Key Points
The “Magnificent Seven” stocks have powered the S&P 500 higher over the past several years, thanks to their leadership in the technology space and, in many cases, their prominence in the high-potential area of artificial intelligence (AI). These companies operate across a range of specialty areas, from smartphones to social media, and each dominates its field — and has established a strong track record of revenue growth over time.
You would expect such stocks to be particularly expensive after their gains in recent years. But that isn’t the case. In fact, one stands out as a once-in-a-decade buying opportunity, as the cheapest of the “Magnificent Seven,” and it’s also close to its own valuation low. This AI stock has soared more than 900% over the past five years and is well-positioned for further gains as the AI story continues to unfold. Let’s check out this surprisingly cheap stock to buy now, before the price goes up.
Missed AI’s “Act 1”? Act 2 Could Be 15x Bigger. Most investors think they missed the AI boat because they didn’t buy Nvidia in 2005. But according to our analysts, we’re only at the end of “Act 1″—the R&D phase. “Act 2” is the global rollout. Continue »
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Seven well-known tech giants
So, first, let’s take a quick look at the “Magnificent Seven.” Most of us are probably familiar with these names, as they have built their reputations and businesses over time, and in most cases, their products are in the public eye. These companies are: Apple, Amazon, Alphabet, Meta Platforms, Microsoft, Nvidia (NASDAQ:NVDA), and Tesla.
Investors have rushed to get in on these stocks in recent years to bet on the AI story and technology in general. At times, valuations reached high levels, but today, many of them, in spite of the positive stock performance, are trading at reasonable prices. This is as earnings have also taken off.
And the best bargain of the bunch just so happens to be the biggest AI winner of all, at least so far, and that’s Nvidia. The company trades for 23x forward earnings estimates, making it even cheaper than Meta, a stock that’s been among the cheapest of the “Magnificent Seven” in recent years.
META PE Ratio (Forward) data by YCharts
Now, here’s why I think such levels won’t last and that this is a once-in-a-decade buying opportunity. We’ll start by talking about the business Nvidia has built. The company is known for its graphics processing units (GPUs), the chips needed for essential AI tasks like the training of models. The GPU and Nvidia’s related products and services have generated enormous earnings growth, with revenue and profit each climbing in the double and triple digits quarter after quarter. In the latest period, they reached $96 billion and $59 billion, respectively.
Why customers like the fastest GPUs
Customers rush to Nvidia because its GPUs are the fastest, and this is a major plus — speed equals efficiency and over time may lower costs. Nvidia has expanded its repertoire as the AI boom has evolved, positioning itself to win in the upcoming phases of growth, and, with this in mind, it recently made a key move.
Nvidia has entered the stand-alone central processing unit (CPU) market as CPUs are seen as the key chips powering agentic AI. This involves AI handling real problems and taking multi-step actions, and it’s viewed as a big growth driver in the coming years. Nvidia says the stand-alone CPU market is worth $200 billion, and the company aims to become a leader.
So, Nvidia’s explosive growth in the early stages of the AI boom may not be the end of the story. The company could be heading for another big wave of growth as agentic AI use gathers momentum. Nvidia is in the process of rolling out its first CPUs and expects $20 billion in revenue from them this year alone. This offers us reason to be optimistic about what’s ahead.
While Nvidia’s explosive growth may keep its valuation somewhat in check, I still see today’s level as exceptionally cheap — and possibly a once-in-a-decade opportunity for growth investors looking for a long-term AI victory.
Should you buy stock in Nvidia right now?
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Adria Cimino has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
