Major tech companies such as Apple, Microsoft, Nvidia, Alphabet, Amazon, Meta Platforms, and Tesla are commonly referred to as the Magnificent Seven. These companies operate in rapidly growing markets such as public cloud, artificial intelligence, digital advertising, and enterprise software, making them some of the largest companies globally.
According to recent data, around 455 companies in the S&P 500 index disclosed their quarterly earnings, with nearly 79.7% surpassing estimates. On average, these companies saw earnings per share growth of 13.3%. Excluding the Magnificent Seven companies, the earnings growth for the remaining S&P 500 companies was notably lower at 8.7%.
The performance of the Magnificent Seven stocks has been a significant driver of stock market gains in 2024. Two standout stocks from this group are currently trading at attractive valuations, presenting buying opportunities for investors.
One of these stocks is Nvidia, valued at US$2.9 trillion by market capitalization and considered the third-largest company on the S&P 500. Although Nvidia has shown exceptional growth, with a 25,000% increase over the past decade, it currently trades 13% below its all-time highs, offering investors a chance to acquire quality stocks at a discounted price.
Nvidia specializes in designing data center chips for AI workloads, benefiting from the high demand for its products as companies like Microsoft, Meta, and Alphabet heavily invest in AI technologies.
In the first quarter of its fiscal year, Nvidia reported robust sales of US$26 billion, a 262% increase year over year. Adjusted earnings per share also surged by 461% to US$6.12 during the same period. Despite its impressive performance, Nvidia’s stock is valued at 43.4 times forward earnings, which might seem high. However, analysts predict a 46% annual increase in adjusted earnings over the next five years.
Another standout stock from the Magnificent Seven is Amazon, valued at US$1.79 trillion by market capitalization. Amazon has experienced significant growth since going public in 1997, with sales increasing from US$148 million to US$575 billion in 2023. The company is a dominant player in various growing markets, including public cloud infrastructure and e-commerce.
Amazon’s focus on cost-cutting has led to substantial free cash flow generation, surpassing US$60 billion in the last 12 months. Despite trading at 36 times forward earnings, Amazon’s earnings are projected to grow by 30.5% annually over the next five years. Analysts are optimistic about Amazon’s future performance, forecasting a 28% increase in its stock price over the next 12 months.
