The Magnificent Seven companies are continuing to seize the AI opportunity at hand. As we head into the second half, there’s a good chance the enthusiasm over new AI products could continue, especially as Apple (NASDAQ:AAPL) helps pave the way for AI on the edge (slang for on-device AI).
The rise of edge AI doesn’t mean cloud-based AI demand will fade. In fact, I’d argue the opposite will be true. As Apple connects its massive user base to a private cloud for requests it can’t handle on the device, we may very well see a continuation of the boom seen in AI data centers.
Either way, the Magnificent Seven are leading the charge as AI technology gets better as every week and month goes by. Over time, we may wander into new frontiers in generative AI with text-to-video models and edge devices.
Each one of the Magnificent Seven firms is a serious contender that just may win the AI race in the future, one in which AGI (artificial general intelligence) marks the finish line or, at the very least, the final rush toward that finish line. Here are the Magnificent 7 stocks to focus on right now.
Meta Platforms (META)
First, we have Meta Platforms (NASDAQ:META), the Zuckerberg-run social-media firm ready and willing to continue spending big money on next-generation technologies, like generative AI and virtual and augmented reality (VR and AR). Some early benefits from AI have already worked their way into the stock. From content recommendation to ad enhancement, Meta seems more like an AI-first company than a metaverse-first one, at least for the time being.
Looking into the future, it’s hard to tell how much of Meta’s coming quarters will be propelled by prior investments in AI. However, for those who want a firm dedicated to coming at or close to the top of the pack in the AI race over the long run, I’d argue META stock is a top Magnificent Seven contender to consider.
The company’s open-source LLaMA 3 model is very impressive as it stands (it’s my favorite ChatGPT rival currently), and it will only get better from here as Meta invests heavily to secure future growth. As for the metaverse, it’s hard to tell when the platform will power sales and earnings. Either way, I don’t see metaverse upside potential priced into META stock at 29.1 times trailing price-to-earnings (P/E).
Apple (AAPL)
Apple faced many doubters in the first quarter of 2024 when analysts downgraded the stock, bringing some bearish headwinds to light. Indeed, the stock seemed too expensive at the time, given its slowing growth. And though many wrote off AAPL stock after a turbulent first half, I think it’s safe to say that Tim Cook proved everybody wrong after one of the best WWDC events ever.
Further, Apple’s epic $110 billion buyback could not have come at a better time, just a few weeks ahead of one of the stock’s biggest near-term surges in recent memory. Now that AAPL stock is at a new high, at over $212 per share, with a respectable 14% gain year-to-date, questions linger as to where the titan heads from here.
At 28.9 times forward (P/E), Apple shares look lofty. But the current valuation, I believe, still underestimates the magnitude of a potential device upgrade boom that could be just around the corner.
We all saw how fast enterprises were to scoop up the latest Nvidia (NASDAQ:NVDA) AI hardware over the past two years. The big question for Apple is whether the consumer will also be nearly as quick to buy an iPhone 16 Pro or the current iPhone 15 Pro, which can also support Apple Intelligence, for a smarter Siri.
Time will tell, but I don’t remember the last time there was a catalyst this big for Apple.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) is the “value play” of the Magnificent Seven right now, with a P/E multiple of 27.4 trailing P/E. In the pre-ChatGPT era, it was often thought that Google was the best AI company to own. Though some may have changed their opinions, I continue to view Alphabet as still one of the biggest winners from the AI revolution, even though some may shrug off innovations such as its large language model Gemini or DeepMind’s video generator Veo.
Gemini and Veo represent profound technologies that, in my opinion, are every bit as jaw-dropping as OpenAI’s comparable offerings. The battle between ChatGPT and Gemini will likely extend for many years. Up ahead, Veo and Sora are sure to battle for text-to-video dominance. And though I give the slight edge to OpenAI at this juncture, I acknowledge that the leader(s) in the AI race can change at any time.
Since you can’t buy OpenAI shares on the public markets, I’d argue GOOG stock is the next best thing. Even if OpenAI stock were live on the Nasdaq exchange, it’d probably be markedly more expensive than Alphabet anyway.
On the date of publication, Joey Frenette held shares of Apple and Alphabet (Class C). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.