These three “Magnificent Seven” stocks hit new highs on the same day. Here are the better buys for 2024.

January 23rd was a great day for the stock market.of S&P500 and Dow Jones Industrial Average It closed at a record high. Three of the Magnificent Seven stocks similarly closed at all-time highs. microsoft (MSFT -0.23%) $398.90 per share; Nvidia (NVDA -0.95%) $598.73 per share, and meta platform (meta 0.24%) $385.20 per share. His other four great stocks are: apple, alphabet, Amazonand tesla.

Microsoft and Nvidia have each hit record highs multiple times this year. However, it took until January 23 for Meta Platforms to surpass its all-time closing price of $382.18 per share, set on September 7, 2021. Even more impressive for Meta is that the stock has quadrupled since dropping below $90 per share. Sharing will begin in early November 2022.

However, past performance does not guarantee future results. Let’s consider the pros and cons of these three companies to determine which has what it takes to maintain its all-time highs and which is his best buy for 2024.

Image source: Getty Images.

1. Metaplatform: More value-oriented Magnificent Seven stocks

Even after Meta Platforms’ epic 15-month rally, the stock is still not very expensive from a valuation perspective. This shows how discounted Meta was and how it shouldn’t have been sold by that much.

No matter what you think about Facebook, Instagram, WhatsApp, or Meta’s other apps, there’s no denying that the company is an absolute cash cow. In fact, Meta’s price-to-free cash flow ratio is the second lowest of the Magnificent Seven.

META Price and Free Cash Flow Data by YCharts

You can think of Meta’s apps as digital real estate. Meta offers the most affordable, effective and measurable advertising space. The company has done an incredible job improving and monetizing Instagram, crushing skeptics who thought Instagram would become irrelevant in the face of TikTok.

Meta would have generated even more cash if it hadn’t lost billions of dollars on its augmented reality/virtual reality division, Reality Labs. But that’s the advantage of companies like Meta. You can afford to take risks and drain cash without derailing your business. Few companies are in the same position.

There’s a lot to like about the meta as a balanced, more value-oriented Magnificent Seven stock.

2. Nvidia: Rapid Growth

Nvidia surpassed the $1 trillion market cap last June and never looked back. Now it’s knocking on the $1.5 trillion door. At this rate, Nvidia could easily overtake Amazon and Alphabet to become the third most valuable company in the world. The only question is what multiple the market will give it.

NVDA market cap data by YCharts

The biggest risk in investing in Nvidia is that much of the company’s future growth is priced into its current stock valuation. Nvidia has a price-to-earnings ratio (PER) of 78.3, which is not cheap. But growth is undeniable.

NVDA Revenue (TTM) Data by YCharts

The graph above shows one company’s impressive feat. In just one year, Nvidia’s sales increased by 66.4% and net profit increased by more than four times his. But what really stands out is his Nvidia margin. Generating $18.9 billion in net income on sales of $44.9 billion is almost unheard of. Nvidia makes so much profit from every dollar of sales that it doesn’t need to grow sales that much to shrink its P/E ratio.

As you can see from the graph, Nvidia has had a downturn. The semiconductor industry is highly cyclical. Nvidia suffered a pretty big drop last year. Profit margins declined significantly, and sales and profits declined. The same thing happened in 2019.

So why are investors excited now? Well, it has to do with artificial intelligence (AI). Nvidia AI accelerator processors are powering OpenAI’s ChatGPT processor, and orders are pouring in as other companies look to jump on the AI ​​train. “We are at the beginning of what is essentially a sweeping industrial transition from generative AI to accelerated computing,” said Nvidia CEO Jensen Huang. ,” Nvidia CEO Jen-Hsun Huang said of the company’s third quarter. Announcement of financial results for 2024.

Nvidia’s products have been at the forefront of many trends, including cryptocurrency mining, gaming, and professional graphics. If growth continues, the stock could look cheap. If the economy slows, stocks will look too expensive to be perfect. His Nvidia as a company is doing incredibly well. Nvidia stock is very expensive.

3. Microsoft: A clear way to leverage AI

Microsoft has experienced the best of both the meta platform and Nvidia. Like Meta, Microsoft is a cash cow with a proven business model. And like Nvidia, Microsoft is investing heavily in AI and is already reaping the benefits.

I think of Microsoft as an AI sandbox. We reach recreational customers from a variety of industries, professional services, gaming, school applications, and daily life. This vast number of touchpoints gives Microsoft a huge advantage. You can stay on top of what people are using and learn what isn’t sticking.

After all, Microsoft’s history is in perfecting sticky products. Microsoft Word wasn’t necessarily the best word processor. Excel wasn’t the most powerful spreadsheet app. But what Microsoft did better than any other company was to package these applications and make them user-friendly.

Making AI tools too complex can turn off less tech-savvy people. Microsoft is shaking up its old strategy with Copilot, a generative AI integrated into existing Microsoft applications. It essentially acts as an assistant, making your application easier to use without complicating it.

Microsoft will generate a lot of cash, which it can use to fund organic growth, buy back its own stock and, if necessary, make acquisitions. Microsoft doesn’t have to go out of its way to want customers to adopt AI. You can try different solutions, tweak over time, and find what works.

Add it all up and Microsoft probably has the best risk/potential reward profile of the Magnificent Seven stocks. That’s why I would buy this over Meta or Nvidia right now, but both of these choices offer just as much.