Top Investment Opportunities with a $1,000 Budget at Present
Technology stocks, particularly those playing a significant role in the buoyant sector of artificial intelligence (AI), have fueled gains in the current bull market. The S&P 500 is projected to surge by 24% this year, following a double-digit growth spurt in 2021, due to the growth momentum of these companies. Investors have been pouring into these stocks as an early investment opportunity in a market predicted to skyrocket throughout the decade. Presently, the $200 billion AI market is projected to reach a staggering $1 trillion by 2030.
This bullish forecast and the escalating demand for AI products and services imply that it's not too late to invest in companies spearheading the AI revolution. Although these firms have already experienced earnings growth, this trend may persist in the foreseeable future. Let's explore the top stocks to purchase with an initial investment of $1,000 today. (Keep in mind that you can either invest in one of these players or all three with this amount.)
1. Oracle
Oracle, once famous for its database software, has recently shifted its focus to cloud infrastructure. This technology giant has realized substantial benefits from this strategic move, attracting numerous customers and witnessing an increase in revenue.
In the latest quarter, Oracle's cloud infrastructure revenue skyrocketed by 45% to $2.2 billion, and demand for cloud infrastructure continues to outpace supply. Oracle's cloud database partnerships with Microsoft Azure, Alphabet's Google Cloud, and Amazon's AWS make it more convenient for customers to use Oracle on a multitude of platforms. Oracle anticipates that cloud database revenue will contribute to one of its three major growth drivers, alongside cloud infrastructure and strategic software-as-a-service.
A glance at Oracle's remaining performance obligations (RPO), or contract revenue yet to be billed, suggests an optimistic future. Cloud RPO surged by 80%, accounting for three-quarters of overall RPO, and total RPO in the quarter rose by 52% to $99 billion.
Moreover, you can count on this tech giant to reward its shareholders through stock buybacks and dividends. In the previous quarter, Oracle purchased $150 million worth of stock and paid out more than $4 billion in dividends over the past year.
2. Amazon
Amazon serves as a consumer of AI as well as a provider of leading AI products and services. As a powerhouse in e-commerce, Amazon has integrated AI into its fulfillment operations, facilitating tasks such as optimizing warehouse efficiency and determining the fastest delivery routes. This ultimately saves Amazon resources and fosters customer loyalty.
As a reseller of AI, European stock exchange Amsterdam-based AWS, Amazon's most profitable division, has embraced AI wholeheartedly, offering a broad range of products and services to customers. AWS's accomplishments in AI have helped it achieve an annual revenue run rate of $110 billion. AWS offers premium chips, like those from Nvidia, in addition to its cost-effective, custom-designed chips for customers on a budget. Furthermore, AWS provides a fully managed system allowing users to access advanced language models and tailor them to their requirements.
Amazon has established a track record of growth, achieving billion-dollar increases in revenue and earnings annually. Since restructuring its costs a few years ago, the company is now realizing significant returns on invested capital and free cash flow increases. This presents an excellent opportunity to invest in Amazon and profit from its growth trajectory over the long term.
AMZN Free Cash Flow data by YCharts
3. Nvidia
Nvidia shares have shot up by almost 200% this year, but this does not suggest the stock has reached its peak. At a forward P/E ratio of 51x, the stock appears reasonably priced given its long-term growth potential in the high-growth AI market.
This tech titan is the world's number one seller of graphics processing units (GPUs), chips that power critical AI tasks like the training and inference of large language models. Nvidia controls around 80% of the AI chip market, and its prowess extends beyond this realm. Nvidia has constructed an AI empire, offering goods and services that make it the preferred destination for any client aiming to launch an AI project.
These accomplishments have helped Nvidia report triple-digit earnings growth in recent quarters, with earnings hitting record highs. Moreover, its gross margin of over 70% indicates high profitability on sales.
Crucially, Nvidia vows to innovate annually, a strategy that should enable it to maintain its leadership in this increasingly competitive market. Additionally, Nvidia has two significant catalysts ahead: its quarterly earnings report on Nov. 20 and the launch of its new Blackwell architecture in the coming weeks.
Thus, despite this year's impressive gains, Nvidia continues to represent an exceptional long-term investment opportunity.
- Given the strong performance of technology stocks, particularly those in the AI sector, investing in Oracle's cloud services could be a wise financial decision. Oracle's cloud infrastructure revenue has seen a significant increase, and its partnerships with major tech companies have made it more accessible to a wide range of customers.
- As Amazon continues to grow in the AI market, investing in its AI products and services, such as those offered by AWS, could be a profitable venture. Amazon's integration of AI in its fulfillment operations has helped it save resources and boost customer loyalty, while its cloud division, AWS, has a wide range of AI products with premium and cost-effective options.
