Here Are My Top 5 “Magnificent Seven” Stocks to Buy Before It Does

Since stocks began trading on the Nasdaq roughly 50 years ago, the index has only produced negative annual returns 14 times. Over the last 20 years, the index has dropped by at least 30% on three occasions: 2002, 2008, and 2022.

Interestingly, following the precipitous declines of 2002 and 2008, the Nasdaq rallied for consecutive years thereafter. Between 2003 and 2007, the Nasdaq returned an average of 16% per year. And in 2009 and 2010, the index produced average returns of 30%.

After its painful performance in 2022, the Nasdaq rebounded sharply in 2023, returning 43%. It’s safe to say that the euphoria surrounding artificial intelligence (AI) largely influenced the upswing in tech stocks.

But 2024 is off to a red-hot start, and further gains could be in store for investors. While each of the “Magnificent Seven” stocks below experienced AI-driven momentum last year, I think all of them still look enticing at the moment.

1. Amazon

Amazon (NASDAQ: AMZN) is best known for its e-commerce and cloud computing operations. The last few years have been brutal for Amazon. Unusually high inflation coupled with the rising interest rates that reined in that inflation have squeezed Amazon’s core businesses. Consumers have scaled back their discretionary spending, putting a strain on Amazon’s e-commerce efforts. In addition, as companies tightened their budgets, its software businesses witnessed a pronounced growth deceleration. This dynamic can be seen in the ebbs and flows of Amazon’s revenue and free cash flow generation below.

AMZN Revenue (Quarterly) Chart

But throughout 2023, Amazon made a series of savvy moves that could help reignite its growth. Among them, the company invested billions into OpenAI competitor Anthropic. As part of the deal, Anthropic will be training future generative AI models on Amazon Web Services (AWS).

Investors should not overlook the impact AI can have on Amazon. The technology should not only help fuel some renewed interest in AWS, but also integrate into Amazon’s e-commerce, streaming, logistics, and advertising businesses.

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