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There is one very simple reason I expect SoundHound AI (NASDAQ: SOUN) stock to beat the market over the next seven years. The company has a huge backlog of long-term contracts and other unfilled orders, just waiting to convert into cash-based revenues. Market makers seem to have missed this as-yet untapped source of future sales — and the average contract in SoundHound AI’s backlog pool is a seven-year deal.

The backlog was worth $723 million in the second quarter. That’s up from $682 million in the previous quarter and $339 million in the year-ago period. In the summer of 2023, the backlog was growing at a 20% annual rate. Now, the rate of year-over-year growth has accelerated to 113%. The company is busy securing new contracts.

Meanwhile, SoundHound AI has started to collect subscription fees and other revenues from previously dormant contracts. As a result, its revenues are skyrocketing right now:

Where SoundHound AI’s customers are coming from

So far, most of SoundHound AI’s voice control sales rest on the twin pillars of automotive and restaurant customers.

• Fiat, Chrysler, and Maserati parent Stellantis (NYSE: STLA) is rolling out SoundHound AI voice controls with ChatGPT integration across its brands in Europe and Japan these days. American installations shouldn’t be far behind.

• Recent restaurant deals include popular fast-food chain White Castle, sandwich-slinger Jersey Mike’s, and sports bar chain Beef ‘O’ Brady’s. The names are getting familiar, and you might have already interacted with SoundHound AI’s computer-controlled voice ordering systems.

• The company is making strategic buyouts in the artificial intelligence (AI) space for voice controls and e-commerce integration. These deals should firm up SoundHound AI’s grip on its core target industries while expanding its reach into new sectors.

This little AI expert is going places, and the revenue collection is just getting started. Keep an eye on SoundHound AI’s order backlog as it converts into a proper revenue stream over the next few years. As the company’s sales soar, the stock price should follow suit.

Should you invest $1,000 in SoundHound AI right now?

Before you buy stock in SoundHound AI, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and SoundHound AI wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

Story continues

See the 10 stocks »

*Stock Advisor returns as of August 22, 2024

Anders Bylund has positions in SoundHound AI. The Motley Fool recommends Stellantis. The Motley Fool has a disclosure policy.

Prediction: SoundHound AI Will Soar Over the Next 7 Years. Here’s 1 Reason Why. was originally published by The Motley Fool

Federal Reserve Chair Jerome Powell told investors on Friday “time has come for policy to adjust.”

In response, stocks finished the week near record highs. The S&P 500 (^GSPC), the Nasdaq Composite (^IXIC), and the Dow Jones Industrial Average (^DJI) all rose more than 1% on the week. The S&P 500 is now within 1% of a record closing high.

But the market’s rebound from August lows will be put to the test this week with a highly anticipated earnings release from AI leader Nvidia (NVDA) after the bell on Wednesday.

Earnings from Salesforce (CRM), Best Buy (BBY), Dell (DELL), and Lululemon (LULU) will also be in focus, while a key reading of the Fed’s preferred inflation gauge will highlight the economic calendar.

A done deal

On Friday, Powell made clear to investors that interest rate cuts are coming in September.

But he did not explicitly signal how aggressively the central bank will slash rates as it gets this easing cycle underway.

Powell noted the timing and pace of cuts will “depend on incoming data,” and markets quickly moved to fully price in four rate cuts of 0.25% by the end of 2024 on Friday morning after the Fed chair said the central bank has “ample room” to maneuver as policy enters its next phase.

With only three Fed meetings left in 2024, the looming question remains when the Fed would cut rates by 0.50% in a single meeting to reach current forecasts.

“We continue to think that if instead the August [jobs] report is weaker than we expect, then a 50bp cut would be likely [on Sept. 18],” Goldman Sachs’ economics team led by Jan Hatzius wrote in a note to clients.

As of Friday afternoon, markets were pricing in a 38.5% chance the Fed cuts by 50 basis points by the end of its September meeting, up from a roughly 24% chance seen the day prior, per the CME’s FedWatch Tool.

Capital Economics’ deputy chief markets economist Jonas Goltermann argued the Fed cutting deeper than 0.25% because of weakness in the labor market may not be a welcome sign for investors.

“Investors may reasonably worry that if the FOMC feels the need to front-load policy easing … it may be because the economy is slowing by more than the still very rosy outlook discounted in equity and credit markets implies,” Goltermann wrote in a note to clients on Friday.

“As such, it may well be that a 25bp cut in September is in fact the preferable outcome for equity markets.”

While Powell spent a large part of his Friday speech emphasizing the downside risks to the labor market, the Fed will still have its eyes on an important inflation update on Friday.

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Economists expect annual “core” PCE — which excludes the volatile categories of food and energy — to have clocked in at 2.7% in July, up from the 2.6% seen in June. Over the prior month, economists project “core” PCE rose 0.2%, in line with the month-over-month increase seen in June.

Powell said on Friday his confidence has “grown that inflation is on a sustainable path back to 2%.”

All eyes on Nvidia

With nearly all members of the S&P 500 done reporting earnings, one massive report has been looming: Nvidia.

As has been the case since the chip giant supercharged an AI-driven stock market rally with its earnings report back in May 2023, expectations for Jensen Huang’s company are sky-high.

Wall Street expects Nvidia grew earnings by roughly 109% year over year with revenue also jumping 99% compared to the same quarter a year ago. Updates on any potential delays for Nvidia’s new Blackwell chip will be in particular focus.

The stock enters the print up roughly 160% year to date.

“We believe modest expectations for Blackwell shipments in FQ3 have been backfilled with higher Hopper bookings,” KeyBanc analyst John Vinh wrote in a recent note.”We expect NVDA to report beat/raise results, in which upside will be driven by strong demand for Hopper GPUs.”

Vinh, who has a $180 price target on Nvidia, told Yahoo Finance on Thursday that the stock still looks attractive even after a recent 30% rally.

“Being one of the best-positioned semiconductor companies, obviously levered to one of the strongest product cycles in AI right now, we think it’s still attractively valued at these levels,” Vinh said.

Charles Schwab Asset Management CEO and chief investment office Omar Aguilar said the release will be a “very anticipated” release for the broader market too.

“What I think is going to be expected by the market is to hear what is the outlook for AI and what is the demand for chips going forward as people continue to spend money in AI technologies,” Aguilar told Yahoo Finance on Friday.

Tech volatility could be ‘behind us’

Whipsaw movements in Nvidia and the other “Magnificent Seven” tech stocks have been a feature of the market’s recent drawdown and subsequent bounce back.

Goldman Sachs equity strategist Ben Snider told Yahoo Finance this week that the back-and-forth action could be primed to settle down.

“I think most of the short-term volatility in [the Magnificent Seven] stocks is behind us,” Snider said.

The rally in this group — which consists of Apple (AAPL), Alphabet (GOOGL, GOOG), Microsoft (MSFT), Amazon (AMZN), Meta (META), and Tesla (TSLA), along with Nvidia — between Aug. 5 and Aug. 19 added more than $1.4 trillion to their collective market cap.

“The trajectory of sales and earnings growth has been resilient, more resilient than a lot of investors feared coming into the second quarter,” Snider added. “Valuations are by no means low compared to history, but they’re lower than they were several weeks ago, and we won’t get another earnings report for a few months now.”

For the first time since the start of 2022, hedge funds trimmed exposure to many Magnificent Seven tech stocks to end the second quarter, according to Snider’s recent analysis of securities filings for the end of the second quarter. Amazon and Apple were exceptions.

Snider said this move “speaks to the anxiety we were hearing from investors heading into the second quarter earnings season.”

He added that investors felt the stocks had benefited from the excitement around AI but also expressed “some concern that that AI investment boom was coming to an end.”

“In my conversations with investors, including hedge fund clients, there was very clearly excitement at the opportunity to buy some stocks that they already liked at lower valuations given the sell-off,” Snider said.

Now, after the snapback in tech stocks, investors aren’t as convicted as they were when buying the dip in early August. “I would call sentiment [around megacap tech] cautiously optimistic,” Snider said.

Nothing like price to change an investor’s feelings.

Weekly Calendar

Monday

Economic data: Durable goods orders, July preliminary (+4.2% expected, -6.7% previously); Dallas Fed manufacturing activity, August (-16 expected, -17.5 previously)

Earnings: Trip.com (TCOM)

Tuesday

Economic data: Conference Board Consumer Confidence, August (100.1 expected, 100.3 previously); S&P CoreLogic Case-Shiller, 20-City Composite home price index, month-over-month, June (+0.3% expected, +0.34% previously); S&P CoreLogic Case-Shiller 20-City Composite home price index, year-over-year, June (+6.81% previously); Richmond Fed manufacturing index, August (-17 previously)

Earnings: Bank of Montreal (BMO), Box (BOX), Nordstrom (JWN)

Wednesday

Economic data: MBA Mortgage Applications, week ending Aug. 23 (-10.1% prior)

Earnings: Nvidia (NVDA), Abercrombie & Fitch (ANF), Affirm (AFRM), Bath & Body Works (BBWI), CrowdStrike (CRWD), Chewy (CHWY), Foot Locker (FL), Five Below (FIVE), HP (HPQ), Kohl’s (KSS), Okta (OKTA), RBC (RBC), Salesforce (CRM), The J.M. Smucker Company (SJM)

Thursday

Economic data: Initial jobless claims, week ended Aug. 24 (235,000 expected, 232,000 previously); Personal income, month-over-month, January (+0.5% expected, +0.3% previously); Second quarter GDP, second estimate (+2.8% expected, +2.8% prior); Wholesale inventories, month-over-month, July preliminary (+0.2% prior); Pending home sales, month-over-month, July (+0.4% expected, +4.8% prior)

Earnings: American Eagle Outfitters (AEO), Best Buy (BBY), Birkenstock (BIRK), Burlington Stores (BURL), Campbell’s (CPB), Dell (DELL), Dollar General (DG), Gap (GAP), Lululemon (LULU), Marvell Technology (MRVL), MongoDB (MDB), Ulta Beauty (ULTA)

Friday

Economic news: Personal spending, month-over-month, July (+0.5% expected, +0.3% previously); PCE inflation, month-over-month, July (+0.2% expected, +0.1% previously); PCE inflation, year-over-year, July (+2.6% expected, +2.5% previously); “Core” PCE, month-over-month, July (+0.2% expected, +0.2% previously); “Core” PCE, year-over-year, July (+2.7% expected; +2.6% previously); MNI Chicago PMI, August (44.5 expected, 45.3 prior); University of Mich. consumer sentiment, August final (67.9 expected, 67.8 prior)

Earnings: No notable earnings.

Josh Schafer is a reporter for Yahoo Finance. Follow him on X @_joshschafer.

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It’s been another great year for the stock market. As of this writing, the benchmark index, the S&P 500, is up nearly 18%.

Yet, if you know where to look, there are even better long-term buy-and-hold opportunities out there. Let’s cover two tech stocks that are each up more than 50% year to date.

Spotify Technologies

Spotify Technologies (NYSE: SPOT) tops the list of tech stocks you can buy and hold for the next decade. The company, which operates the world’s largest audio streaming platform, continues to impress.

Since the start of 2023, shares of Spotify are up 339%, making it one of the top-performing stocks over that period. The secret to its stock market success? Spotify has combined revenue growth with cost-cutting. When done right, that’s a powerful combination.

Spotify’s trailing-12-month revenue has increased to $15.7 billion, up from $13.6 billion one year ago. Similarly, 12-month net income has increased to $500 million versus a nearly $800 million loss a year earlier.

In terms of revenue, the company relies on its premium users to provide roughly 90% of its sales. Those users pay a subscription fee for access to ad-free music, podcasts, and audiobooks. Meanwhile, the company derives about 10% of its total revenue from ad-based listening.

Regarding its expenses, Spotify has embarked on a series of cost-cutting measures over the last few years, including reducing staff levels, trimming its marketing budget, and canceling some content projects.

In turn, the company is firing on all cylinders. Granted, Spotify operates in a competitive field, with Apple, Amazon, and Alphabet all offering their own form of audio streaming.

However, Spotify has more than held its own. With over 600 million listeners and almost 250 million subscribers, Spotify has established itself within the audio streaming market. Investors looking for a growth stock with legs should consider Spotify.

Meta Platforms

Next is Meta Platforms (NASDAQ: META), the operator of Facebook and Instagram.

Granted, I’ve had my concerns with Meta, particularly around the tens of billions of dollars the company chose to spend on the Metaverse. However, one fact is undeniable: Meta generates cash at an almost unbelievable level. This company can afford to take some expensive risks. And I’m sure that’s one of the reasons Meta CEO Mark Zuckerberg felt comfortable pouring $46 billion into the company’s Reality Labs segment — money that heretofore has not generated any return.

At any rate, let’s take a closer look at Meta’s cash flow. In the last 12 months, the company has generated $50 billion in free cash flow.

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META Free Cash Flow data by YCharts

It’s a staggering sum, and it puts Meta into rarified air. Its $50 billion in free cash flow, for example, is comparable to the total free cash flows from energy giants ExxonMobil and Chevron — combined.

No wonder the company initiated its first-ever regular dividend payment this year. After all, finding the cash to pay for those dividends is no problem. The new payout policy shows that Facebook has plenty of surplus cash profits on hand, in search of a shareholder-friendly cash management policy.

What’s more, as long as Meta Platforms remains disciplined in its spending, there’s plenty more cash flow on the way. Analysts expect the company to grow its sales by 20% this year and a further 13% in 2025. Those rising revenue figures should support even more free cash flow and perhaps even higher dividend payouts at some point. All of this should make investors happy to own Meta Platforms for the next decade.

Should you invest $1,000 in Meta Platforms right now?

Before you buy stock in Meta Platforms, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Meta Platforms wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 22, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Alphabet, Amazon, ExxonMobil, and Spotify Technology. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Chevron, Meta Platforms, and Spotify Technology. The Motley Fool has a disclosure policy.

2 Tech Stocks You Can Buy and Hold for the Next Decade was originally published by The Motley Fool

During a CNBC interview, Wedbush Securities analyst Dan Ives called artificial intelligence (AI) the fourth industrial revolution. He drew parallels between the burgeoning AI market, the creation of the internet in 1995, and the launch of the iPhone in 2007. Ives expects an “AI spending tidal wave” to supercharge the technology sector in the coming years.

Similarly, billionaire fund manager Dan Loeb told clients that AI “has matured to the point that it is driving a transformational technology platform shift similar to those seen roughly once per decade: the personal computer in the 1980s, the internet in 1990s, mobile in the 2000s, and cloud in the 2010s.”

In short, AI is a once-in-a-decade investment opportunity. That doesn’t mean the so-called AI bubble — a phenomenon whereby numerous AI stocks have gained substantial value over a short period — will never burst. There will undoubtedly be setbacks and drawdowns along the way. But smart investors will ignore temporary hurdles because they know interest in AI is here to stay.

Here’s why Amazon (NASDAQ: AMZN) and Docebo (NASDAQ: DCBO) could help investors capitalize on this once-in-a-decade opportunity.

1. Amazon

Amazon reported mixed financial results in the second quarter, with its top line growing a little more slowly than analysts anticipated. Specifically, revenue increased 10% to $148 billion, but Wall Street expected $148.6 billion. However, generally accepted accounting principles (GAAP) net income surged 94% to $1.26 per diluted share, easily exceeding the consensus estimate of $1.03 per diluted share.

Unfortunately, Wall Street was also disappointed with the guidance. Management said operating income would increase between 3% and 34% in the third quarter, but analysts anticipated 37% growth. However, the shortfall is due to investments in AI infrastructure and fulfillment capacity for the holidays, as well as digital content costs associated with NFL Thursday Night Football, all of which are worthwhile expenses.

Looking ahead, Amazon should continue to benefit as e-commerce spending increases, but its largest opportunities lie in digital advertising and cloud computing. Amazon is the third-largest digital advertiser worldwide, and the company is gaining share so quickly that it could overtake second-place Meta Platforms by the end of the decade, according to eMarketer.

Amazon Web Services (AWS) runs the largest public cloud in the world, and it widened its lead by a percentage point over Microsoft Azure and Alphabet‘s Google Cloud Platform in the second quarter. AI is one reason AWS is gaining market share. New products like generative AI development platform Amazon Bedrock and coding assistant Amazon Q are gaining customer traction.

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CEO Andy Jassy recently told analysts, “Our AI business continues to grow dramatically with a multibillion-dollar revenue run rate despite it being such early days.” AWS is perfectly positioned to meet the demand for AI cloud services because it operates the largest public cloud and spends heavily on product development, from custom AI chips to software.

Looking ahead, Wall Street expects Amazon to grow earnings per share at 25% annually through 2025. That consensus estimate makes the current valuation of 42 times earnings look reasonable. Those figures give a price/earnings-to-growth (PEG) ratio of 1.7, a material discount to the three-year average of 2.9. Investors should feel comfortable buying a small position in this stock today.

2. Docebo

Docebo specializes in corporate learning software. Its learning management system lets businesses create, curate, deliver, and measure the impact of training across internal and external use cases. To elaborate, businesses can use the platform to train employees and partners and to embed customer-facing education into their products.

Docebo has differentiated itself with two innovative applications. Docebo Flow lets users integrate learning content into other applications, enabling employees to learn during the normal flow of work. Docebo Shape uses generative AI to turn source materials, like online articles, corporate documents, and case studies, into learning content.

In a note to clients, Morgan Stanley analysts Josh Baer and Keith Weiss wrote, “Docebo is not only disrupting the internal learning management system (LMS) market, taking share from legacy vendors, but it is also leading the market in a greenfield external learning opportunity.”

Docebo reported solid financial results in the second quarter that beat expectations on the top and bottom lines. Its customer count climbed 9%, and the average contract value rose 10%. In turn, revenue increased 22% to $53 million, and adjusted net income surged 86% to $0.26 per diluted share. Interim CEO Alessio Artuffo told analysts, “Our leadership in the learning industry, along with the effective use of AI, continue to set us apart from legacy competitors.”

Looking ahead, Grand View Research estimates that LMS spending will compound at 19% annually through 2030. Docebo should match that pace, with potential upside arising from its generative AI application. Wall Street expects Docebo’s adjusted earnings to increase by 58% annually through 2025. That makes its current valuation of 83 times adjusted earnings look reasonable. Patient investors should feel comfortable buying a small position today.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 22, 2024

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Docebo, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

A Once-in-a-Decade Investment Opportunity: 2 Artificial Intelligence (AI) Stocks to Buy Now was originally published by The Motley Fool

Although Wall Street’s major stock indexes don’t move higher in a straight line, there’s been no question that the bulls have been in firm control since the start of 2023.

Over a nearly 20-month stretch, the ageless Dow Jones Industrial Average (DJINDICES: ^DJI), benchmark S&P 500 (SNPINDEX: ^GSPC), and growth-powered Nasdaq Composite (NASDAQINDEX: ^IXIC) have respectively increased in value by 23%, 45%, and 68%, as well as surpassed their previous all-time highs on a multitude of occasions.

However, the party on Wall Street may be coming to a close. Even though investors were able to shrug off a 1,400-point, three-session plunge in the Nasdaq Composite to begin August, one predictive indicator, with a virtually flawless track record dating back to 1959, foreshadows trouble for the U.S. economy, as well as stocks.

This forecasting tool hasn’t been wrong in 58 years

Let me preface this discussion by pointing out that there is no such thing as a perfect predictive tool or metric. If there were a metric that could, with 100% accuracy, forecast short-term directional moves for stocks, every single professional and retail investor would be using it.

There are, however, a few economic data points and predictive metrics that have previously correlated very closely with big moves in the stock market’s major indexes. It’s these tools that investors are leaning on with the hope of gaining an edge in determining what comes next for Wall Street.

Recently, I’ve examined a number of these metrics and events that strongly correlate with moves lower in the Dow Jones, S&P 500, and Nasdaq Composite and/or portend trouble for the U.S. economy. This includes the first notable decline in U.S. M2 money supply since the Great Depression, one of the priciest S&P 500 Shiller price-to-earnings readings since the early 1870s, as well as the historic performance of stocks following the kickoff to a Federal Reserve rate-easing cycle. The nation’s central bank is expected to begin easing rates next month.

But it’s the Federal Reserve Bank of New York’s recession probability indicator that might be the most damning of them all.

The NY Fed’s recession tool measures the likelihood of a U.S. recession taking place over the next 12 months by examining the spread (i.e., difference in yield) between the 10-year Treasury bond and three-month Treasury bill.

When the U.S. economy is strong and investors are optimistic, the Treasury yield curve slopes up and to the right. This is to say that bonds set to mature in 10 or 30 years will have higher yields than Treasury bills that’ll mature in a year or less. It’s normal to receive a higher yield when your capital is tied up for a longer period of time.

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Conversely, when there are concerns about the health of the U.S. economy, we see the yield curve invert, with short-term T-bills sporting higher yields than long-term T-bonds. Although not every yield-curve inversion means a U.S. recession is imminent, every U.S. recession since World War II has been preceded by a yield-curve inversion.

As you can see from the latest monthly update of the NY Fed’s recession-forecasting model, which highlights the longest continuous yield-curve inversion in history, there’s a 56.29% chance of a U.S. recession taking shape by July 2025.

Since 1959, there’s only been one instance (October 1966) where the probability of a U.S. recession surpassed 32% and an official economic contraction, as declared by the National Bureau of Economic Research (NBER), didn’t take place. In other words, a recession probability of 32% or greater over the last 58 years has, without fail, signaled a coming recession for the U.S. economy.

Although the economy and stock market aren’t tethered at the hip, the overall health of the economy does matter for corporate America. If the U.S. economy weakens and unemployment rises, it’s almost a lock to adversely impact corporate earnings.

Data collected and analyzed by Bank of America Global Research finds that approximately two-thirds of the S&P 500’s peak-to-trough drawdowns occur after, not prior to, a recession being declared by the NBER. With a key recession ingredient firmly in place, the implication is that stocks could head meaningfully lower — i.e., into a bear market — in the foreseeable future.

Patience isn’t just a virtue — it’s a necessary ingredient to success on Wall Street

As much as investors might dislike U.S. recessions and stock market corrections/bear markets, they’re normal and inevitable aspects of the economic and investing cycle.

But if you take a step back, widen your lens, and allow patience and perspective to be your guides, you’ll see that these occasional moments of panic and disappointment serve as opportunities for long-term-minded investors to take advantage of potential price dislocations in time-tested businesses on Wall Street.

The key thing to understand about the economic cycle is that it isn’t linear. While recessions may be inevitable, nine of the 12 official downturns since the end of World War II were resolved in under a year. Comparatively, almost every economic expansion has stuck around for multiple years, including two growth spurts that surpassed the decade mark. Betting on the U.S. economy to expand over time has unquestionably been the smarter move, even with the occasional recession sprinkled in.

The nonlinear nature of economic cycles also translates to Wall Street’s major stock indexes.

In June 2023, the researchers at Bespoke Investment Group posted a dataset to X (the social media platform formerly known as Twitter) that examined the calendar length of every bear and bull market in the broad-based S&P 500, dating back to the start of the Great Depression in September 1929.

Over a 94-year stretch, the average length of the 27 recorded S&P 500 bear markets was just 286 calendar days, or about 9.5 months. On the other hand, the typical S&P 500 bull market was 1,011 calendar days long, equating to roughly two years and nine months.

You’ll also note that the lengthiest bear market in the S&P 500’s history, which occurred between January 1973 and October 1974, is still shorter than 13 out of the 27 S&P 500 bull markets since September 1929.

At the end of the day, we’re never going to be able to precisely forecast when a correction or bear market will begin, how long it’ll last, or where the ultimate bottom will be. But history does conclusively point to patience and perspective being powerful tools for investors that can help them navigate whatever short-term turbulence or uncertainty Wall Street or the U.S. economy throws their way.

Don’t miss this second chance at a potentially lucrative opportunity

Ever feel like you missed the boat in buying the most successful stocks? Then you’ll want to hear this.

On rare occasions, our expert team of analysts issues a “Double Down” stock recommendation for companies that they think are about to pop. If you’re worried you’ve already missed your chance to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:

• Amazon: if you invested $1,000 when we doubled down in 2010, you’d have $19,939!*

• Apple: if you invested $1,000 when we doubled down in 2008, you’d have $42,912!*

• Netflix: if you invested $1,000 when we doubled down in 2004, you’d have $370,348!*

Right now, we’re issuing “Double Down” alerts for three incredible companies, and there may not be another chance like this anytime soon.

See 3 “Double Down” stocks »

*Stock Advisor returns as of August 22, 2024

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Sean Williams has positions in Bank of America. The Motley Fool has positions in and recommends Bank of America. The Motley Fool has a disclosure policy.

Are a Recession and Bear Market Imminent? A Virtually Flawless Predictive Indicator Weighs In. was originally published by The Motley Fool

What comes to mind when I mention Nasdaq stocks? I doubt many thought of ultra-high-yield dividend stocks. On the other hand, I suspect high-flying tech stocks were front and center in the thoughts of many readers.

The reality, though, is that the Nasdaq is chock-full of both high-flying tech stocks and stocks that offer exceptionally juicy dividends. Should you buy the three highest-paying dividend stocks in the Nasdaq? Here they are.

1. B. Riley Financial

B. Riley Financial (NASDAQ: RILY) is a Los Angeles-based financial services company. It focuses on investing in and acquiring companies. B. Riley also operates subsidiaries that provide asset management, brokerage, direct lending, investment banking, wealth management, and other services.

The company’s forward dividend yield stands at nearly 33%. Why is B. Riley’s yield so high? Mainly because the stock has plunged more than 70% so far this year.

B. Riley’s troubles largely stem from a federal investigation of a hedge fund operated by Brian Kahn, a business partner of the company’s founder and CEO, Bryant Riley. The hedge fund lost hundreds of millions of dollars for investors. Earlier this month, B. Riley received a federal subpoena from the U.S. Securities and Exchange Commission (SEC) related to the investigation of Kahn.

It hasn’t helped matters that B. Riley posted a net loss of $5.1 million in the first quarter of 2024. The company also delayed submitting its second-quarter filing to the SEC. It said the filing couldn’t be made on time “primarily due to delays experienced in finalizing the valuations of certain of the Company’s loans and investments for the quarter ended June 30, 2024.”

2. Icahn Enterprises LP

Icahn Enterprises LP (NASDAQ: IEP) is a master limited partnership (MLP) founded by billionaire Carl Icahn. It’s a holding company that owns businesses in the automotive, food-packaging, energy, home fashion, pharmaceutical, and real estate industries.

The MLP’s forward dividend yield tops 25%. Unlike B. Riley, Icahn Enterprises’ ultra-high yield isn’t due to a collapse in its share price. The stock is down year to date, but not by a huge percentage.

However, Icahn Enterprises was up by more than 25% early in 2024. The company’s announcement of a $411 million decrease in net asset value (NAV) on Feb. 21 caused some unitholders to panic. This significant reduction in NAV stemmed largely from the underperformance of Icahn Enterprises’ investments.

3. Service Properties Trust

Service Properties Trust (NASDAQ: SVC) is a real estate investment trust (REIT) that owns 220 hotels in the U.S., Canada, and Puerto Rico. The REIT also owns 749 retail properties across the U.S., including department stores, restaurants, and truck stops.

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REITs must return at least 90% of their income to shareholders as dividends. Service Properties Trust pays a quarterly dividend of $0.20 per share, which translates to a forward dividend yield of over 18%.

Why is Service Properties Trust’s dividend yield so high? Partially because its stock has plummeted nearly 50% year to date. The REIT continues to post hefty net losses. Its funds from operations (FFO) have also declined significantly year over year.

Are these highest-yielding Nasdaq stocks buys?

Investors should be leery of all three of these stocks, in my view. While their yields are tempting, I think these temptations should be avoided.

B. Riley Financial is the most worrisome of the group because of the SEC investigation. Perhaps everything will work out fine for the company. However, until the dark cloud passes, staying on the sidelines with this stock seems to be the smartest move.

Which is the most likely to rebound? I’d go with Service Properties Trust. The REIT should benefit if the Fed cuts interest rates in September. Its diversified lease portfolio also lowers risks to some extent.

Should you invest $1,000 in B. Riley Financial right now?

Before you buy stock in B. Riley Financial, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and B. Riley Financial wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 22, 2024

Keith Speights has no position in any of the stocks mentioned. The Motley Fool recommends Nasdaq. The Motley Fool has a disclosure policy.

Should You Buy the 3 Highest-Paying Dividend Stocks in the Nasdaq? was originally published by The Motley Fool

It’s difficult to believe it’s been about 16 years since the Great Recession that nearly brought the automotive industry to its knees. It was a massive wake-up call, and executives at Ford Motor Company (NYSE: F) and General Motors (NYSE: GM) drastically adjusted their organizations and strategies from top to bottom.

While Ford was lauded for how it funded its way through the rough times, and the company has done so much correctly over the years, it could be about to make the same mistake that got it into trouble years ago.

More affordable, less desirable

Over the past few years, Ford did something that was considered controversial when it phased out all passenger cars other than the Mustang in North America, its primary profit engine. The idea was simple: Trucks and SUVs only cost marginally more to produce than passenger cars and can sell for two or three times as much.

You don’t have to be a finance major to figure out that math, and neither did Ford. The margins on SUVs and trucks keep the lights on and the profits rolling. So, here’s the rub: At a time when the automotive industry is in overdrive on transitioning to electric vehicles (EVs), Ford is refocusing on delivering a low-cost and highly affordable EV platform with a price target of $25,000.

The problem is that bigger vehicles require larger batteries, which are generally the highest-cost component of the vehicle. For now, that means some of those delicious margins are deteriorating — and amid a race to more affordable EVs to attract a mainstream consumer, Ford’s Model-e division is drowning and is projected to lose as much as $5.5 billion in 2024 alone.

As Ford reverses its vehicle strategy — at least as far as EVs go — not only will it cost a pretty penny to adjust, it could be a repeat of all those years ago when the company failed to generate profits on passenger cars.

What’s Ford doing?

Ford announced this week that it’s canceling plans for three-row electric crossovers entirely, and delaying its full-size electric pickup by 18 months as it pulls back on billions in EV spending to help curb losses. It’s a move that could cost up to $1.9 billion, including a $400 million noncash charge. EVs will now account for 30% of Ford’s capital expenditure, down from a planned 40%.

Ford finds itself between a rock and a hard place. It could ignore EVs until costs come down and be ostracized for arrogance and a lack of vision for the future — similar to when foreign automakers introduced more fuel-efficient vehicles into the U.S. market. Or, the company can suffer losses with EVs with an eye on the future, and subsidize EV development with its traditional lineup of gasoline-powered SUVs and trucks.

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The iconic Detroit automaker has chosen the latter, but the risk for investors is that the longtime gravy train of juicy SUV and truck margins will never be the same once the transition to EVs gains massive traction. That’s a major problem for a company that in recent years has produced record profits and gained zero traction with a lagging stock price.

What’s an investor to do?

For Ford, delaying some of its EV projects, and replacing EVs with its massively popular and lucrative Super Duty trucks at its Canada plant, is the right move. But for investors, it’s imperative for the automaker to prove a checklist of things before it can be considered a long-term holding.

Ford must prove it can curb losses from the profit black hole that its EV division currently is. It also must prove it can develop a low-cost EV platform and make money on the vehicles — or get close to breakeven, as EVs at that price point may always be a money loser. Then it must prove the juicy margins on SUVs and trucks can exist as battery costs are reduced. And then, perhaps most importantly, it must prove it can take those low-cost EV customers and step them into the more profitable vehicles.

As the world transitions to EVs, it’s clear the company can’t operate the way it did recently when it phased out nearly all passenger cars. But if it can’t generate profits on those affordable EVs, it could be déjà vu all over again. Investors would be wise to keep track of those boxes Ford needs to check before buying shares for the long haul. Ford’s entire investing thesis is changing.

Should you invest $1,000 in Ford Motor Company right now?

Before you buy stock in Ford Motor Company, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Ford Motor Company wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 22, 2024

Daniel Miller has positions in Ford Motor Company and General Motors. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.

Déjà Vu: Is Ford Repeating One of Its Biggest Mistakes? was originally published by The Motley Fool

Warren Buffett hasn’t seen a lot to like in the stock market recently. He’s sold more stock than he bought for Berkshire Hathaway‘s (NYSE: BRK.A) (NYSE: BRK.B) equity portfolio in each of the last seven quarters. But last quarter Buffett made his biggest stock sale in the history of the company.

Berkshire unloaded 389,368,450 shares of Apple (NASDAQ: AAPL). Those shares are valued around $88 billion at the time of this writing. Berkshire received less for the shares as Apple traded below its current level throughout the second quarter.

That makes the third straight quarter Buffett sold shares of Apple, but last quarter’s sale was by far the largest. He sold 10 million shares in the fourth quarter followed by 116 million shares in the first quarter, and the 389 million in the second quarter.

At Berkshire’s most recent shareholder meeting, Buffett said the sales of highly appreciated assets like its Apple investment take advantage of the current tax code. Still, the tax bill will be quite hefty for Berkshire this year.

Here’s how big the tax bill could be

Apple shares traded between $165 and $216 during the second quarter. The average closing share price during the period was $186.49. If we assume Buffett received the average share price on the sale, just so we can do some that, that would be proceeds of $72.6 billion.

Berkshire accumulated the bulk of its Apple position between 2016 and 2018, paying an estimated $36.51 per share on a split-adjusted basis. If every single share sold last quarter came from that lot of purchases and sold at the Q2 average, Berkshire Hathaway would have produced a gain around $150 per share for the 389 million shares sold. That’s a $58.4 billion gain.

Berkshire also sold a big chunk of Apple shares in the first quarter, when the stock traded for an average price of $181.83. The estimated gain on that sale is $16.9 billion. That would be a total gain of $75 billion on Apple stock sales alone, and we’re only halfway through the year.

Using these calculations, at the current federal corporate tax rate of 21%, Berkshire would have to pay Uncle Sam about $15.8 billion out of the proceeds from the stock sale. Nebraska currently charges a corporate tax rate of 6.5%, so Berkshire will have to pay its state government an additional $4.9 billion.

That said, the current tax code saved Berkshire shareholders a lot of money compared to several years ago. The 2017 tax cuts lowered the corporate tax rate from 35% to 21%. Under the old law, Buffett’s sale would’ve cost an additional $10.5 billion. President Joe Biden has proposed a 28% corporate tax rate to go into effect when the 2017 tax cuts expire after next year.

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How will a massive tax bill impact Berkshire shareholders?

Berkshire Hathaway shareholders may be wondering how this tax expense will impact the company’s earnings. The good news for investors is that Berkshire accounts for its tax liability on unrealized capital gains each quarter as a deferred tax expense. In other words, the bulk of the tax on Apple’s gains has probably already been accounted for during previous quarters’ earnings reports. That’s why investors didn’t see a sudden surge in tax expenses on Berkshire’s second-quarter report.

As a result, earnings won’t be affected by the stock sale (other than the missed earnings from any continued rise of Apple’s shares). That said, the sale will result in a real cash expenditure, which management warns will impact cash flows. “Operating cash flows over the remainder of 2024 will be reduced by significant income tax payments derived from taxable gains on disposals of equity securities,” management wrote in its second-quarter earnings release.

Despite the hefty tax bill, Berkshire has more than enough cash on hand to pay the government. As of the end of June, it held $277 billion in cash and short-term Treasury bills. A measly $20.7 billion in taxes won’t change the fact that Buffett has more cash than he has good investment options for Berkshire.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 22, 2024

Adam Levy has positions in Apple. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.

Warren Buffett Just Made His Biggest Stock Sale Ever. Here’s What the Tax Bill Could Be. was originally published by The Motley Fool

With $1.4 million in your IRA at age 65, you have a robust nest egg that could potentially fund a secure retirement of 25 years or more. However, making sure that money lasts will require prudent planning. You’ll need to assess your income needs, balance investment risk and return, secure supplemental insured income streams, account for required minimum distributions (RMDs) and their tax impact, and thoughtfully tune withdrawal rates for sustainability. But you don’t have to go it alone. A financial advisor can help you plan for retirement and manage your nest egg.

Retirement Funding Primer

One way to increase the chances that your savings will endure an extended retirement is to use a safe withdrawal rate. The 4% rule, for instance, suggests limiting annual withdrawals to about 4% of total savings in your first year of retirement and then adjusting withdrawals in subsequent years for inflation.

For example, if you retire this year with $1.4 million in an IRA, you would withdraw 4% or $56,000. Your withdrawal next year would account for inflation – say 2.5% – meaning you would withdraw $57,400. Conservative analyses indicate that using this rule will allow your savings to last for 30 years or more and provide for increasing income to accommodate inflation.

Though the 4% rule is a commonly referenced rule of thumb, critics contend that it’s overly simplistic and doesn’t account for evolving income needs. Your specific situation may warrant a different plan. The keys are thoughtfully balancing withdrawal rates, investment returns, taxes, inflation and your life expectancy. Investing appropriately to achieve solid returns while managing risk is also vital. A financial advisor can help you balance these different variables and estimate how much you can afford to withdraw from your savings.

Know Your Situation

Thoroughly assessing the financial landscape of your life, as well as retirement lifestyle goals can help ensure your $1.4 million IRA adequately supports your needs over the long term. To kick off this assessment, ask yourself:

• What are my basic and discretionary spending estimates?

• What large outlays might I need to make?

• What other income streams do I have?

• How risk-averse am I?

• Do I have an estate plan?

• How will RMDs and taxes impact me?

Your answers to these questions can help inform how you approach withdrawal rates, investments, insurance and contingency reserves.

Forecasting Retirement Needs

Now put some effort into budgeting your expected living expenses and accounting for any other sources of income. Social Security payments, pension benefits, annuity payments, part-time work and investment interest can all supplement your IRA withdrawals.

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After conservatively estimating these other streams of income, you may plan to use them to cover as much of your living expenses as possible. You can then use IRA withdrawals to cover any leftover costs. You may also want to build in buffers to account for market volatility and rising costs of goods and services in the future. Lastly, you’ll want to regularly review your expenses and income needs and adjust your plan accordingly.

Risk Management

Balancing investment risk across a long retirement while also addressing longevity risk is critical. You can smooth market volatility through broad diversification and holding fixed-income assets like bonds, cash and annuities in addition to equities.

You can potentially mitigate longevity risk by maintaining flexibility in your spending and withdrawal plans. Aim to be able to reduce withdrawals during extended market declines. To address other uncertainties, review your insurance needs for health, property, liability and long-term care coverage. Depending on your health, it may be particularly important to identify Medicare gaps and secure supplementary policies.

As you can see, there’s a lot to consider when planning for retirement but a financial advisor can help you navigate the process.

Accounting for RMDs

RMDs also play an important part in retirement planning. These mandatory withdrawals are dictated by the IRS starting at age 73. On a $1.4 million IRA, RMDs would likely start at nearly $53,000 annually. Failing to take your RMDs can trigger a 25% tax penalty on the amount you were supposed to withdraw, so don’t neglect this obligation.

RMDs can push you into a higher income tax bracket and significantly increase your obligation to the IRS. RMDs are taxed as ordinary income, so ensure your tax planning addresses their impact. For example, a $56,000 RMD could create a $4,736 federal tax bill in 2024 after taking the standard deduction.

Strategically using Roth conversions can reduce the size of your RMDs, or eliminate them altogether, giving you more tax flexibility in retirement. However, you’ll have to pay taxes on the money you convert, which will increase your tax liability in the year a conversion is completed. A financial advisor can help you execute a Roth conversion and even manage your IRA for you.

Bottom Line

With $1.4 million in your IRA at age 65, sustainable lifetime withdrawals are feasible if you plan well, control risk and stick to prudent withdrawal rates. Plan to pay your expected costs with other income streams first before tapping IRA funds. Model the impact of portfolio volatility, required distributions and taxes over time, adjusting asset allocations and spending downward when markets decline. Don’t forget to account for health costs and insurance needs, as well.

Retirement Planning Tips

• Social Security benefits are an important component of income planning for most people. Estimate your future benefit now with SmartAsset’s Social Security calculator.

• Consider meeting with a financial advisor to review your evolving retirement income plan and withdrawal strategy. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

• Keep an emergency fund on hand in case you run into unexpected expenses. An emergency fund should be liquid — in an account that isn’t at risk of significant fluctuation like the stock market. The tradeoff is that the value of liquid cash can be eroded by inflation. But a high-interest account allows you to earn compound interest. Compare savings accounts from these banks.

• Are you a financial advisor looking to grow your business? SmartAsset AMP helps advisors connect with leads and offers marketing automation solutions so you can spend more time making conversions. Learn more about SmartAsset AMP.

Photo credit: ©iStock.com/insta_photos, ©iStock.com/skynesher, ©iStock.com/Nutthaseth Vanchaichana

The post I’m 65 With $1.4 Million in an IRA. How Do I Make Sure This Money Lasts the Rest of My Life? appeared first on SmartReads by SmartAsset.

Microsoft (NASDAQ: MSFT) is a king of reliability, known for its consistent financial and stock growth. Over the last five years, the company’s share price has risen 200%, while free cash flow has climbed 92%.

Microsoft’s steady growth has secured it a market cap above $3 trillion, allowing it to remain in the world’s top three most valuable companies. In fact, from about February to June of this year, Microsoft temporarily surpassed Apple and Nvidia (NASDAQ: NVDA) in market cap, taking the top spot.

Market fluctuations have seen the world’s top five most valuable companies reshuffle multiple times in 2024. Even throughout August, Nvidia and Microsoft have been duking it out for second place on an almost weekly basis. Meanwhile, Amazon (NASDAQ: AMZN) appears to be on a bull run that could surpass the Windows company in the coming years.

Nvidia and Amazon have been on exciting growth paths thanks to skyrocketing earnings. These companies dominate their respective industries and are profiting from consistent investment in the lucrative artificial intelligence (AI) market.

While Microsoft is known for consistency, Nvidia and Amazon are expanding at a rate that could allow them to overtake the company. So, here are two growth stocks I predict will be worth more than Microsoft in five years.

1. Nvidia: A meteoric rise that is unlikely to slow any time soon

Nvidia’s business has delivered record growth since the start of 2023, with its stock up 779%. Its meteoric rise has seen it steadily climb through the ranks of the world’s most valuable companies, as seen in the chart below.

As of this writing, Nvidia’s market cap is above Microsoft’s. Their positions switched multiple times this month, suggesting could swap again by the time you read this. However, Nvidia is included in this list as I’d argue that it will have surpassed Microsoft for good and gained a solid lead within the next five years.

Nvidia massively outperformed Microsoft in 2024, with its stock up 159% compared to Microsoft’s 10% rise. Meanwhile, Nvidia’s quarterly revenue is up 18% year to date, with Microsoft’s up 4%. At this rate, Nvidia could even secure its spot ahead of Microsoft much sooner than five years.

Nvidia’s stellar gains are primarily thanks to its dominance in AI. The company is responsible for between 70% and 95% of all AI graphics processing units (GPUs), the chips necessary for training AI models. Competitors like Advanced Micro Devices and Intel are working to catch up, launching rival GPUs this year. However, Nvidia’s head start and $39 billion in free cash flow (compared to AMD’s $1 billion and Intel’s negative $13 billion) suggests it won’t have too much trouble maintaining its lead.

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In AI, Microsoft has a prominent role in cloud computing. However, fellow cloud giants Amazon and Alphabet are much closer competitors than Nvidia’s rivals in the GPU market.

Nvidia will report its second quarter of fiscal 2025 earnings on Aug. 28. After over a year of beating quarterly earnings, the company will likely continue recent trends and deliver another quarter of impressive growth. Its stock could soar, furthering its lead on Microsoft.

2. Amazon: Soaring earnings and the cash to surpass its rivals

Amazon and Microsoft are in steep competition in the cloud industry. As of Q2 2024, Amazon Web Services (AWS) cloud market share stood at 31%, while Microsoft Azure’s was at 25%. However, Amazon ramped up its cloud investment over the last year, which could allow it to hold onto its lead in the industry and eventually push its market cap above Microsoft’s.

Amazon consistently outperformed Microsoft over the last year. Solid growth in retail and AWS has seen Amazon’s profits soar, allowing it to sink billions into its AI efforts.

In March, Bloomberg reported that Amazon plans to spend nearly $150 billion on data centers over the next 15 years to expand AWS’ reach. The company anticipates an explosion of demand for AI applications and other digital services, requiring a more extensive cloud network. The news aligns with multiple reports in recent months that announced Amazon’s data center investment in U.S. locations including Ohio, Indiana, and Virginia, as well as international spots such as Singapore, Spain, Saudi Arabia, India, and Taiwan.

The expansion will increase Amazon’s cloud and AI capabilities. Meanwhile, a vast network will allow it to boost other areas of its business with the generative technology, such as e-commerce, grocery, digital advertising, and more.

Amazon’s market cap currently sits at $1.8 trillion. However, its earnings and stock are expanding at a rate that will likely see it overtake Microsoft in the coming years.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $792,725!*

Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.

See the 10 stocks »

*Stock Advisor returns as of August 22, 2024

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Prediction: 2 Growth Stocks That Will Be Worth More Than Microsoft in 5 Years was originally published by The Motley Fool