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The tech industry has long been known for being rich in growth stocks that tend to provide stable returns over the long term. The innovative nature of the industry creates an ever-expanding environment that provides assured growth for companies and their investors.
The graph below shows this Nasdaq 100 Technology Sector The index significantly outperformed Nasdaq Composite and S&P500 In the last 10 years.
Data by YCharts
Therefore, a successful holding company like Warren Buffett’s berkshire hathaway A significant portion of the portfolio is in tech stocks. From 1965 to 2022, Berkshire’s stock price rose at a nearly 20% compound annual growth rate (CAGR) as Berkshire’s portfolio soared. As a result, it’s not a bad idea to dedicate a large portion of your holdings to technology as well.
Nvidia (NVDA -0.20%) and Amazon (AMZN -0.36%) are two attractive options. These companies dominate their respective industries, with one leading with high-performance chips and the other with the world’s largest cloud platform.
So let’s find out whether Nvidia or Amazon is a better technology stock right now.
Nvidia
Chip manufacturers are one of the best ways to invest in technology. These companies are strengthening the industry with their hardware and driving overall market growth. In Nvidia’s case, its chips are used in a wide range of items, from artificial intelligence (AI) models to cloud platforms, video game consoles, laptops, and custom-built PCs.
The company’s success in technology has seen its stock price soar more than 1,400% over the past five years, and annual revenue has increased 130%. But last year’s AI boom suggests Nvidia has a lot more to offer new investors.
Nvidia has dominated the graphics processing unit (GPU) market for years, but other chipmakers are also Advanced Micro Devices and intel We have primarily prioritized the central processing unit (CPU). As a result, Nvidia has been able to gain an advantage in industries that require GPUs, such as his AI.
Rising interest in AI will cause demand for GPUs to skyrocket in 2023, and Nvidia is perfectly positioned to supply chips to the entire market. As a result, the company’s stock price rose approximately 250% year-on-year. Meanwhile, in the third quarter of 2023 (ending October 2023), it recorded revenue growth of 206% and operating profit increased by over 1,600%.
The AI market is expected to grow at a CAGR of 37% through 2030, reaching $257 billion this year. This sector is one of the fastest growing areas in technology, and NVIDIA’s leading role in AI chips makes it a compelling reason to invest in the company’s stock.
Amazon
Like Nvidia, Amazon has vested interests in multiple areas of the technology industry. The company’s retail sites command the top market share in e-commerce in many countries, paving the way for the company to expand into cloud computing, consumer robots, and even space satellites.
However, the company’s cloud platform, Amazon Web Services (AWS), is the biggest reason to consider investing in its stock. AWS holds his 32% market share in the cloud market, outpacing its competitors. microsoft with azure alphabetGoogle Cloud. Meanwhile, this industry is predicted to develop at a CAGR of 20% until at least 2030, and its size is expected to exceed $2 trillion.
Additionally, AWS has given Amazon a strong position in the AI space. Businesses are increasingly looking for ways to integrate technology into their workflows and are turning to cloud services to do so. AWS has responded to growing demand by adding a range of AI tools over the last year, and will soon move into chip production and diversify its role in emerging areas.
AWS accounts for 16% of Amazon’s revenue but more than 60% of its operating profit. Cloud computing is a highly profitable business, which only strengthens the company’s long-term prospects.
Which is a better technology stock: Nvidia or Amazon?
Nvidia and Amazon both earned spots on the technology industry’s “Magnificent Seven.” appleMicrosoft, Alphabet, meta platformand tesla. These companies are industry-leading performers and could have a lot to offer investors over the long term. However, earnings per share (EPS) estimates suggest that Nvidia could grow further in the coming years.
Data by YCharts
This chart shows that over the next two fiscal years, Nvidia’s earnings could reach $24 per share, and Amazon’s earnings could reach nearly $5 per share. Multiplying these numbers by each company’s forward price/earnings ratio (44x for Nvidia and 43x for Amazon) yields a stock price of $1,056 for Nvidia and $202 for Amazon.
Considering both companies’ current positions, these forecasts would see Nvidia’s stock price rise by 96% and Amazon’s stock price by 34% over the next two fiscal years. Both numbers are impressive, but Nvidia’s high weight and booming chip business make it the best tech stock right now and a must-buy in 2024.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Alphabet executive Suzanne Frye is a member of The Motley Fool’s board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool’s board of directors. Dani Cook has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Berkshire Hathaway, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool recommends Intel and recommends the following options: Long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
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