spread fixed costs over a larger number of units, helping reduce the per-unit production cost. Management is also leaning into this by substantially reducing the R2's materials cost through strategies such as underbody gigacasting, and changes to the vehicle's suspension and harness systems.

The R2 program will also benefit from a recent partnership with Uber Technologies, which plans to use the vehicle as a platform for its robotaxi ambitions, alongside other manufacturers. The deal involves an expected investment of $1.25 billion, along with a purchase agreement for up to 50,000 units of the new vehicle. While these purchases will likely be spread out over many years, they could help boost production volume and provide economies-of-scale advantages.

Is Rivian a buy yet?

Rivian definitely seems to have all the ingredients for a potential turnaround. But investors have been burned many times in the past. Cash burn remains alarmingly high, and the new R2 platform has yet to have a meaningful impact on operational results. It makes sense to take a wait-and-see approach before considering a position in the stock.

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

It might be difficult to envision holding on to one stock for 10 years. But long-term investing is ideal because it gives a company time to execute its business strategies while smoothing out short-term volatility and the impacts of temporary geopolitical crises or the business cycle.

For Amazon (NASDAQ: AMZN), the next decade will be crucial. The company appears to be at a crossroads, where it must decide if it wants to transition into a mature and stable business built around its currently reliable cash cow segments, or continue to pour money into pursuing new growth drivers that may or may not perform as expected. The choices that management is making today could impact its stock price performance over the next 10 years and beyond.

Amazon is a burgeoning logistics leader

Under CEO Andy Jassy, Amazon has made impressive progress in improving the efficiency of its e-commerce business. This strategy has involved breaking up its U.S. distribution network into eight independent hubs that serve their specific regions. And it has helped speed up delivery times and bring down transportation costs.

Over the coming decade, investors can expect Amazon to leverage its logistics edge in novel ways. This month, the company surprised many on Wall Street by opening its distribution network to other businesses through a platform called Amazon Supply Chain Services.

In this, it followed a path that was remarkably similar to the one that led to the creation of Amazon Web Services, which emerged after the company realized the internet infrastructure it had created for internal use could become an industry-leading business in its own right. The company is now using the same playbook in logistics, where it will compete directly with UPS and FedEx, potentially transforming distribution from a costly part of its e-commerce business into a new engine for long-term growth and revenue diversification.

Amazon has many advantages that could help it outcompete the incumbents. Just like with AWS, the company's internal operations will give it economies-of-scale cost savings that it can pass on to clients.

Management is betting big on generative AI

Amazon's long-term growth story isn't limited to logistics. In fact, generative artificial intelligence (AI) will probably play a much bigger role in its stock price performance. This year, the company plans to spend an eye-popping $200 billion on AI-related capital expenditures such as data centers and custom AI chips.

To put this number in perspective, Amazon's operating income was "just" $80 billion in 2025. So naturally, pouring so much more money into data centers could hurt the company's stock performance if there isn't a clear and substantial payoff in the future.

That said, Jassy is hugely optimistic, telling CNBC that the company believes AI will "reinvent every single customer experience we know and altogether new ones we never imagined." And while he acknowledges that it could take years for the current spending to pay off, he believes investors will eventually be rewarded, just like when Amazon began investing heavily in its AWS infrastructure in the 2000s.

Image source: Getty Images.

Will these bets play out over the next 10 years?

Many mature companies tend to focus on cutting costs and maximizing profits, which can then be returned to shareholders through stock buybacks and dividends. Amazon is doing the first part of that equation (cutting costs), but it is pouring the extra cash into new long-term growth drivers.

The company's logistics push has a high probability of success because it is essentially already an industry leader. However, it might be more difficult for Amazon to find success in generative AI because of the immense costs involved in building and running data centers, on top of the rising competition in this unproven industry.

Amazon still looks like a long-term winner. But AI-related uncertainty will likely pressure the stock's growth for a few years until there is more clarity about when management's massive capital spending will pay off.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and United Parcel Service. The Motley Fool recommends FedEx. The Motley Fool has a disclosure policy.

For growth investors, there is nothing better than a small company that could disrupt a huge industry. And Archer Aviation (NYSE: ACHR) fits the bill with its market cap of just $4.8 billion and plans to pioneer electric vertical takeoff and landing vehicles (eVTOLs) -- an industry that analysts at Morgan Stanley believe could be worth $1.5 trillion by 2040.

That said, the stock's performance has been lackluster so far in 2026 -- declining roughly 22% year to date. Let's dig deeper to decide if this dip is a long-term buying opportunity or a sign to avoid the company.

Image source: Getty Images.

The next big transportation trend?

eVTOLs are exciting because of their clear potential for real-world utility in the short-haul transportation market. These small electric helicopters are designed to fly over traffic in dense urban locations, potentially replacing land-based taxis for crucial routes such as between airports and city centers. They are also more environmentally friendly than traditional helicopters because they don't produce tailpipe emissions.

eVTOLs are yet to enjoy large-scale commercial operation. Nevertheless, the industry is highly competitive, with dozens of start-ups tackling the opportunity across the U.S., the EU, and China. Archer Aviation aims to set itself apart with its unique business model.

Instead of strictly focusing on manufacturing eVTOLs, it also plans to launch an air taxi service of its own. This strategy could give Archer Aviation the typical benefits of vertical integration, such as greater operational efficiency, while also expanding revenue opportunities and unlocking economies of scale by spreading fixed production costs across units used internally and those sold to third parties.

And instead of figuring out its manufacturing from scratch, the company has teamed up with global automotive giant Stellantis to take advantage of its expertise in large-scale production and supply chains. The two companies have worked together to create a 400,000-square-foot facility (called ARC) in Georgia, with the goal of producing 650 units of Archer Aviation's flagship Midnight eVTOL aircraft annually by 2030.

Turning an idea into a sustainable business

On the surface, Archer Aviation's business model sounds fantastic, but a great idea won't always translate to near-term commercial success. The company's recent earnings highlight some of these challenges.

Fourth-quarter sales were just $300,000 (up from zero in the prior year period), which is abnormally low for a publicly traded company. This sum mainly came from early-stage partnership agreements instead of recurring operating revenue, which is understandable considering that its Midnight eVTOL hasn't secured the approvals from the Federal Aviation Administration (FAA) necessary for commercial use.

However, operating losses reached almost to $234.4 million as the company continued to pour more cash into research and development to meet the government's strict testing requirements.

With just over $1 billion in cash and equivalents on its balance sheet, Archer Aviation will probably rely on continued equity dilution (issuing and selling more stock shares) to fund its operations. And while this is arguably safer than taking on high-interest debt, it isn't free money because it dilutes current investors' ownership stake in the company and their claim on future earnings. This can cause shares to underperform.

Is Archer Aviation a buy?

Archer Aviation's buy thesis depends on how quickly it can turn its great idea into a viable business. Management believes the company can deliver piloted flights later this year and provide bona fide air taxi services during the 2028 Olympic Games. But while this sounds encouraging, it might be outside management's direct control because it depends on the FAA approval process, and government agencies are not known for rushing.

Meanwhile, investors should expect Archer Aviation to continue diluting shareholders for the next few years. And even though it looks like a long-term winner, there doesn't seem to be any reason to rush to buy shares now instead of waiting for the price to potentially drop further.

Will Ebiefung 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.

If you put $10,000 into Lucid Motors (NASDAQ: LCID) stock at its peak in February 2021, you would have just $120 today -- a decline of 99%. This horrifying crash highlights the risks involved in betting on speculative and unprofitable disruptors. That said, Lucid may be down, but it isn't out. And the lower price tag gives investors an opportunity to bet on a rebound.

Let's dig deeper to decide if new model releases, an exciting robotaxi partnership with Uber Technologies, and continued support from the Saudi Arabian government can help Lucid bounce back and start creating sustainable shareholder value over the next few years.

Lucid is still a mixed bag

Lucid's first-quarter earnings highlight its complicated operational situation. The good news is that production volume jumped 149% year over year to 5,500 vehicles. And this trend was driven by the ramping up of capacity at its Arizona manufacturing plant and the rollout of the new Gravity SUV, which has significantly expanded its addressable market.

Improving volumes is one of the main goals for a growth-oriented company because it allows for economies of scale advantages as fixed costs are spread over a larger number of units. This can improve margins and help a company like Lucid to turn the corner into profitability or offer lower prices to consumers to further increase its market share.

But while the production trend is encouraging, building a huge number of vehicles doesn't necessarily mean Lucid will be able to sell them.

First-quarter deliveries lagged, leading revenue to only grow by a relatively modest 20% to $282.5 million -- far short of the $440.4 million Wall Street analysts expected. Furthermore, inventories are building up as the company produces more vehicles than it can sell. And while Lucid hasn't provided much color on what it plans to do to fix the situation, CEO Silvio Napoli plans to conduct a review of the company's operations, which will be shared during its second-quarter earnings call.

Losses remain alarming

First-quarter earnings could have been a massive breakthrough for Lucid. The Gravity SUV looked poised to supercharge its flagging business and potentially create a pathway to profitability -- or at least an end to the eyewatering cash burn. Instead, investors have gotten more of the same.

Operating losses increased 37% year over year to $1.27 billion, which is extremely high for a company with a market cap of just $2.06 billion. And remember, that's for just one quarter. If current trends continue, full-year operating losses could easily exceed $5 billion. And this raises questions about the scale of equity dilution (issuing and selling more stock) that will be needed to raise the capital needed to keep the company afloat.

Image source: Getty Images.

Lucid is an extremely risky stock -- but there is still hope

Investors who buy Lucid now should remember that they are betting on an extremely distressed company with a high risk of failure. That said, there is still a possibility that it manages to turn things around over the long term and generate potential millionaire-maker returns.

Right now, the biggest glimmer of hope looks like the recent partnership with Uber Technologies, which plans to use Lucid's Gravity SUV as a platform for its self-driving robotaxis. The deal has involved $500 million in direct investment so far. And it is expected to involve the purchase of up to 35,000 vehicles, which could help soak up Lucid's excess production capacity, although this will be spread out over several years.

Lucid also enjoys significant support from the government of Saudi Arabia, which owns 60% of its equity through its public investment fund. The Saudis see Lucid as a part of their goal to diversify their economy away from fossil fuels. And they may be willing to financially support the company, even if it doesn't have a clear near-term payoff. That said, for regular investors, the stock looks like a hold until more information becomes available.

Will Ebiefung has positions in Lucid Group. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.

Wall Street expects Elon Musk's rocket company, SpaceX, to go public through an initial public offering (IPO) later this year. And while many investors are excited to finally have access to the established industry leader, there are some reasons to pause and consider the other options.

With an estimated valuation of $2 trillion, SpaceX will hit the market as an extremely mature company with much of its growth in the rearview mirror. It also comes with the potentially unwanted exposure to the highly volatile generative AI market because of its acquisition of xAI in February.

Let's explore some reasons why Rocket Lab (NASDAQ: RKLB) and Intuitive Machines (NASDAQ: LUNR) could make interesting alternatives.

Image source: Getty Images.

Rocket Lab

Generally, smaller companies have more room for growth than their bigger counterparts. And with its market cap of just $46.4 billion, Rocket Lab is a small fry compared to SpaceX. It gives investors an opportunity to get in on the ground floor of a long-term growth story as it scales up its business model with new, larger rocket platforms.

Like SpaceX, a significant part of Rocket Lab's operations involves designing and manufacturing rockets that can be used to transport payloads into space for clients. Right now, its flagship launch vehicle, the Electron, can transport 300 kg into low-Earth orbit (LEO). But later this year, it plans to launch a new, larger rocket called the Neutron, which could bump this number up to 13,000 kg.

Bigger rockets mean bigger payloads and better economies of scale, as fixed costs are spread across more cargo per launch. It will also give the company access to larger, more complex contracts.

That said, Rocket Lab's situation is not without uncertainty. New rockets are prone to delays. And with a price-to-sales (P/S) ratio of 70, Rocket Lab is quite expensive for a company that has yet to demonstrate consistent profitability. While it probably has more long-term growth potential than SpaceX, there is downside risk if it fails to meet the market's lofty expectations.

Investors may want to wait for more information about the Neutron timeline before considering a position.

Intuitive Machines

While SpaceX and Rocket Lab focus on the launch side of the space industry, Intuitive Machines targets a very different niche. The company develops lunar landers and propulsion systems, which help complete the "last mile" transportation of payloads to the surface of the moon. It also helps transmit data from space back to clients on Earth.

This is a relatively small and targeted market compared to the broader commercial opportunities served by other space companies. LEO payloads can be used for a variety of ground-based services, like broadband internet or real-time navigation. On the other hand, lunar missions are much more research-oriented. That said, Intuitive Machines is still compelling because of its relationship with the U.S. government.

In March, NASA awarded the company a $180 million contract to deliver payloads to the south pole of the moon. This deal will mark Intuitive Machine's fifth mission as part of NASA's ​Commercial Lunar Payload Services initiative (CLPS) -- a policy that sees the agency shift some of the work it would have previously done in-house to private-sector companies in an effort to speed up innovation and reduce costs.

NASA's evolving approach to space exploration could be a significant and scalable revenue opportunity for trusted companies like Intuitive Machines that boast an established track record of completing missions.

Initiative Machines is still a relatively speculative company, so it could take a while before it picks up steam. Fourth-quarter revenue declined 11.5% year over year to $58.5 million. But the company boasts a backlog of $235.9 million as of September. And its losses are manageable at just $15.4 million, which suggests there could be a pathway to profitability through more scale as it works through its backlog.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Intuitive Machines and Rocket Lab. The Motley Fool has a disclosure policy.

Growth stocks and cryptocurrency can be exciting, but if you want sustainable retirement income to supplement your pension or Social Security, high-yield dividend stocks are the way to go. To put their power into perspective, if you have a portfolio worth $500,000 that averages a yield of 5%, you could be looking at $2,083 in extra cash per month -- with significantly less risk than other types of assets.

Let's dig deeper into why Realty Income (NYSE: O) and Phillip Morris International (NYSE: PM) look like great picks for investors who prioritize safe passive income for the long haul.

Realty Income Corporation

Since its founding with the acquisition of a Taco Bell restaurant in 1969, Realty Income has grown to become one of the largest and most respected real estate investment trusts (REITs) in the U.S. This is a special class of stock, in that REITs are exempt from regular income taxes if they return at least 90% of profits to shareholders through a dividend.

Realty Income stands out because of its business model. Many large REITs specialize in specific industries, such as casinos, data centers, or storage space. But instead of concentrating on a niche, Realty Income targets the relatively broad category of single-tenant freestanding units, which can range from fast-food restaurants to dollar stores and auto-repair shops.

These businesses tend to be classified as consumer staples, which means demand tends to stay strong, even during a difficult economy. This characteristic helps make the company's cash flow recession-resistant, which is crucial in this period of rising economic uncertainty.

Realty Income offers a dividend yield of around 5.1%, which is far above the S&P 500 average of just 1.1%. The company is also starting to enjoy impressive stock-price growth, with shares already up 13% year to date.

Phillip Morris International

Over the last century, tobacco stocks -- especially Phillip Morris's former parent company, Altria Group -- have delivered some of the best inflation-adjusted returns of any public equities. And it isn't hard to see why. Nicotine is a habit-forming chemical, which means people tend to keep buying it even when the price increases or the economy is in a downturn.

However, the characteristics that made the tobacco industry succeed also caused its fall from grace, as people and governments became more aware of its health risks and ethical shortcomings. But instead of sinking with the ship, Phillip Morris has decided to transition away from cigarettes, toward reduced-risk products that can help its customers quit smoking and potentially bring less public-health and reputational damage.

Image source: Getty Images.

Outside the U.S., Phillip Morris has become known for its wildly popular platform called Iqos, which is designed to heat tobacco without burning it, thus releasing fewer harmful chemicals. In 2022, the company also acquired Swedish Match in a $16 billion deal that gave it ownership of the Zyn brand of nicotine pouches, along with a much wider U.S. distribution network. The impacts of these moves are showing up in its results.

Philip Morris' first-quarter sales jumped 9.1% to $10.1 billion, driven by the popularity of its portfolio of smoke-free nicotine products. The company is also solidly profitable, with operating income jumping 9.8% to $3.9 billion. And it returns value to shareholders through a dividend that currently yields 3.5%.

The company has also historically done periodic share repurchases. These were suspended after the Swedish Match acquisition, but could potentially resume if profits continue to grow.

Which stock is best for you?

Realty Income and Phillip Morris International are both great picks for income-hungry investors. That said, Realty Income is better for people who want a stock they can buy and forget about, because of its higher yield and diversified defensive business model. Phillip Morris has a much lower yield, but will probably deliver a bigger total return because of its new and innovative tobacco products.

Will Ebiefung has positions in Realty Income. The Motley Fool has positions in and recommends Realty Income. The Motley Fool recommends Philip Morris International. The Motley Fool has a disclosure policy.

If you want to make millions in the stock market, you should look for small, little-known companies pioneering disruptive tech niches. Poet Technologies (NASDAQ: POET) certainly seems to fit into this category with its unique spin on generative artificial intelligence (AI) hardware.

With a market cap of just $1.1 billion, the company is significantly smaller than the $4.8 trillion industry leader Nvidia. And if Poet Technologies can replicate even a little bit of its success, that could mean potentially life-changing returns for its early backers. Let's explore the pros and cons of the stock to decide how the next few years might play out.

A unique spin on AI hardware

Most of us experience generative AI through conversational chatbots and those silly animated videos flooding social media. But a multi-billion-dollar industry has developed behind the screens to provide the computational power, connectivity, and infrastructure needed to support consumer-facing large language models and other applications.

Poet is building a niche through its photonics technology, which is designed to move data through light waves alongside electricity. The company believes it can disrupt the AI data center ecosystem by offering better performance and lower energy and cost requirements compared with traditional forms of AI computing infrastructure. And if it pulls this off, it would help ease one of the industry's biggest bottlenecks.

That said, Poet's success is far from a sure thing. And the stock has experienced huge volatility during the past few months -- losing more than 50% of its value between late April and May as investors grew more skeptical.

What went wrong?

Finding the next big technology stock is a bit like searching for a needle in a haystack because groundbreaking innovations do not always translate to sustainable commercial success. Regular investors also don't necessarily have the technical expertise to understand Poet's complex photonic systems or compare them to alternative solutions.

With all this in mind, the company's stock performance heavily relies on validation from industry insiders -- particularly the major AI and semiconductor giants that could actually use its technology in real-world scenarios. Their adoption is crucial for the company's long-term success. And so far, it has had mixed results in persuading them to hop aboard.

Image source: Getty Images.

In late April, Poet experienced a major setback when a client, Celestial AI, a subsidiary of Marvell Technology, canceled all purchase orders, including orders dated back to 2023. The deal was related to phonics and optical systems and would have served as a major validation for Poet's technology as well as a source of much-needed growth.

Marvell claims that the cancellation is related to the contravention of confidentiality requirements. But Marvell was brought into the deal through its acquisition of Celestial AI in February, not something it undertook on its own. It is possible that it also see Poet's technology as too speculative and poorly aligned with its strategic goals. The company may also be looking to develop photonics technology in-house.

Is Poet Technology a millionaire-maker stock?

At the end of the day, public stocks exist to make money for their shareholders. And so far, Poet's situation is complicated. The good news is that the company's full-year 2025 revenue soared almost 2,500% to $1.07 million because of early shipments of its photonics systems.

However, investors shouldn't get carried away because this growth comes from a very small base, and it isn't guaranteed to continue -- especially considering the recent loss of the Marvell contract. That deal was worth $5 million alone, likely spread out over several years. Furthermore, Poet Technology has no clear pathway to profitability with an operating loss of $42.1 million in 2025 compared with a $30.1 million loss in the prior year.

Poet Technology's small size and potentially disruptive technology give it the potential to generate millionaire-maker returns. But the risks outweigh the potential rewards right now, and investors should probably sit on the sidelines until more information becomes available.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Marvell Technology and Nvidia. The Motley Fool has a disclosure policy.

Over the long term, stocks tend to rise in price. But these long periods of growth are usually interrupted by market corrections, which are temporary drawdowns of over 10%. Let's discuss some reasons why the Nasdaq Index looks overdue for one of these dips and discuss strategies investors can use to make the most of the situation.

Interest rates and inflation

In late February, the US and Israel commenced military strikes on Iran, a nation responsible for around 4% of the world's oil supply. The war is having a profound impact on the energy markets, which could have knock-on effects throughout the global economy and financial markets.

For stock market investors, the biggest challenge will be potential stagflation. These are periods of slow growth and rising prices that historically followed other Middle Eastern supply shocks, such as the 1973 OPEC oil embargo and the Iranian Revolution in 1979. Back then, higher energy costs reduced the amount of money consumers were able to spend on other things, which hurt corporate earnings and margins.

Image source: Getty Images.

Interest rates are another big challenge. In April, the Federal Reserve voted to keep the benchmark rate unchanged at 3.5% to 3.75%, citing uncertainty related to the war and Trump's erratic trade policy. While these rates are not particularly bad from a historical perspective, they are significantly higher than the near-zero rates enjoyed for much of the pre-pandemic period. And many credit-dependent industries, like automotive and real estate, are experiencing lower growth because the higher rates have brought monthly payments to unaffordable levels.

Higher rates also mean growing companies will have a harder time securing the capital they need to expand. Furthermore, investors will generally have less money to put into risk assets, pressuring equity prices. This comes at a time when valuations are already stretched.

The market flashes a warning not seen in over 20 years

There are many ways to value the stock market. But one of the most useful tools is the cyclically adjusted price-to-earnings (CAPE) ratio. This metric is designed to smooth out the influence of the business cycle by averaging real corporate earnings over 10 years. And it gives investors an idea of how cheap or expensive stocks are from a historical perspective.

With a CAPE ratio of almost 40.9, U.S. stocks are trading at highs not seen since the dot-com bubble, when they peaked at 44. Back then, investors were pouring money into speculative internet stocks in a situation that is eerily reminiscent of the current generative artificial intelligence (AI) boom.

Technologists generally believe that generative AI will eventually become an important -- if not transformational -- technology megatrend. But from a financial perspective, it is far from a sure bet. The challenge comes from the vast amounts of capital needed to build and run AI data centers, coupled with high competition and unclear monetization strategies for the consumer-facing large language models (LLMs) themselves.

The clearest example comes from the industry leader OpenAI, which is expected to burn through an eye-popping $115 billion (in combined losses and capital expenditures) by 2029. It is far from the only AI company that is struggling. Elon Musk's privately owned SpaceX is believed to have generated an operating loss of $5 billion because of its recent AI investments. And other AI companies are likely facing similar challenges.

What should investors do?

Corrections are natural and expected in the stock market, and investors shouldn't look at them as a negative thing. Instead, try to see dips as an opportunity to buy quality stocks at a discount and bet on an eventual rebound. It might be a good idea to keep a pile of cash ready.

Will Ebiefung 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.

By now, most people in the cryptocurrency market know that long-term investing is the key to sustainable returns. The asset class is notoriously volatile, and a buy-and-hold strategy helps smooth out the booms and busts to let its fundamental growth drivers shine through.

For Bitcoin (CRYPTO: BTC), this mindset is particularly important. The world's leading cryptocurrency reached its all-time high of $126,000 in October last year before falling 39% as of the time of this writing.

Investors are eager to know what factors could drive its eventual recovery. Let's dig deeper to see what the next three years could hold.

Why did Bitcoin crash?

On the surface, the crypto's correction is surprising considering the recent tailwinds for digital assets. Under President Donald Trump, the U.S. has moved away from lawsuits and enforcement toward a more accepting stance that prioritizes clarity. The creation of a Bitcoin strategic reserve and new legislation also helped push the crypto into the mainstream, making institutional investors more comfortable holding it.

Furthermore, the war in Iran raised some investors' hopes that the digital coin might act as a safe haven against economic risk -- similar to the role played by U.S. Treasury bonds and precious metals like gold, which tend to rise during times of global uncertainty and inflation. Unfortunately for the bulls, these scenarios didn't play out as expected.

Instead of performing like a safe haven, Bitcoin is acting more like a traditional risk asset -- posting a rising correlation with technology stocks as measured by the Nasdaq-100 (although it tends to be more volatile).

This trend suggests that crypto is becoming more integrated into mainstream finance and will benefit from the same factors that benefit other risk assets, such as lower interest rates and overall economic growth. While the near-term situation is challenging, stocks have always bounced back over the long term. And if the trend holds, Bitcoin should as well.

Image source: Getty Images.

Why is Bitcoin different?

When it comes to long-term cryptocurrency investing, the asset you pick can make a huge difference in your returns. Speculative meme coins like Dogecoin or Shiba Inu can post explosive returns in the near term, but their volatility can lead to underwhelming long-term results.

As the first cryptocurrency, however, Bitcoin has established a first-mover advantage, which contributes to its brand recognition among large financial institutions (such as university endowments, hedge funds, and family offices) that might be hesitant to put funds into less-trusted assets.

Adoption is rising rapidly. According to cryptocurrency data platform Arkham, inflows into spot Bitcoin exchange-traded funds (ETFs) totaled $823 million last week alone. And on top of helping support prices, this trend could reduce volatility by increasing the influence of stable deep-pocketed institutions that are less likely to panic and sell compared to retail investors.

What will the next three years have in store?

Bitcoin tends to behave like a risk asset. And that means the rest of 2026 could be challenging as the war in Iran promises to keep inflation high and delay the Federal Reserve's timeline for lowering interest rates.

Meanwhile, with a Shiller price-to-earnings ratio (CAPE) of 40, stocks trade at historically high valuations, raising the possibility of downside.

While Bitcoin isn't directly tied to the stock market, its rising correlation with equities suggests a drop in investor sentiment could pressure both asset classes simultaneously.

But while we don't know how long these headwinds will last, it's safe to assume they won't last forever. Mainstream institutional investors are becoming increasingly comfortable with crypto, and Bitcoin's trusted brand helps it stand out. Three years from now, the asset is fully capable of recapturing its previous highs and possibly pushing new ones. In fact, I expect Bitcoin to do that.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Bitcoin. The Motley Fool has a disclosure policy.

Initial public offerings (IPOs) are some of the most exciting events in financial markets because they give regular investors the ability to buy into businesses that were previously out of reach. But investors shouldn't assume every IPO is a good deal. Instead, they should ask questions about timing, management incentives, and stock valuation.

If SpaceX is so great, why are its current owners willing to sell off some of their shares instead of keeping it all to themselves as a private company? And why doesn't management want to go public now, instead of 10 or 20 years ago? These aren't necessarily red flags, but they do warrant some deeper digging for investors considering buying SpaceX stock.

Image source: Getty Images.

SpaceX is already too large

Many companies time their IPOs at a relatively early stage in their life cycles. And this makes sense because the public offering gives the young business a boost in the capital it needs to fund its expansion and grow -- while giving new investors ground-floor access to what could eventually become a much larger business. However, with an expected IPO market cap of $2 trillion, SpaceX clearly doesn't fall into this category.

If things go as expected, SpaceX will be the largest IPO in history. The company is also relatively mature. According to data from private market research firm Sacra, its revenue grew by just 18% to $15.5 billion in 2025. While this is a decent number, it represents a sharp deceleration from the growth rates of 51% and 89% reported in 2024 and 2023.

To make matters worse, SpaceX's valuation is also extremely high. The company's expected market cap of $2 trillion would give the stock a price-to-sales (P/S) ratio of 129, which is substantially higher than the S&P 500 average of 3.5. The valuation is also far too high for a company with plateauing growth, and it doesn't leave much room for fundamentals-driven stock price appreciation over the next few years.

Generative AI exposure adds risk

Slowing growth and a high valuation aren't the only challenges SpaceX will face after its IPO. There is also uncertainty about its business direction and long-term strategy. Investors who think they are betting on a space industrial company may be in for a very rude awakening.

In February, SpaceX acquired Elon Musk's artificial intelligence start-up xAI in an all-stock deal worth $250 billion. xAI is known for developing the Grok chatbot, and this move has made SpaceX a major player in the market for large language models (LLMs) alongside companies like OpenAI and Anthropic.

There are several problems with this merger. For starters, the AI business and space are not necessarily related. And it is unclear what synergies will be unlocked by combining the two companies. To make matters worse, generative AI is an extremely speculative industry, so the deal has substantially increased the risk profile of SpaceX as a whole.

According to tech news website The Information, generative AI-related spending caused SpaceX to post a $5 billion loss in 2025. This negative trend probably won't end anytime soon because generative AI still seems to be far from commercial viability. And SpaceX is likely planning to pour much of the funds it raises from the IPO into building out data centers and other AI infrastructure. It is very unclear whether shareholders will benefit from this.

IPOs historically underperform

History tells us that big IPOs usually come with big risks. Research from investment firm Edward Jones has found that these stocks frequently underperform the market over the three to five years following their listing. And with its gargantuan valuation coupled with slowing growth and a risky pivot to AI, SpaceX looks likely to contribute to that statistic.

The Motley Fool has a disclosure policy.

A thousand dollars may not seem like a lot right now. But it could help set the stage for impressive long-term returns if invested in the right companies at the right times. Because of their combination of long-term growth potential and above-average dividend yields, Vici Properties (NYSE: VICI) and PepsiCo (NASDAQ: PEP) could make great picks.

Vici Properties

Vici Properties is a real estate investment trust (REIT) that was formed from the spin-off of Caesars Entertainment's real estate assets after its bankruptcy liquidation in 2017. Since then, Vici has transformed into a leading leisure-focused real estate company with 54 casinos, four championship golf courses, and 39 other entertainment properties.

The REIT business model involves raising capital to acquire real estate, which is then rented out to tenants. Vici stands out because of its specialization, high-quality tenants, and use of triple-net leases. These contracts shift property-level operating costs like insurance, maintenance, and taxes to the tenant, allowing Vici to reduce its exposure to real-estate inflation and enjoy stable cash flows.

Among the near-term challenges it faces is the current tourism downtrend in Las Vegas, where visitor traffic dropped by around 7.5% in 2025. However, the good news is that Vici's assets are diversified across North America -- it doesn't have excessive exposure to any single market. The company also has a significant footprint outside the gambling industry with its Bowlero portfolio of bowling alleys.

REITs are required by law to distribute at least 90% of their annual income to shareholders via dividends, and with a yield of 6.3%, Vici's stock offers far more income than the S&P 500's average yield of just 1.1%. And the company has increased its annual payout for seven years in a row.

PepsiCo

Blue chip stocks are established industry leaders that can be expected to generate consistent profits for the long haul. PepsiCo easily fits into this category. Since its founding in 1965, the company has grown to dominate the market for convenient snacks and beverages, boasting high-profile global brands like Pepsi, Doritos, and Gatorade. It leverages these assets to deliver reliable returns to its shareholders.

Over the last few years, there have been rising fears that the spread of GLP-1-based weight-loss drugs like Ozempic could reduce demand for the junk food PepsiCo specializes in. But over time, these concerns have begun to look overblown. Pepsi's growth remains robust. In the first quarter, its net revenue jumped 8.5% year over year to $19.44 billion, driven by strength in international markets, while operating profit surged 24% to $3.21 billion.

Image source: Getty Images.

The company has what it takes to maintain its stability. Junk food often behaves as a consumer staple because people often still spend on these items when the economy is weak. Given that analysts at Moody's project a 49% chance of a U.S. recession in 2026, this knowledge will help PepsiCo shareholders sleep a little easier at night.

While PepsiCo's dividend yield of 3.7% falls short of the massive yields you can expect to find in the REIT sector, the company has increased its payouts annually for a jaw-dropping 53 years in a row. And it has what it takes to maintain this impressive streak.

Which dividend stock is best for you?

Diversification is one of the most important long-term investing strategies because it prevents underperformance by any one asset or sector from having too big an impact on the overall portfolio's performance.

With that in mind, it would make a lot of sense for investors to bet on both Vici Properties and PepsiCo. But between the two, Vici looks like the better pick for investors who prioritize income over capital growth -- making it ideal for a tax-advantaged account, such as a 401(k) or an individual retirement account. By contrast, PepsiCo is more likely to deliver the majority of its total returns through capital appreciation.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Moody's. The Motley Fool recommends Vici Properties. The Motley Fool has a disclosure policy.

The future will be complicated for Amazon (NASDAQ: AMZN). The diversified technology behemoth has a long track record of exceptional growth. However, its market cap of $2.74 trillion suggests that the business is mature, and most of the low-hanging fruit has already been plucked.

Let's dig deeper into the pros and cons of Amazon stock to decide if it can still generate market-beating performance over the next five years.

A history of reinventing itself

Amazon is unique because of its track record of reinventing itself by pivoting to new synergistic industries. First, it was an online bookstore. CEO Jeff Bezos used that fulfillment infrastructure to create a general-purpose e-commerce marketplace. He then used the company's substantial web hosting prowess to offer Amazon Web Services (AWS) to clients, supercharging the company's growth and profitability.

Amazon's future will depend on its next big transition. There are already some hugely synergistic opportunities on the table. The clearest move is in digital advertising. Amazon has already made significant progress here by incorporating ads into its shopping experience.

Amazon ads can be particularly effective. Unlike rivals such as Alphabet's Google or Meta Platforms, Amazon owns its own marketplace, giving it a treasure trove of data on consumer behavior and habits. It can also offer valuable first-page product placement (the sponsored category), which can ensure practically guaranteed sales for clients, leading to better demand and pricing power for Amazon. The company's ad business grew by an impressive 22% year over year to $21.3 billion in the fourth quarter.

Generative AI is Amazon's next big bet

The 2022 launch of OpenAI's ChatGPT set off a race as America's largest technology companies poured billions into the AI opportunity to avoid falling behind. For Amazon in particular, AI spending could be key to maintaining AWS' leading 28% market share in the cloud computing market. That's because AI companies typically rely on remote third-party infrastructure to handle their vast computing and storage needs.

But the scale of these investments may be cause for alarm. This year, the company expects to spend a jaw-dropping $200 billion in capital expenditure related to things like data centers and AI hardware. This figure represents a 60% increase from last year. It could also dramatically reduce the amount of cash the company has for other things.

To put this in context, Amazon generated an operating income of roughly $80 billion for the entirety of 2025. The huge disparity between operational profits and capital expenditure means that investors probably shouldn't expect buybacks or dividend payments anytime soon. There is also the possibility that AI tech in general will fail to live up to expectations.

Image source: Getty Images.

On a more encouraging note, Amazon is finding substantial success in the hardware side of the industry, where it is competing with industry leader Nvidia to provide the chips needed to run and train large language models (LLMs). The business is scaling up rapidly. This month, AWS signed a three-year deal with Meta Platforms to supply hundreds of thousands of its Graviton chips designed for general-purpose computing.

The AI chip business might be more interesting than the cloud business because it doesn't require the construction of large, expensive data centers. Amazon can also leverage its in-house chip designs to bring down costs for clients within its cloud computing ecosystem.

What will the next five years bring?

The next five years will be a period of transition for Amazon as it attempts to turn AI infrastructure into its next big growth driver. That said, the huge amount of capital spending will probably make the market nervous until more tangible results become visible. The stock looks like a cautious buy or a hold until more information becomes available.

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

Long-term investing is the key to life-changing returns in the stock market because it smooths out the noise and volatility, allowing time for a stock's real growth thesis to take shape. This concept is especially true for companies like Rocket Lab (NASDAQ: RKLB), which are pioneers in relatively new opportunities.

Let's discuss the pros and cons of the space industrial start-up to decide what the next decade might have in store.

Why the space industry?

Nowadays, growth stock investors have a lot of places to put their money, ranging from generative artificial intelligence (AI) to robotics and even quantum computing. But space exploration stands out because it is a more proven opportunity.

Industry leader SpaceX is estimated to have earned revenue of $18.5 billion in 2025 alone. And with analysts at McKinsey and Company expecting the market to reach a trillion by 2025, there is plenty of room for smaller companies like Rocket Lab to follow in its footsteps.

Both companies use rockets to transport payloads into low Earth orbit (LEO) to serve government and commercial clients. These missions can include bringing satellites to space for GPS, broadband internet, or defense. But with a market cap of just $49 billion (compared to SpaceX's estimated $2 trillion), Rocket Lab allows investors to get in on the ground floor of the growth story. It also doesn't have SpaceX's arguably unwanted AI exposure caused by its acquisition of xAI in February.

Rocket Lab's finances are a mixed bag

When it comes to growth stocks, risk and potential reward usually come hand in hand, and Rocket Lab is no exception. The company's fourth-quarter (Q4) revenue jumped 36% year over year to $180 million as it launched a record of seven missions with its small launch vehicle Electron.

The company's top line is expected to continue expanding because of a slew of new launch contracts with government and commercial clients. This includes a $816 million deal with the Space Development Agency to help design a constellation of advanced missile-warning spacecraft. Revenue will likely be recognized over the next few years, and it highlights the company's ability to compete with established aerospace and defense contractors for the next-generation military technology.

That said, Rocket Lab's bottom line is much less exciting. The company is still quite far away from profitability, with operating losses of $51 million.

The good news is that this represents a slight decrease from the prior-year period, and it's mainly due to increased research and development costs as the company works to bring its new rocket platform, Neutron, across the finish line. Gross profits (which don't factor in research or office expenses) actually jumped 85% year over year to $68.2 million. The company has a clear pathway to profitability through more scale.

What will the next 10 years have in store?

Image source: Getty Images.

Over the coming years, Rocket Lab will have to grow into its valuation. While the company's $49 billion market value looks tiny compared to industry leaders like SpaceX, it is quite large relative to its sales and currently nonexistent earnings. With a price-to-sales (P/S) multiple of 79, Rocket Lab's shares trade at an immense premium over the S&P 500 average of just 3.5, and this leaves very little room for failure.

Valuation concerns may be solved with the launch of RockLab's medium-sized rocket Neutron. This vehicle will be capable of transporting payloads of 13,000 kilograms (28,660 pounds) into LEO, potentially giving the company the extra scale it needs to drive more revenue growth and potentially even profits when it arrives later this year. And while nothing is guaranteed, the company looks capable of delivering a multibagger over the coming decade if it demonstrates the ability to deliver on promises.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Rocket Lab. The Motley Fool has a disclosure policy.

There are no guarantees in the investment world. If you bet on the wrong company at the wrong time, be prepared to potentially lose boatloads of money. Lucid Group's (NASDAQ: LCID) early backers learned this lesson well. Shares in the electric vehicle start-up are down by a blistering 99% from the all-time high they reached in early 2021.

The biggest loser is probably the Saudi Arabian government, which controls over 60% of the company's equity through its Public Investment Fund (PIF). But plenty of regular investors have also gotten burned. Let's dig deeper to see if the situation can turn around over the next few years.

Rising energy costs are a bullish factor

The war in Iran might be an underacknowledged bullish factor for the electric vehicle industry. The conflict has virtually choked off the Strait of Hormuz, through which 20% of the world's oil shipment volumes pass. Many top Middle Eastern energy producers have been caught in the crosshairs, sending oil futures up by a whopping 53% year to date.

Electric vehicles allow people to bypass oil prices by getting electricity from the grid, which is typically less volatile. There are signs that consumers are already changing their behavior. Data from New Automotive indicates that EV registrations surged 51% year over year across 15 countries in the European Union. In the U.S., online marketplace Autotrader reports a 28% jump in inquiries about EVs.

The situation also has substantial political ramifications as governments around the world realize the importance of reducing their reliance on imported oil. This trend could encourage them to support the industry.

Lucid's fundamentals are complex

Favorable macroeconomic conditions don't matter much if a company can't convert them to profits. Lucid's fourth-quarter earnings were a mixed bag. The good news is that top-line figures were phenomenal. Revenue surged 123% year over year to $522.7 million amid a huge surge in deliveries driven by the company's new midsize SUV, the Gravity.

Generally, SUVs are a much more popular vehicle type than luxury sedans in the U.S. The launch of the Gravity last year has quickly expanded Lucid's addressable market. That said, with a starting MSRP of $79,900, the car is a little pricey. Over the next few years, management could boost growth by pivoting to lower-priced offerings such as the Lucid Earth, expected to start at $50,000 when it becomes available next year.

But while Lucid's top line is doing well, the company's bottom line continues to struggle. Q4 operating losses ballooned 45% to $1.06 billion, which is an alarming amount of quarterly cash burn for a company with a market cap of just $2.6 billion. Lucid will struggle to remain in business without massive commitments from its backers.

Could Saudi Arabia and Uber save the day?

Image source: Getty Images.

Lucid's situation would look hopeless without the continued support from the Saudi Arabian government, which sees the company as a useful tool to transition itself away from overreliance on fossil fuels. The war in Iran further exposes the vulnerabilities in the traditional energy industry. This uncertainty could bolster the Saudi government's commitment to financing Lucid, even if it doesn't make strict financial sense right now.

Another lifeline could come from Uber Technologies. This week, it was reported that the ridesharing giant plans to invest an additional $200 million into Lucid (bringing its total to $500 million) as part of the two companies' robotaxi partnership. This deal will involve using Lucid's new Gravity SUVs as a base for autonomous vehicles. It could also help Lucid increase production volume and improve margins by spreading fixed manufacturing costs across a larger number of vehicles.

But while I am cautiously optimistic about Lucid, it is always risky to catch a falling knife. Investors shouldn't overcommit to the stock until there are signs that its extreme levels of cash burn are coming under control.

Will Ebiefung has positions in Lucid Group. The Motley Fool has positions in and recommends Uber Technologies. The Motley Fool has a disclosure policy.

Most investors are on the lookout for stocks that give exposure to untapped growth industries. And it's natural to pay attention to reports that Elon Musk's leading space company, SpaceX, could soon hit public markets through an initial public offering (IPO). But while this is exciting, all that glitters is not gold.

Let's dig deeper into the potential pitfalls of buying SpaceX stock when it becomes available and compare it to a much smaller alternative called RocketLab (NASDAQ: RKLB), which is already publicly traded.

SpaceX wants you to buy

Last week, SpaceX executives began meeting with bankers to outline plans for the stock's public launch in June. And according to Reuters, they have a target valuation of $1.75 trillion. Not only will it be the largest IPO in history, but it could also have the highest amount of shares allocated to retail investors at 30%, compared to the usual 5% to 10%.

The report suggests that SpaceX's CEO, Elon Musk, wants mom-and-pop investors to have a larger ownership stake in the company relative to more-sophisticated institutional investors. However, this decision could cause the equity to trade like a meme stock, where the valuation often becomes detached from a realistic assessment of growth and earnings.

Investors should make sure to remain grounded in SpaceX's fundamentals instead of getting carried away by the excitement and hype. There are already some potential concerns that could make the stock risky.

What are the downsides of SpaceX?

The first and most obvious drawback of the SpaceX IPO will be its size. The company's estimated market capitalization of $1.75 trillion would make it the eighth-largest company in the world, ahead of giants like Tesla and Meta Platforms. The difference is that these other businesses allowed retail investors to get in on the ground floor of their growth journeys, while SpaceX investors will have to buy shares potentially near the top.

There are signs that the space company is maturing. Private market research firm Sacra estimates revenue grew by 18% year over year in 2025. While that's a decent number, it represents a sharp decrease from rates of 51% and 89%, respectively, in 2024 and 2023.

Image source: Getty Images.

SpaceX's pivot to generative artificial intelligence (AI) could also pose some risks. In February, the company purchased Musk's large language model (LLM) developer, xAI, in a stock deal worth $250 billion.

The AI industry is extremely competitive, and while the deal could give the combined company a new growth driver, it also runs the risk of increasing losses and burning through cash that could have otherwise gone to shareholders. The Information, a technology news website, reports that SpaceX lost $5 billion in 2025, largely due to unprofitable AI-related spending.

Is RocketLab the better buy?

Investors who want exposure to the space industry without the slowing growth and generative AI risk involved in SpaceX have an alternative. RocketLab is a pure play that focuses on transporting payloads into low Earth orbit. With a market capitalization of $49 billion, it offers room for long-term growth, and it plans to ramp up its scale with the launch of a new, higher-capacity rocket called the Neutron later this year.

That said, while RocketLab looks like a better buy than SpaceX, it is not without its risks. With a price-to-sales ratio (P/S) of 74, shares are already priced for perfection. And delays in the launch could lead to a market sell-off.

Overall, investors should remember that space is still a relatively speculative and unproven industry. And whichever space stock you choose, it is best to only have moderate exposure as part of a diversified portfolio.

Will Ebiefung has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Rocket Lab, and Tesla. The Motley Fool has a disclosure policy.

As your investment portfolio gets larger, it makes sense to prioritize stability and income over short-term gains. Dividends also feel much more impactful when you have more money to work with. To put this in perspective, a 5% yield on a $1,000 portfolio gives you an extra $50 each year -- that jumps to $50,000 per year on a $1 million portfolio.

It's the same percentage yield but with a much more potentially life-changing impact. And over the long term, this money can compound into a comfortable retirement or even lasting generational wealth.

Let's explore some reasons why Alpine Income (NYSE: PINE) and Dollar General (NYSE: DG) look like great picks for investors who want to build income-focused portfolios that can stand the test of time.

Image source: Getty Images.

1. Alpine Income

Real estate investment trusts (REITs) are a special type of stock designed to give investors access to the wealth-generating power of real estate without the real-world complexities like tenants, maintenance, and insurance. REITs are ideal for long-term investors because of their above-average yields alongside often safe and diversified business models.

The industry is dominated by giants like Realty Income and Welltower (which boast market caps of $61 billion and $148 billion, respectively). But Alpine Income stands out because of its relatively small size. With a market cap of just $324 million, the company gives investors a chance to get in on the ground floor of its expansion story.

Unlike larger REITs, it will be easier for Apine's management to find quality real estate deals that can move the needle. And in late 2025, the company closed a series of deals, including a $20.7 million strip mall anchored by Walmart and TJ Maxx. These large mainstream brands promise reliable cash flow. And Alpine Income further boosts its safety through the use of triple net leases, where the tenant is responsible for many property-level operating costs like taxes, maintenance, and insurance.

The market is finally taking notice of Alpine Income, sending shares up 18% year to date. But with a dividend yield of around 6%, shares still look like an excellent income opportunity at the time of writing.

2. Dollar General

The war in Iran has injected a high level of uncertainty into the U.S. economy, with rising fuel costs threatening to boost inflation and making it harder for consumers to afford nonessential goods. The situation is bad enough that credit ratings agency Moody's puts the probability of a recession at 49% in 2026. That said, Dollar General's business model could help it thrive in this uncertain macroeconomic environment.

Unlike a typical grocery store, the company offers a streamlined, no-frills shopping experience -- often prioritizing locations in rural and underserved areas where land and labor are cheaper. It then passes these savings on to consumers in the form of lower prices. While lower income brackets still represent the company's bread and butter, it is increasingly appealing to wealthier consumers.

This trend has allowed Dollar General to raise prices slightly to maintain its margins. And over the long term, investors can expect the company to continue broadening its niche within the U.S. retail landscape. Fourth quarter net sales jumped 5.9% year over year to $10.9 billion, driven by healthy same-store growth. Meanwhile, quarterly profits surged 106.1% to $606.3 million, generating plenty of cash to return to shareholders.

With a dividend yield of just 1.9%, Dollar General's payout falls short of traditional income-oriented stocks like Alpine Income. That said, Dollar General has maintained its dividend for over a decade. And there is plenty of room for growth as it continues to scale up. The stock is ideal for investors who want a balance of income and capital appreciation.

Will Ebiefung has positions in Realty Income and is short shares of Dollar General. The Motley Fool has positions in and recommends Moody's, Realty Income, and Walmart. The Motley Fool has a disclosure policy.

With shares down 19% since the start of 2026, Rigetti Computing (NASDAQ: RGTI) has lost much of the hype that pushed it to an all-time high of $56 in late 2025. Investors have generally lost interest in the quantum computing story, and markets are distracted by the geopolitical crisis in Iran, which is broadly hurting stock market performance.

That said, Rigetti's core thesis remains largely unchanged. Let's dig deeper into the pros and cons of the stock to decide how the company's shares might perform over the next half-decade and beyond.

Why did Rigetti Computing soar last year?

The past year was a breakout period for Rigetti Computing, and this was largely due to major advancements for the industry as a whole. In December 2024, Google announced the release of Willow, a state-of-the-art quantum chip capable of correcting its own mistakes and outperforming one of the world's most powerful supercomputers on a benchmark test.

Willow made investors optimistic that quantum could soon be ready for widespread commercialization (Google expects this by 2029). And the industry also got a boost in October when financial media outlets began reporting that the Trump administration was in talks to financially support quantum companies with the goal of maintaining a lead over China.