Key Points

• Taiwan Semiconductor's growth seems unstoppable as demand for AI chips surges.

• Upstart has beaten the market despite a huge selloff after the Q2 report.

• Meta's hard pivot into AI has drawn considerable investor interest.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Although many artificial intelligence (AI) stocks have performed well since "Liberation Day" on April 2, the rough start to the year has weighed on many of them. So severe was the drop in some stocks that many continue to lag the performance of the S&P 500 in 2025 despite dramatic recoveries.

Fortunately, a few have managed to outperform the index. Moreover, some even remain solid buys. Investors looking for AI stocks that can continue to perform should consider these names.

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Taiwan Semiconductor

In a sense, the performance of Taiwan Semiconductor (NYSE: TSM) may not come as a surprise. The company dominates advanced semiconductor manufacturing, as competitors such as Samsung and Intel failed to match its technical prowess.

Consequently, top chip design companies such as Nvidia and Apple outsource most manufacturing to TSMC, which holds a 68% market share in the third-party foundry market. Since such companies cannot run AI workloads without its chips, TSMC is one of the most essential companies in the AI industry.

So, it is little wonder that Grand View Research forecasts a compound annual growth rate (CAGR) for the AI chip industry of 29% through 2030. This means that doubts about the economy are much less likely to affect TSMC.

Indeed, one can find little that is sluggish about TSMC's performance. In the first half of 2025, it generated nearly $56 billion in revenue, a 40% increase from year-ago levels. Over the same period, costs and expenses rose 24%. Thus, its net income of almost $24 billion was 60% higher than in the first two quarters of 2024.

It sells at a P/E ratio of 28. That valuation is unlikely to deter investors, considering its rapid growth, and should translate into gains for TSMC stock over time.

Upstart Holdings

The fact that Upstart Holdings (NASDAQ: UPST) is a market beater so far in 2025 may come as a surprise. Its stock lost 19% of its value following Q2 earnings. Additionally, it had posted net losses for years before the current quarter. At one point in the 2022 bear market, it had even lost 97% of its value.

Nonetheless, Upstart is worth following, especially considering its ability to transform the credit scoring market. Fair Isaac's FICO score, the industry standard, has not had a major update since 1989.

In contrast, Upstart's model leverages AI to consider attributes overlooked by FICO. It trained its model on over 90 million data points and is working to increase its advantage in AI during the year. Such efforts have helped it uncover loan opportunities overlooked by FICO without adding to lender default risks.

Moreover, amid a sluggish economy, the Fed appears poised to lower interest rates, which should encourage more consumers to take out loans. So far, it mainly scores personal loans, but expanding into auto and home equity loans should significantly broaden its addressable market.

Due to a modest profit in Q2, Upstart has earned only $3.1 million this year. Still, revenue of $426 million in the first half of the year is up 59% yearly.

Also, recent losses temporarily left it without a price-to-earnings ratio. Still, considering its revenue growth, investors are likely to perceive its forward P/E ratio of 39 as reasonable, making it feasible for interested investors to cash in on this potentially lucrative opportunity.

Meta Platforms

Another company banking heavily on AI is social media giant Meta Platforms (NASDAQ: META). Over 42% of the world's population uses at least one of its social media sites daily.

Amid such saturation, its user base growth slowed to 6%. Thus, to maintain rapid revenue growth over the long term, it leveraged its treasure trove of personal data to help clients train AI models.

In 2025 alone, it pledged between $66 billion and $72 billion in capital expenditure (capex) to compete in this space, investing heavily in technical improvements and data center capacity to maintain its leadership.

Additionally, digital advertising continues to drive growth for now. In the first two quarters of 2025, Meta generated $90 billion in revenue, 19% more than the same period last year. In comparison, costs and expenses grew 10% over the same time, allowing its $35 billion in profit for the first half of the year to rise by 36%.

Despite those increases, Meta's stock sells for around 28 times earnings. Considering its rapid growth and growing role in AI, that valuation should make Meta stock attractive to prospective shareholders.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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Will Healy has positions in Intel and Upstart. The Motley Fool has positions in and recommends Apple, Intel, Meta Platforms, Nvidia, Taiwan Semiconductor Manufacturing, and Upstart. The Motley Fool recommends Fair Isaac and recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.

Key Points

• Warren Buffett has authorized $77.8 billion worth of stock buybacks since 2018, double the amount he has ever invested in any other stock.

• While Berkshire's buyback program remains active, Buffett hasn't pulled the trigger in any of the past four quarters.

• A combination of Berkshire's current valuation and pending leadership change could be among the reasons Buffett is sitting on his hands.

• 10 stocks we like better than Berkshire Hathaway ›

Warren Buffett has been the chief executive officer of Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) since 1965. He oversees a variety of wholly owned subsidiaries like Dairy Queen, Duracell, and GEICO Insurance, in addition to a $293 billion portfolio of publicly traded stocks and securities.

Berkshire is also sitting on $344 billion in cash. Buffett and his team would normally deploy this money into new opportunities when they come up, or return some of it to shareholders through stock buybacks.

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He authorized $77.8 billion worth of buybacks between 2018 and mid-2024, which is more than double what he has ever invested in any other stock.

However, he hasn't authorized any buybacks for the past four consecutive quarters, which might be concerning for investors who follow the Oracle of Omaha's every move. Does he think a stock market crash is on the way, or is he no longer bullish on Berkshire's prospects? Below, I'll highlight two plausible reasons for the pause.

Warren Buffett turned Berkshire into a cash-generating machine

Before diving into the two possible reasons for Buffett's recent inaction on buybacks, let's examine why Berkshire is sitting on so much cash.

First, the conglomerate has been a net seller of stocks for 11 straight quarters on the back of historically expensive valuations, which has freed up a mountain of cash. It even sold more than half of its stake in Apple last year; after investing about $38 billion in the iPhone maker between 2016 and 2023, the position was worth more than $170 billion in early 2024, so it was probably wise to cash in some of those gains.

Second, Berkshire is a cash-generating machine. It owns numerous insurance, utilities, and logistics companies that deliver steady income and earns a truckload of dividends each year from its stock portfolio. The conglomerate is on track to receive $2.1 billion in dividends during 2025 from just three stocks alone: American Express, Chevron, and Coca-Cola.

With so much money coming in, why is Buffett hesitating to repurchase Berkshire stock?

The first possible reason: Berkshire's valuation

Buybacks reduce the number of shares in circulation, which organically increases the price per share by a proportionate amount and gives each shareholder a larger stake in the company. In other words, they are great for investors.

Berkshire stock has generated a compound annual return of 19.9% since Buffett took the helm, crushing the average annual gain of 10.4% in the benchmark S&P 500 index during the same period. Therefore, chances are Berkshire will outperform almost any other stock Buffett could invest in, which minimizes the opportunity cost of performing buybacks.

However, Buffett has a keen eye for value and he never wants to overpay for a stock -- not even his own. Berkshire is currently trading at a price-to-sales ratio (P/S) of 2.5, which is a huge 25% premium to its 10-year average of 2.

BRK.A PS Ratio data by YCharts.

Berkshire stock last traded in line with its average P/S in early 2024. Interestingly, the buybacks stopped after the second quarter of that year, which could be a sign Buffett thinks the stock is simply too expensive at these levels.

The second possible reason: Succession

Berkshire can repurchase its own stock at management's discretion as long as the balance of its cash and equivalents is more than $30 billion. Since it is sitting on $344 billion in dry powder right now, that certainly isn't an issue.

However, at Berkshire's annual shareholder meeting on May 3, Buffett announced he will step down from his role as CEO at the end of 2025. He will continue to serve as chairman so his brand of long-term value investing will probably endure, but he will hand the majority of his day-to-day responsibilities over to his chosen successor, Greg Abel.

Buffett is leaving Berkshire in an incredibly strong position, so it's possible he wants to avoid making any major decisions in his remaining time as CEO, especially those that would deplete the company's cash balance. He likely wants to leave Abel with plenty of resources to carry the conglomerate into the future, because it will give him the best chance to succeed.

After all, maybe buybacks won't be on Abel's agenda at all. He might prefer to use Berkshire's $344 billion cash pile to make a series of bold acquisitions, or expand the conglomerate's stock portfolio. It's difficult to know what the future holds, but the impending leadership change is certainly a plausible reason for Berkshire's buyback hiatus during the past four quarters.

Should you invest $1,000 in Berkshire Hathaway right now?

Before you buy stock in Berkshire Hathaway, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Berkshire Hathaway wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of August 11, 2025

American Express is an advertising partner of Motley Fool Money. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, and Chevron. The Motley Fool has a disclosure policy.

Key Points

• Dutch Bros is developing products and creating a consumer experience that's generating loyalty.

• It reported outstanding second-quarter earnings.

• It sees the opportunity to increase its store count sevenfold.

• 10 stocks we like better than Dutch Bros ›

The market has been getting plenty of good news lately, and stocks are starting to climb again. President Donald Trump met with Apple CEO Tim Cook last week, with Apple announcing a $600 billion investment in U.S. operations, while Nvidia and Advanced Micro Devices agreed to give 15% of revenue from Chinese goods to the U.S. government in exchange for the ability to sell chips to China.

But coffee chain Dutch Bros' (NYSE: BROS) stock soared last week on its own news, and after middling performance for most of the year, it's up more than 26%, beating the S&P 500's 9% rise.

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Here's why the market is loving Dutch Bros.

Back to the basics

Investors love to get into a detailed earnings report or 10-K filing to see how a company's finances are doing. But the beginning of any great company is a great product. Dutch Bros sells coffee through its chain of just over 1,000 stores today, but its concept was built on innovative products, and that vibrant approach to coffee still drives the business.

Don't get me wrong; the economics here are excellent, which furthers the investment thesis. But it starts with great coffee that customers love, and the high sales follow.

CEO Christine Barone detailed the company's three-part plan to generate higher transaction growth. It involves menu innovation, paid advertising to enhance brand awareness as it rolls out in new regions, and leaning into the loyalty program.

Dutch Bros has always differentiated itself by launching its own branded beverages, and that's one way it stands out. Barone called it a mix of art and science, understanding what's trending in the coffee world and translating it into products that its customers want to drink. Some of the innovation is in the customized beverages, such as protein coffee and flavors like lavender, and some of that is in the menu itself. One of the initiatives it's working on is a pilot of a morning food menu, which is driving higher engagement and sales in the morning coffee run.

Part of the product is the experience, and making its stores a positive experience involves rigorous systems and technology to ensure speed and effective customer service. The company takes things slow in that respect to ensure it has its systems in check before opening new stores or making any changes. Barone said that the food menu will roll out slowly through 2026 even though it's already demonstrating positive metrics, to ensure that stores are ready to handle it.

Phenomenal performance

This fresh approach is driving incredible growth. Revenue increased 28% year over year in the 2025 second quarter, with a 6.1% increase in same-shop sales and a 3.7% increase in transactions.

Company-operated shop contribution margin was 31.1%, 0.3 percentage points higher than last year, and net income increased from $22.2 million to $38.4 million. Management raised full-year guidance after the report.

Massive expansion

Dutch Bros recently hit the 1,000-store mark, up from less than 500 when it went public in 2021. It's planning to double its store count again, hitting 2,029 stores by 2029.

The company is deliberate in its store opening strategy, but it's going to need to accelerate to reach that target. It opened 31 stores in the second quarter, and plans for at least 160 this year, which means things are going to speed up in the second half of the year. It's going to need to open even faster over the next four years to hit that target, but as it refines and perfects its strategy, it should be easier.

Longer term, it sees the opportunity for 7,000 stores, or seven times its current store count. It has already raised that from its original target of 4,000 stores, and that ceiling could be raised again as it builds its brand and generates consumer loyalty.

Dutch Bros is brimming with opportunity, and it's not surprising that investors are scooping it up.

Should you invest $1,000 in Dutch Bros right now?

Before you buy stock in Dutch Bros, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dutch Bros wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 11, 2025

Jennifer Saibil has positions in Apple. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, and Nvidia. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.

Key Points

• Nvidia's top-tier clients are investing huge amounts of money in AI development, and they're partnering with Nvidia.

• Several large tech stocks reported strong earnings last week.

• Nvidia reports at the end of the month and it tends to beat guidance.

• 10 stocks we like better than Nvidia ›

Last week was a busy one for tech followers. Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), Amazon (NASDAQ: AMZN), and Apple (NASDAQ: AAPL) all reported second-quarter earnings, and while they were mostly positive in different ways, artificial intelligence (AI) continued to be a strong trend. That's great news for Nvidia (NASDAQ: NVDA) investors. Let's see what's happening and why investors should get excited about what Nvidia will have to say when it reports quarterly earnings later this month.

Winning with AI

AI has become an enormous growth driver for tech companies, and really all kinds of companies. It unlocks productivity and aids in creativity in ways that make it essential if a company doesn't want to be left behind.

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Amazon said that its AI business through the Amazon Web Services (AWS) cloud division continues to grow at triple digits year over year, "with more demand than we have supplied for at the moment." It's launching all sorts of new features as demand grows and changes, and releasing powerful new tools aimed at developers creating large language models and in need of the highest-power AI chips. It also boasted that it rolled out new EC2 instances, a type of virtual server on the AWS cloud supported by new Nvidia Blackwell "super chips," the most powerful graphics processing units (GPUs) on AWS.

Amazon spent $31.4 billion on capital expenditures, which it says is a reasonable estimate for the back half of the year. Although that could be in many parts of the business, it said the AI business is where most of it is going. That means it could be spending even more than the original $100 billion it said it would spend in 2025.

Microsoft boasted that its Azure cloud business is grabbing market share, up 34% year over year in the 2024 fiscal fourth quarter (ended June 30), and that it now has 400 data centers, the most of any other cloud business. Management highlighted that while there's industry talk about the first gigawatt or multi-gigawatt data centers, it launched two gigawatts of power in its data centers over the past 12 months, and it's scaling faster than the competition.

At Meta, CEO Mark Zuckerberg discussed many exciting developments in AI, including the launch of Meta Superintelligence Labs, which combines all of the company's AI efforts, and progress on upgrades to its Llama LLMs. In April, Nvidia announced its own involvement in the new Llama developments. Zuckerberg said Meta is working on the next generation of products "that will push the frontier in the next
year or so." Meta has made headlines over the last few weeks as it crafts a team of AI specialists it's been pulling from rival companies.

Apple continues to disappoint, or at least confuse, investors with its AI developments. It's taking its time to develop an AI infrastructure that rivals the competition, and it's questionable whether or not it's losing ground or if it's going to eventually release something different and special, which is its signature. Management said it's making substantial investments in AI and that its capital expenditures are going to increase.

Although investors seemed disappointed in Apple's AI updates, there's no question that it provided an excellent report, beating expectations on the top and bottom lines, and it's likely to report progress in Apple Intelligence over the coming quarters.

Driving AI

The common denominator here is Nvidia, which partners with all of these companies. It provides the power for Amazon's and Microsoft's clientele to develop potent LLMs and AI agents, and they also use Nvidia GPUs for the data centers that drive their own LLMs. Meta uses Nvidia's GPUs for its own LLMs and AI agents, and Apple partners with Nvidia for its AI business as well.

Nvidia is guiding for sales to increase about 50% over last year in the fiscal second quarter, which it will report on Aug. 27. Its quarterly results usually beat guidance, but with the success and continued capital investments of its top-tier clients, it's very likely that it will beat sales guidance and give shareholders a strong outlook.

Should you invest $1,000 in Nvidia right now?

Before you buy stock in Nvidia, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $653,427!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,119,863!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 182% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Jennifer Saibil has positions in Apple. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Apple beat analyst estimates when it reported Q3 2025 financial results.

• CEO Tim Cook is ready to spend much more to accelerate Apple’s push into AI, which has been underwhelming so far.

• The stock’s valuation doesn’t add sizable upside for prospective investors.

• 10 stocks we like better than Apple ›

Apple (NASDAQ: AAPL) just reported third-quarter 2025 (ended June 28) financial results that pleased investors. Revenue soared 9.6% year over year to $94 billion, while diluted earnings per share climbed 12.1%. These headline figures beat Wall Street estimates.

Despite the upbeat results, Apple shares have disappointed. They're down 15% in 2025 (as of Aug. 6). And in the last 12 months, they are essentially flat. The S&P 500 index is up 22% during the same time. This trend doesn't inspire confidence among the investment community.

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But maybe the future will bring optimism. Where will this consumer discretionary stock be one year from now?

Leaning into the AI opportunity

The general view is that Apple has so far fallen behind in the ongoing artificial intelligence (AI) race. Apple Intelligence, its AI system that's integrated with its devices and software, has launched 20 different features for users. But it hasn't exactly had that wow factor that people are accustomed to seeing from Apple.

There was also supposed to be an AI-powered Siri launching in late 2024. However, this more personalized voice assistant won't be introduced until sometime in 2026. Big tech peers have gone full steam ahead in the meantime, while it appears that Apple is playing catch-up.

On the latest earnings call, though, CEO Tim Cook gave investors a reason to be bullish. "We see AI as one of the most profound technologies of our lifetime," he said on the Q3 2025 earnings call. Maybe he's finally starting to regard AI as a serious paradigm shift that can have huge implications for his business.

Apple is raising the amount of money it's spending on AI-related capital expenditures (capex). CFO Kevan Parekh said capex spending "is going to grow substantially." In Q3, the company's capex totaled $3.5 billion. Mergers and acquisitions could be part of the plan.

Therefore, investors shouldn't be surprised for Apple to push more aggressively into AI initiatives. This seems to be the right move from a strategic perspective. At the end of the day, it's all about Apple being able to bolster its competitive position. It's hard to say what new products or services will come next from this.

It's also difficult to see any meaningful effect on the company's financials. For Apple, this means being able to sell more devices and simultaneously grow the services segment. According to Wall Street consensus analyst estimates, Apple's revenue will rise 6.3% in fiscal 2025 and 4.8% in fiscal 2026.

Making accurate predictions is hard

It can be a valuable exercise for investors to understand the current situation that a business is in, as well as what the near future might hold. However, making correct predictions about the direction of a stock is almost impossible to do. There are so many variables at play.

For what it's worth, the consensus price target for Apple shares is $233.61, which implies 10.9% upside from today's price. That would certainly be an improvement from the last 12 months' performance. It's a gain that I wouldn't be surprised by.

But investors looking at Apple shouldn't make a decision based on what could happen over the next 12 months. Instead, it's worth assessing whether or not this is a business that you'd want to own for the next five years. That's the proper way to invest, with a long-term mindset.

Right now, Apple stock trades at a price-to-earnings ratio of 31.9. That's a high valuation to pay for a company whose growth is harder to come by these days. To be fair, Apple possesses one of the world's strongest brands, its products and services are hugely in demand, and its profitability is incredible. However, I don't believe investors who own this stock will achieve market-beating returns between now and 2030, regardless of what happens in the next year.

Should you invest $1,000 in Apple right now?

Before you buy stock in Apple, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,108,033!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

Key Points

• Apple's artificial intelligence strategy appears to have been a failure so far.

• AI features haven't been a huge selling point for its iPhones -- at least, not yet.

• Apple could buy a generative AI company to accelerate its AI development timeline.

• 10 stocks we like better than Apple ›

It's no secret that Apple (NASDAQ: AAPL) has been a laggard in the artificial intelligence (AI) arms race. It has been outpaced every step of the way by its Android competitors. Additionally, the gap only seems to be getting wider and wider. However, Apple may be implementing a new strategy that could be a genius move.

On the conference call for the fiscal third quarter of 2025, ended June 28, Apple CEO Tim Cook commented about the company's new AI strategy, and it may be enough to vault Apple from an AI laggard to an AI leader.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Apple could be open to acquiring a generative AI company

During Apple's quarterly conference call, Cook said Apple is open to acquiring an AI company. If it acquired an AI leader, then it could rapidly accelerate its development pace. He also mentioned that it's not focused on a specific size, which could indicate management could be going after one of the larger generative AI companies.

Some of the businesses on the short list that Apple could acquire are OpenAI, Perplexity, and Anthropic. These three tend to be among the best generative AI models that aren't already associated with a parent company (like xAI's Grok or Google's Gemini). However, an acquisition for these wouldn't come cheap.

All three of these companies are currently private, so we have relatively limited data to establish the value of the company. According to the most recent reports for each company, OpenAI was last valued at $300 billion, Anthropic at $170 billion, and Perplexity at $18 billion. At the end of Q3, Apple's cash and short-term investments totaled over $55 billion.

So, while it could probably flex its muscle and scoop up OpenAI or Anthropic at an extreme price tag, an acquisition of a company like Perplexity is probably more likely. This also would make the most sense, as OpenAI is currently partnered with Microsoft and Anthropic is linked to Amazon.

With Perplexity's relatively low valuation compared to its peers, Apple could scoop it up in an all-cash deal and immediately be in a great position in the AI arms race. I wouldn't be surprised to see a deal like this get announced within the next year, and it may not be with Perplexity; it could be with another generative AI competitor.

However, I think this route is likely as Apple has already fallen well behind its peers in this realm. But the question is, does Apple need AI to sell its products?

Apple's revenue growth is already returning despite its AI product lineup

During Q3, Apple did something it hasn't done in some time: produce double-digit revenue growth (as long as you round up).

AAPL Operating Revenue (Quarterly YoY Growth) data by YCharts

Apple has been stuck in a rut since 2022, and now it's finally showing some signs of life, despite having little AI featured compared to its peers. The question then becomes: Do AI features matter to consumers? This could be a hotly debated topic, as most users likely aren't using the AI capabilities of Android phones, and Apple users may not care.

But there could be a time someday when users are comfortable using AI features, and the specific AI model on a phone becomes a huge selling point. We're not there yet, so Apple still has some time to catch up in the AI arms race. However, we'll reach that point eventually, and if Apple doesn't do something major, like acquire an AI company, it could be left in the dust over the long term, even if it isn't feeling the pain right now.

I think Apple's new strategy could be genius if it makes a move to acquire a company like Perlexity, and the entire investment thesis surrounding Apple would improve overnight. But if it fails to do so, Apple could be on the outside looking in a few years from now.

Should you invest $1,000 in Apple right now?

Before you buy stock in Apple, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,108,033!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Keithen Drury has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Apple, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• The Vanguard Value ETF has a much lower valuation than the Vanguard S&P 500 ETF.

• The Value ETF is a wealth compounder first and a passive income tool second.

• The ETF can be an effective tool for investors who don’t want to amplify their exposure to mega-cap growth stocks.

• 10 stocks we like better than Vanguard Index Funds - Vanguard Value ETF ›

The S&P 500 (SNPINDEX: ^GSPC) has historically been a fantastic way to compound wealth -- generating annualized total returns of 9% to 10%. The proliferation of low-cost index funds and exchange-traded funds (ETFs) has made it easier than ever to invest in the S&P 500 without racking up high fees.

The Vanguard S&P 500 ETF (NYSEMKT: VOO) -- one of the largest S&P 500 index funds by net assets -- has an expense ratio of just 0.03% -- or 3 cents for every $100 invested. When I first began investing, it was normal to see flat fees per stock trade of around $5 to $10. So fees and expense ratios are no longer a major drag on returns for investors who regularly pour their savings into equities.

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One issue with buying the S&P 500 is that it doesn't have a high yield. Today's top S&P 500 companies are growth stocks that have yields well below 1% or don't pay dividends at all -- a stark contrast to the days when the most valuable companies were oil and gas giants, industrials, or consumer staples behemoths with high yields.

As a result, the yield of the S&P 500 has fallen to just 1.2%. What's more, the valuation of the S&P 500 has gotten more expensive as stock prices have outpaced earnings growth.

Here's why investors looking to use passive income as a key way to achieve their financial goals may want to consider buying the Vanguard Value ETF (NYSEMKT: VTV) over the Vanguard S&P 500 ETF.

A lower yield at a better valuation

The Vanguard Value ETF sports an expense ratio of 0.04%, so it has just one cent more in annual fees per $100 invested than the Vanguard S&P 500 ETF. It also offers a full percentage point higher in 30-day SEC yield at 2.2% compared to 1.2% for the S&P 500 ETF.

In addition to having a higher yield, the Value ETF sports a 19.6 price-to-earnings (P/E) ratio (as of June 30) and holds 335 stocks compared to a 27.2 P/E ratio (also as of June 30) and 505 holdings for the S&P 500 ETF.

The Value ETF's higher yield and significantly lower valuation may appeal to investors looking to avoid paying a premium for the top stocks that are leading the S&P 500.

A different cast of characters

The Value ETF's higher yield and lower valuation result from its composition.

	Vanguard Value ETF		Vanguard S&P 500 ETF
Holding Rank	Company	Weighting	Company	Weighting
1	Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B)	4%	Nvidia (NASDAQ: NVDA)	7.3%
2	JPMorgan Chase (NYSE: JPM)	3.6%	Microsoft (NASDAQ: MSFT)	7%
3	ExxonMobil (NYSE: XOM)	2.1%	Apple (NASDAQ: AAPL)	5.8%
4	Walmart (NYSE: WMT)	2%	Amazon (NASDAQ: AMZN)	3.9%
5	Procter & Gamble (NYSE: PG)	1.7%	Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL)	3.5%
6	Oracle (NYSE: ORCL)	1.7%	Meta Platforms (NASDAQ: META)	3.1%
7	Johnson & Johnson (NYSE: JNJ)	1.7%	Broadcom (NASDAQ: AVGO)	2.5%
8	Home Depot (NYSE: HD)	1.7%	Berkshire Hathaway	1.7%
9	AbbVie (NYSE: ABBV)	1.5%	Tesla (NASDAQ: TSLA)	1.7%
10	Bank of America (NYSE: BAC)	1.4%	JPMorgan Chase	1.5%
	Total	23.1%	Total	38%

Data source: Vanguard.

Aside from Berkshire Hathaway and JPMorgan Chase, there are no other companies that overlap the top 10 holdings in the Value ETF and S&P 500 ETF.

You'll also notice that the S&P 500 is much more top-heavy -- meaning that just a handful of names can move the index. Whereas the Value ETF is more balanced and not as dominated by just 10 companies.

Far more than a passive income vehicle

Over the last decade, the Value ETF has gone up 111.5% and has a total return of 173.5%. Meaning that capital gains have made up a much higher percentage of the total return than dividend income. The investment thesis centers around the companies it holds rather than being all about yield, a stark contrast to ETFs that prioritize passive income over upside potential.

The JP Morgan Nasdaq Equity Premium ETF (NASDAQ: JEPQ) sells covered call options on the Nasdaq-100 as a way to generate income -- which provides a sizable stream of monthly payouts while capping the upside potential of the Nasdaq-100 moving higher. The fund sports an 11.2% 30-day SEC yield (as of June 30), so it could be a great way for investors who are primarily focused on passive income. However, the Value ETF offers a way to get a higher yield than the S&P 500 without having any cap on upside potential.

The Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) doesn't use call options to achieve its high 3.9% yield. But many of its holdings are arguably lesser quality companies than what you'll find in the Value ETF.

The Vanguard Value ETF remains a top fund to buy now

The Value ETF is a good buy if you already own many of the top growth stocks in the S&P 500 and are looking to diversify your portfolio into different companies and boost your passive income.

It's also a good option for investors who want to participate in the broader market and collect more passive income than the S&P 500.

While there are plenty of ETFs that offer higher yields than the Value ETF, I would argue that the quality of companies in the ETF makes it one of the best ways to consistently collect more passive income than the index.

Should you invest $1,000 in Vanguard Index Funds - Vanguard Value ETF right now?

Before you buy stock in Vanguard Index Funds - Vanguard Value ETF, consider this:

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,108,033!*

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*Stock Advisor returns as of August 4, 2025

Bank of America is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Daniel Foelber has positions in Nvidia and Procter & Gamble. The Motley Fool has positions in and recommends AbbVie, Alphabet, Amazon, Apple, Berkshire Hathaway, Home Depot, JPMorgan Chase, Meta Platforms, Microsoft, Nvidia, Oracle, Tesla, Vanguard Index Funds-Vanguard Value ETF, Vanguard S&P 500 ETF, and Walmart. The Motley Fool recommends Broadcom and Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Credit card middleman American Express has earned its way to Berkshire's No. 2 spot for all the right reasons.

• While the oil and gas industry may be running on borrowed time, it's borrowed a lot of time, during which there's lot of money to be made.

• The recent purchase of a stake in Pool Corp. seems unusual on the surface. But a closer look reveals the Buffett-like thinking behind the trade.

• 10 stocks we like better than Occidental Petroleum ›

Veteran investors know the market is forever changing, requiring you to change with it. These changes include industry leadership, stock-selection strategies, allocation adjustments, and more.

There are still some reliable constants though. One of them is Warren Buffett, and the picks he makes -- or at least approves -- for Berkshire Hathaway's (NYSE: BRK.A) (NYSE: BRK.B) portfolio. If a stock becomes a Berkshire holding, you can bet it's a quality name with a promising future.

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Here's a closer look at three Warren Buffett picks currently held by Berkshire Hathaway that just might work for your portfolio as well.

1. American Express

Buffett's done a fair amount of selling over the past few quarters, lightening up on Berkshire's positions in Apple, Bank of America, and DaVita, and outright exiting its stakes in Citigroup and Nu Holdings.

One stock has remained conspicuously untouched for years now, however, to quietly become Berkshire Hathaway's second-biggest holding (right behind Apple). That's credit card outfit American Express (NYSE: AXP).

It's not too difficult to see why Buffett's such a fan, though; the company's certainly more than proven it knows how to make its unique business model work.

On the surface it's just another credit card company. Under the hood though, it's more. Unlike Visa and Mastercard, which are only payment networks for card issuers, American Express is both the issuer and the payment middleman.

This leveraged position allows it to offer a perks and rewards program that cardholders are willing to pay up to $700 per year just to access. This annual fee also means American Express' cardholders tend to be a bit more affluent than the average consumer, and as such are less likely to miss payments, and more likely to continue spending even when other people are tightening their purse strings.

And the proof is in the company's results. With the obvious exception of 2020 when the COVID-19 pandemic was in full swing, Amex's top line has improved every year going all the way back to 2017.

Profit growth hasn't been quite as consistent. It's remained reliable enough, however, to make American Express a solid dividend stock. Although the company tends to not raise its dividend payments in times of uncertainty -- like in the wake of 2008's subprime mortgage meltdown or during the COVID-19 pandemic -- it still continues to pay a quarterly dividend, and begins raising these payments again as soon as the economy makes it feasible to do so.

2. Occidental Petroleum

If it seems like the oil and gas business is inching its way to obsolescence, that's because it is. With the advent of electric cars and renewable energy sources, consumers just won't need oil like they have in the past. To this end, Goldman Sachs predicts "peak oil" -- the point at which the planet's daily consumption of crude stops growing and starts shrinking -- will happen in 2035.

There's a reason, however, that Buffett remains enough of a fan of oil giant Occidental Petroleum (NYSE: OXY) to stick with Berkshire's 265 million share position despite the stock's relatively poor performance of late. That is, there's still a great deal of money to be made in the business between now and then, and even after 2035.

See, while demand will likely start to shrink then, it's apt to shrink very, very slowly. Indeed, outlooks from ExxonMobil, OPEC, and Standard & Poor's all suggest that oil will still be the world's top source of energy production as far down the road as 2050. The continued proliferation of alternative energy options just won't be able to keep up with the ever-growing demand for electricity.

And Buffett feels very good about Occidental's ability to deliver, even in an environment where crude oil prices remain subdued. As he noted in 2023's letter (published in early 2024) to Berkshire Hathaway shareholders:

"Under Vicki Hollub's leadership, Occidental is doing the right things for both its country and its owners. No one knows what oil prices will do over the next month, year, or decade. But Vicki does know how to separate oil from rock, and that's an uncommon talent, valuable to her shareholders and to her country."

That's strong personal praise from the Oracle of Omaha.

The kicker: Buffett also touted the potential of the carbon-capture technology that Occidental Petroleum is developing, which literally sucks carbon dioxide out of the ambient air. While it's not quite yet ready for mass commercialization, that day is coming, and soon, putting Occidental into what's apt to be another multibillion-dollar market.

3. Pool Corp.

Finally, add Pool Corp. (NASDAQ: POOL) to your list of Warren Buffett stocks you might want to buy for yourself right now.

It's the smallest and least-known of the three companies in focus here, with a market cap of only $11 billion. It's not a particularly big Berkshire holding either; the conglomerate's 1.5 million Pool Corp. shares are worth less than $500 million, which is less than 4% of Pool itself.

This relatively small stake makes Buffett's interest in the company all the more telling. While owning this much Pool stock doesn't actually do much for Berkshire's bottom line, Buffett and/or his lieutenants waded in anyway. There's a reason, even if it's not yet clear.

But first things first. Yes, this is the company that sells swimming pool supplies. It's the biggest name in the business, in fact, doing $5.3 billion worth of business last year. Of that, $617 million was turned into net income.

Curiously, both of those numbers were down from 2023's comparisons. Neither figure is expected to improve any this year, either. Berkshire bought the stock anyway despite its relatively rich valuation of 28 times this year's expected per-share profit of $10.88. It's a significant vote of confidence in this company's future growth prospects.

The thing is, it may not be a crazy bet at all.

There's no denying this stock's been a poor performer since 2021's peak, largely due to headwinds on the residential real estate front, where costs have soared. Investors are just worried, and understandably so.

As Buffett says though, "Be fearful when others are greedy and greedy when others are fearful." This business may be struggling right now, but it will eventually thrive again once the economy gets back up to full speed and the highly cyclical homebuying and home-improvement markets perk up, in turn driving demand for pools, and, subsequently, demand for pool maintenance supplies. Berkshire's just positioning in a quality company now for whenever that recovery materializes.

Should you invest $1,000 in Occidental Petroleum right now?

Before you buy stock in Occidental Petroleum, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Occidental Petroleum wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,563!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,108,033!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 181% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

American Express is an advertising partner of Motley Fool Money. Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. James Brumley has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Berkshire Hathaway, Goldman Sachs Group, Mastercard, and Visa. The Motley Fool recommends Nu Holdings and Occidental Petroleum. The Motley Fool has a disclosure policy.

Key Points

• Berkshire Hathaway once again was a net seller of stocks.

• Buffett also snubbed repurchasing Berkshire stock, despite having a huge stockpile of cash.

• Buffett clearly remains cautious on the stock market at current valuation levels.

• These 10 stocks could mint the next wave of millionaires ›

Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) and its chief executive officer, legendary investor Warren Buffett, continued to shun stocks in Q2. Buffett has long been considered one of the world's best investors, but he's been selling a lot more stocks than buying recently.

In fact, the second quarter was the 11th straight quarter in which Buffett was a net seller. During the quarter, he bought about $4 billion in stock while selling roughly $7 billion. Last year, Buffett aggressively pared his stakes in a few top holdings, most notably Apple and Bank of America. In total, he was a net seller of more than $130 billion worth of stock last year.

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Berkshire also continued its streak of not buying back any of its own stock. The conglomerate hasn't made any repurchases since May 2024. Buffett previously would only buy back stock when Berkshire shares were trading at 1.1 times book value or below, before later moving it to 1.2 times. It then stopped using price-to-book (P/B) altogether, saying it wasn't necessarily reflective of Berkshire's true intrinsic value.

However, as Berkshire's P/B has crept up, he's stopped buying back stock. Berkshire P/B now stands at 1.5 times, down from about 1.8 times earlier this year and closer to where it's been trading the past few years. It will likely have to write down its investment in Occidental Petroleum, as it is carrying the 25% position it has in the stock on its balance sheet at more than $4 billion above its current value, but given Berkshire's size, that should have a minimal impact on its book value.

Meanwhile, Berkshire ended the quarter with a colossal $344 billion in cash and equivalents on its balance sheet. Taken altogether, it appears that Buffett continues to think the value of stocks, including his own, remains too high.

In Berkshire's annual letter from March, Buffett said he believed investing in good businesses is still the best use of cash over the long term. However, he noted that given its size, Berkshire isn't able to nimbly make large investments, so it needs to get them right the first time.

As for Berkshire's Q2 results, they were nothing to write home about. After-tax operating profit fell 4% to $11.2 billion, but that was largely due to currency swings. The company saw strength at its Burlington Northern Santa Fe railroad, where operating income climbed 20%, while its utility portfolio saw a 7% jump in profit. Its insurance underwriting profit, however, sank 12%. Meanwhile, it warned that the one big beautiful bill signed into law could hurt its utility business due to a reduction in tax credits for renewable energy. Berkshire's utility business has one of the largest portfolios of wind farms in the country.

Should investors follow Buffett's lead?

Buffett is clearly cautious about the stock market at this time, including his own company's stock. He's been reducing Berkshire's equity positions while also not buying back stock. That combination has led to Berkshire having a mountain of cash at its disposal, which he hasn't felt inclined to use.

If Buffett thinks Berkshire stock is overvalued and doesn't want to buy it, I think that is a good indication that investors shouldn't be piling into it at this moment. If he starts buying back shares again, then investors can return to more aggressively buying the stock for themselves.

As for the market as a whole, I would not recommend trying to time the market for the average investor. The best course of action is to still follow a simple dollar-cost averaging strategy, where you invest a set amount each month. Exchange-traded funds (ETFs) can be a great vehicle for this strategy, as can Berkshire stock itself, as it is a sound collection of businesses and stocks.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,026%* — a market-crushing outperformance compared to 180% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

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*Stock Advisor returns as of August 4, 2025

Bank of America is an advertising partner of Motley Fool Money. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool recommends Occidental Petroleum. The Motley Fool has a disclosure policy.

Key Points

• Nvidia has played a pioneering role in the proliferation of AI, but it wouldn't have been possible without this company.

• Nvidia, along with many other chip designers and consumer electronics companies, relies on the manufacturing expertise of this Taiwan-based giant.

• The wide range of industries that this Nvidia partner caters to makes it one of the best ways to play the global AI boom.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Nvidia (NASDAQ: NVDA) is considered a pioneer in the artificial intelligence (AI) hardware market, and rightly so, as the chip designer's graphics processing units (GPUs) have allowed cloud computing companies and others to train AI models and run inference applications.

The parallel computing power of Nvidia's GPUs makes them ideal for performing a large number of calculations simultaneously, which is precisely what's required for training AI models. Also, these chips are now gaining traction in AI inference as well, thanks to their ability to quickly make predictions and decisions using the trained model.

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Not surprisingly, Nvidia has established a solid foothold in the AI chip market. It towers above its competitors with an estimated market share of 80% in AI data center accelerators. However, Nvidia's dominance wouldn't have been possible without its foundry partner Taiwan Semiconductor Manufacturing (NYSE: TSM), which is the real kingpin of the AI chip market.

Let's look at the reasons why TSMC is a bigger power player than Nvidia in AI chips.

TSMC's dominant foundry position makes it the go-to manufacturer of AI chips

TSMC operates semiconductor fabrication plants across the globe, which are used to manufacture chips based on designs provided by its customers. It is worth noting that TSMC doesn't design its own chips. It simply makes chips for fabless semiconductor companies that don't have production facilities of their own.

Nvidia is one such company that utilizes TSMC's facilities for manufacturing its AI chips. Equity research and brokerage firm Bernstein estimates that Nvidia could account for over a fifth of TSMC's top line this year, up significantly from around 5% to 10% a couple of years ago. That's not surprising, as Nvidia has been aggressively looking to secure more of TSMC's chipmaking capacity.

Taiwan-based business newspaper Economic Daily News pointed out earlier this year that Nvidia has reportedly secured more than 70% of TSMC's advanced chip packaging capacity for 2025 in a bid to meet the robust demand for its AI GPUs. However, Nvidia is not the only company that's in line to utilize TSMC's fabs.

Apple (NASDAQ: AAPL) is another major customer, and its contribution toward TSMC's top line is expected to be identical to that of Nvidia's in 2025. The consumer electronics giant taps TSMC to manufacture the processors that go into popular devices such as iPhones and iPads, and it has reportedly pre-booked the foundry giant's 2-nanometer (nm) capacity to mass produce chips for its next-generation iPhones.

It is worth noting that Apple had reportedly booked all of TSMC's 3nm supply in 2023 to make processors for the iPhone and other devices. And now that Apple is looking to bolster the on-device AI capabilities of its devices, it is expected to move to the 2nm node so that it can pack more computing power and increase energy efficiency.

Apple, however, has company, as another smartphone chip designer -- Qualcomm -- is expected to produce chips based on TSMC's 2nm process node as well. On the other hand, Nvidia's peers in the AI accelerator market are also partnering with TSMC to manufacture advanced chips.

Marvell Technology, for instance, is reportedly going to adopt TSMC's sub-3nm process nodes to manufacture the next generation of its custom AI processors, which are in tremendous demand from cloud computing giants to reduce costs. Meanwhile, AMD is getting its central processing units (CPUs) and GPUs that power both servers and personal computers (PCs) manufactured by TSMC as well.

Clearly, TSMC is the power player in the AI chip market. Its plants manufacture chips that go into a wide variety of applications, ranging from smartphones to PCs to data centers, and all of these markets are on track to record secular growth because of AI. Importantly, TSMC is taking steps to ensure that it can meet the incredible demand from all of these markets.

An aggressive expansion plan should help it satisfy the booming AI chip demand

TSMC's 2025 capital expenditure forecast of $38 billion to $42 billion points toward a significant increase over its 2024 outlay of $30 billion. It is going to invest 70% of its 2025 capex on advanced process technologies that are used for making AI chips, which isn't surprising.

Moreover, the company has aggressive long-term expansion plans as well. It has outlined an investment of $165 billion in the U.S. to build more plants, while it is also building factories in Taiwan and Europe. These expansionary moves should enable TSMC to capitalize on the AI chip market's impressive long-term growth.

According to one estimate, the global AI chipset market could clock an annual growth rate of 31% through 2033, which means that TSMC has the ability to sustain its terrific growth for years to come. Not surprisingly, analysts are expecting a pick-up in TSMC's growth going forward.

TSM EPS Estimates for Current Fiscal Year data by YCharts

That's why it would be a good idea to buy this AI stock hand over fist right now, as it seems undervalued. TSMC's earnings are expected to jump by 34% this year, which is nearly five times the projected increase in the S&P 500 index's average earnings. With the stock trading at 28 times earnings, investors are getting a good deal on TSMC based on the potential upside it could deliver.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $636,628!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,063,471!*

Now, it’s worth noting Stock Advisor’s total average return is 1,041% — a market-crushing outperformance compared to 183% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 21, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Nvidia, Qualcomm, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.

Key Points

• Alphabet and GitLab are misunderstood stocks that are poised to be AI winners.

• Salesforce and ServiceNow are software companies with big AI opportunities in front of them.

• SentinelOne has a big potential catalyst in the second half as its deal with Lenovo rolls out.

• 10 stocks we like better than GitLab ›

The first half of 2025 wasn't kind to a number of promising artificial intelligence (AI) stocks, particularly in the software space. However, the second half could be very different.

Let's look at five stocks that were AI losers in the first half of 2025 that look poised to rebound in the second half.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

Alphabet

Alphabet (NASDAQ: GOOGL)(NASDAQ: GOOG) continues to be one of the most misunderstood stocks in the market. Investors keep worrying about AI disrupting its core search business, but that misses the bigger picture. Google isn't a search company -- it's a content discovery platform with a huge distribution advantage and decades of behavioral data behind it.

Alphabet's browser and mobile operating system give it an enormous edge. Chrome commands more than 65% of global browser share, while Android runs on over 70% of smartphones. Meanwhile, Google has revenue-sharing deals to be the default search engine across Apple devices and other browsers. As search and AI evolve, that distribution becomes increasingly important.

At the same time, Google has stepped up its game with its new AI-powered Search Mode. In a recent Oppenheimer survey, 82% of users found it more helpful than traditional search, and 75% preferred it to ChatGPT. Importantly, Google doesn't need to change user behavior and have people switch over to its apps. Its billions of users just need to click AI Mode to get this experience.

Its cloud computing business is also gaining traction. Google Cloud revenue rose 28% last quarter, and the company is investing heavily to build capacity to keep up with demand. Add in under-appreciated assets like its Waymo robotaxi business and its Willow quantum chip, and Alphabet looks ready to rebound in the back half.

GitLab

Another company that is misunderstood is GitLab (NASDAQ: GTLB). Investors are worried that with AI, organizations are going to need fewer coders. However, thus far AI has led to more software development, while GitLab has quietly been transforming itself into a software development lifecycle platform.

The company took a big step forward in this direction with the release of GitLab 18. It added over 30 new features, including its Duo Agent Platform, which allows users to deploy AI agents across the entire development cycle from code generation to testing to compliance. This is important, as according to William Blair, developers only spend about 20% of their time actually writing code.

The company has already been growing revenue at a strong clip, including 27% last quarter. The growth is being driven by new customers as well as existing customers buying more seats and upgrading tiers. GitLab has also been expanding key partnerships, including with Amazon.

As a company that is helping drive end-to-end development workflow efficiency, GitLab has a strong future ahead and looks like a solid rebound candidate.

Salesforce

Salesforce (NYSE: CRM) has spent the last year refocusing its platform around AI. Its new Agentforce platform has over 4,000 paying customers already, and it's at the center of what could become a much bigger digital labor platform.

The company's strategy is to unify apps, data, automation, and metadata to a single framework called ADAM. It will then use this as a foundation to build and scale AI agents, helping create a digital workforce. It also recently rolled out a more flexible pricing model tied to outcomes to help increase adoption.

Salesforce is already the leader in customer relationship management (CRM) software, and its push into AI agents could be a huge growth driver. With the stock lagging in the first half, it could rebound if Agentforce starts to gain more traction.

ServiceNow

ServiceNow (NYSE: NOW) may not be an obvious AI name, but it's also using AI to help transform its business. The company's roots are in IT management, but it has since expanded into human resources, finance, and customer service.

The company's strength has always been connecting siloed departments and helping organizations streamline their operations. It has embedded AI into its Now Platform, helping take these efforts to the next level. It's been seeing strong traction, with AI-driven Pro Plus deals quadrupling year over year last quarter. As organizations increasingly focus on efficiency and automation to help reduce costs, ServiceNow is well-positioned.

While some investors worry about enterprise software budgets, ServiceNow is a cost-saving platform that should continue to perform well in the current environment. That should help set the stock up to rebound later this year.

SentinelOne

SentinelOne's (NYSE: S) stock was under pressure in the first half of the year, but there's a good reason to believe that it will perform much better in the second half. The big reason is that its new partnership with Lenovo is about to ramp up.

Lenovo is the world's largest enterprise PC vendor, and starting in the second half, it will pre-install SentinelOne's Singularity Platform on all new computers it sells. Existing Lenovo users will also be able to upgrade to SentinelOne's AI-powered security platform. That's a huge opportunity for the cybersecurity company.

SentinelOne has already been seeing solid revenue growth, including 23% last quarter. While it's not the leader in the endpoint security space -- that would be CrowdStrike -- its platform receives high marks from Gartner. Meanwhile, its Purple AI solution, which helps analysts hunt complex security threats through the use of natural language prompts, has been the fastest-growing solution in its history.

All in all, SentinelOne is a solid company whose stock trades at a big discount to some of its bigger peers. Meanwhile, the Lenovo deal should be a catalyst in the second half.

Should you invest $1,000 in GitLab right now?

Before you buy stock in GitLab, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and GitLab wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $652,133!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,056,790!*

Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 15, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Geoffrey Seiler has positions in Alphabet, GitLab, Salesforce, and SentinelOne. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, CrowdStrike, GitLab, Salesforce, SentinelOne, and ServiceNow. The Motley Fool recommends Gartner. The Motley Fool has a disclosure policy.

Key Points

• Warren Buffett has an unrivaled track record allocating capital, but maybe the best dollar gain occurred with a decision made just in the past decade.

• This business, which remains Berkshire's top holding, has numerous traits showcasing its high quality.

• Investors shouldn't blindly follow Buffett.

• 10 stocks we like better than Apple ›

Since 1965, Berkshire Hathaway has compounded shareholder capital at a nearly 20% annualized rate. That unbelievable performance was under the stewardship of Warren Buffett, arguably the best investor ever.

The Oracle of Omaha's most lucrative idea might have happened in the past decade, though. Shares of this consumer-facing enterprise have soared 749% in the last nine years (as of July 15), producing a huge dollar gain for Berkshire. Despite numerous stock sales over a four-quarter stretch from the fourth quarter of 2023 through the third quarter of 2024, this company still represents 22% of the conglomerate's $290 billion portfolio, making it the biggest position.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

This is a wonderful business, but should investors buy the stock?

Passing Buffett's filter is a valuable endorsement

During the first quarter of 2016, Buffett and Berkshire initiated a position in Apple (NASDAQ: AAPL). Based on the percentage return mentioned above, this turned out to be an investing masterstroke. Looking back at the decision, investors can gain valuable insights as to how Apple passed Buffett's filter.

Berkshire's portfolio is full of businesses that possess strong brands. There might be none more powerful than Apple, which has a global customer base that's loyal to the company's products and services, constantly waiting for what will be launched next. Apple positions itself at the premium end of the consumer electronics industry, but its intense focus on innovation has won over consumers.

This also allows for pricing power, a trait that Buffett loves. Apple's share of the smartphone industry's profits is significantly higher than its share of unit sales, which reveals the financial success of the iPhone.

Buffett likes to own companies in pristine financial shape. Apple generates copious amounts of free cash flow each quarter. And in the past five years, the operating margin has averaged a breathtaking 30%.

Of course, a great company doesn't always make for a worthwhile investment opportunity. Here's where valuation comes into focus. During the first quarter of 2016, Apple shares traded at an average price-to-earnings (P/E) ratio of 10.6. Viewing this multiple with the company's brand, pricing power, and profits, buying Apple more than nine years ago looks like a no-brainer decision for Buffett with the benefit of hindsight.

Is Apple stock a buy now?

As of March 31, Berkshire Hathaway owned 300 million Apple shares. If Buffett and his team weren't still bullish on Apple, then they wouldn't have such a huge position in the stock. But should individual investors buy shares now?

To come to an informed answer requires a fresh perspective. Some of the favorable traits still hold true, like the powerful brand and the monster profits.

However, there's reason to believe that this "Magnificent Seven" stock will struggle to outperform the market over the next five or 10 years. Apple's growth is nothing to write home about. The analyst community sees revenue increasing at a compound annual rate of 5.3% between fiscal 2024 and fiscal 2027.

Apple's lack of progress with artificial intelligence (AI) initiatives also continues to receive criticism. Updates to the Siri voice assistant that integrate AI aren't coming until next year. And Apple has relied on partnerships to bring AI capabilities to its operating system. At the end of the day, these aren't driving meaningful growth.

Investors also certainly won't be pleased with the fact that the stock currently trades at a P/E ratio of 32.9. At a valuation three times what Buffett first paid, Apple stock isn't a buy right now.

Should you invest $1,000 in Apple right now?

Before you buy stock in Apple, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $652,133!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,056,790!*

Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 15, 2025

Neil Patel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple and Berkshire Hathaway. The Motley Fool has a disclosure policy.

Key Points

• Community Trust sold 13,371 Microsoft shares worth $5.79 million.

• This trade represented 0.34% of Community Trust's 13F reportable AUM as of Q2.

• The investment firm now holds 224,197 shares, valued at $111.52 million.

• Microsoft remains the fund’s largest position after the trade.

• These 10 stocks could mint the next wave of millionaires ›

On July 10, 2025, Community Trust & Investment Co reported selling shares of Microsoft (NASDAQ:MSFT), reducing its position by $5.79 million in the latest SEC filing.

What happened

According to a filing with the Securities and Exchange Commission dated July 10, 2025, The firm sold 13,371 shares of Microsoft during Q2 2025. The reported transaction totaled $5.79 million. After the trade, the fund held 224,197 shares as of June 30, 2025, with a position value of $111.52 million as of June 30, 2025.

What else to know

The sale reduced Microsoft’s portfolio weight to 6.45% of 13F reportable AUM as of June 30, 2025

Top holdings after the filing:

MSFT: $223,035,672 (12.90% of AUM)

GOOGL: $216,864,286 (12.54% of AUM)

NVDA: $214,820,910 (12.42% of AUM)

CTBI: $209,470,000 (12.10% of AUM) as of Q2 2025

AAPL: $157,356,788 (9.10% of AUM)

Microsoft shares closed at $501.48 on July 10, 2025, up 9.13% over the year ending July 10, 2025

One-year alpha versus the S&P 500: (3.49) percentage points as of July 10, 2025

Dividend yield 0.65%; forward P/E ratio of 37.44 as of July 10, 2025

Company overview

Metric	Value
Revenue (TTM)	$270.01 billion
Net income (TTM)	$96.6 billion
Dividend yield	0.65%
Current price	$501.48

Company snapshot

Offers a diversified portfolio including software (Windows, Office, Azure), cloud services, business solutions, gaming (Xbox), and hardware devices.

Generates revenue through software licensing, cloud subscriptions, enterprise services, device sales, and advertising.

Serves organizations, enterprises, and individual consumers globally.

Microsoft Corporation is a global leader in technology, operating at scale across cloud infrastructure, productivity software, and digital platforms. The company leverages a broad product suite and recurring revenue streams to maintain a strong competitive position. A strategic focus on cloud computing and enterprise solutions underpins its sustained growth.

Foolish take

Microsoft is a giant in tech and with its early backing of OpenAI, a leader in artificial intelligence. The company has seen double-digit growth in both revenue and net income for the past five quarters (with Q2 2024 as the sole exception at 9.7% net income growth), largely driven by its cloud computing segment, which grew 22% last quarter.

With a strong financial standing, Microsoft is heavily investing in AI-related cloud infrastructure, projecting approximately $80 billion in spending for 2025.

However, investors should be aware of risks, primarily the strain in Microsoft's relationship with OpenAI and its reliance on it for the lion's share of its cloud revenue growth. There's a possibility OpenAI could switch cloud providers and leave Microsoft hanging out to dry.

Microsoft stock currently trades at a P/E ratio of 38, higher than its 20-year average. While it's a solid addition to a diversified portfolio, I think there are better opportunities within big tech.

Glossary

13F reportable assets under management (AUM): The value of securities an institutional investment manager must report quarterly to the SEC on Form 13F.
Portfolio weight: The percentage of a fund’s total assets allocated to a specific investment or holding.
Alpha: A measure of an investment’s performance compared to a benchmark, showing value added or subtracted by active management.
Dividend yield: Annual dividends paid by a company divided by its share price, expressed as a percentage.
Forward P/E ratio: Price-to-earnings ratio using forecasted earnings over the next 12 months, indicating expected valuation.
Transaction value: The total dollar amount generated from buying or selling a security in a single trade.
Cloud services: On-demand computing resources and software delivered over the internet, often by subscription.
Filing with the Securities and Exchange Commission: Submission of required financial or ownership documents to the SEC for regulatory compliance.
Top holdings: The largest investments in a fund’s portfolio, ranked by value or percentage of assets.
TTM (Trailing Twelve Months): Financial data covering the most recent 12 consecutive months, used for analysis.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,058%* — a market-crushing outperformance compared to 179% for the S&P 500.

They just revealed what they believe are the 10 best stocks for investors to buy right now, available when you join Stock Advisor.

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*Stock Advisor returns as of July 14, 2025

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• TSMC has become the undisputed foundry leader.

• This essentially makes it the arms dealer in the AI chip battle, making it a winner no matter who comes out on top.

• The company could be one of the biggest beneficiaries of autonomous driving as well.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Taiwan Semiconductor Manufacturing (NYSE: TSM) may not design artificial intelligence (AI) chips, but it's a company that every AI chipmaker relies on. The AI giants rely on TSMC to manufacture their number-crunching chip designs. That's why TSMC is the safest long-term play in the AI infrastructure space.

Let's look at what makes the company so special.

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The foundry leader

TSMC is the world's most advanced semiconductor foundry, and it counts the world's leading chip designers among its top customers, including Nvidia, Advanced Micro Devices, Broadcom, and Apple. It has the scale and technological leadership that rivals can't match. Intel has been burning cash trying to establish its foundry business, while Samsung's yield issues continue to be an issue. That has given TSMC a huge market share lead in the advanced node market, and it's not particularly close.

Nodes refer to the size of the transistors used on a chip, measured in nanometers. The smaller the node, the more transistors can be packed onto the chip, which boosts performance and power efficiency. Smaller nodes are becoming a bigger part of TSMC's mix. Chips made on 7nm and smaller nodes made up 73% of its revenue in the first quarter, up from 65% a year ago. Its 3nm node accounted for 22% of revenue, and Apple has booked much of its 2nm supply for future products. Even Intel has been using TSMC's 3nm tech for some of its most advanced chips. That says a lot.

TSMC's clear leadership in the space has also given the company strong pricing power. Between increasing demand and higher prices, this is driving both strong revenue growth and improved gross margins. Last quarter, its revenue jumped 35% to $25.5 billion, led by growth in high-performance computing (HPC). That continued in Q2, with the company reporting preliminary revenue growth of 39% to $31.9 billion, as estimated by Reuters.

Margins remain strong despite new fabs ramping. Gross margin rose 190 basis points to 58.8% in Q1 despite its Arizona and Japan fabs still ramping up and weighing on profitability. TSMC expects these newer facilities to dilute margins by 2 to 3 percentage points this year, but the company is already raising prices to offset the pressure. According to reports, TSMC will increase AI chip prices this year, with Arizona-made chips potentially commanding a 30% premium.

TSMC's business risks

TSMC is not entirely without risks. Geopolitical tensions around Taiwan will always be part of the story, and it's not immune to tariffs and policy shifts in the U.S. However, TSMC is already addressing both by expanding its footprint globally. The company has been building new fabs in the U.S., Japan, and Europe in partnership with its largest customers.

However, what makes TSMC the safest AI semiconductor stock is its position in the semiconductor value chain. It ultimately doesn't matter which company wins the AI chip race. TSMC's success is tied to overall AI chip demand, not any one company's products.

AI chip demand isn't slowing down, either. TSMC previously projected AI-related revenue to grow at a mid-40% compounded average growth rate (CAGR) over the next five years, starting in 2024. It's also working closely with customers to time its capacity expansion accordingly. With its top customers booking future supply, it has solid visibility into future growth.

Meanwhile, it could see a tailwind beyond AI with autonomous driving. Robotaxis are beginning to take off and gain traction, and all of those vehicles will need to be fitted with advanced chips. It's still early, but if robotaxis and autonomous driving become commonplace, TSMC will be a big beneficiary.

Time to buy the stock

In the AI chip battle, TSMC is essentially the AI arms dealer. It doesn't need to bet on who will dominate the chip market, because it sells manufacturing services to all of them. For investors who want exposure to AI semiconductors without betting on a single chipmaker, TSMC is the safest way to play it.

The stock is also attractively valued, trading at a forward price-to-earnings (P/E) ratio of 24 times based on analysts' 2025 estimates and a price/earnings-to-growth ratio (PEG) of less than 0.7. Stocks with PEG ratios below 1 are typically considered undervalued.

Taken all together, TSMC is one of the best and safest stocks to buy in the semiconductor space right now.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,010,880!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.

Key Points

• Microsoft is the second-largest company by market cap, behind Nvidia.

• The cloud computing leader is well positioned to be the next $4 trillion stock.

• Microsoft could continue to perform well long after it reaches $4 trillion.

• 10 stocks we like better than Microsoft ›

Nvidia (NASDAQ: NVDA) has been firing on all cylinders over the past two years, and the company just added one more accomplishment to its long list of medals: The chipmaker became the first stock to hit the $4 trillion mark. It now sits as the most valuable company in the world, but others are close behind.

Other corporations will eventually reach that valuation too, perhaps even sooner than many think. And the stock most likely to get to $4 trillion next is Microsoft (NASDAQ: MSFT). Read on to find out why.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Why Microsoft has the clear edge

Most of the members of the "Magnificent Seven" have market caps above $1 trillion, but some are much closer to the $4 trillion mark than others. The two largest companies behind Nvidia are Apple, valued at $3.16 trillion, and Microsoft, at $3.72 trillion. The others are much further behind.

And while there's the possibility that they will soar while these two drop, assuming they all perform relatively similarly in the next few months, Microsoft will get there first simply because it's the closest.

However, Microsoft has an excellent chance of performing better than, at the very least, its closest competitor, Apple. The iPhone maker has been hit hard this year due to the current U.S. administration's trade policies. The Trump administration aims to bring manufacturing back to the United States, which poses a challenge for Apple, as the company outsources most of its manufacturing to countries such as China, a favorite target of Trump's aggressive tariffs, and other Asian nations.

Trump recently doubled down on his threat of aggressive tariffs. Additionally, Apple has fallen behind Microsoft and its tech peers in the artificial intelligence (AI) race. While I think Apple could still perform well over the long run, the company's short-term prospects don't look attractive.

What about Microsoft? The tech leader delivered excellent results during its latest update, which covered the third quarter of its fiscal year 2025, ending on March 31. Microsoft's cloud computing and AI businesses are booming. It has been gaining ground on Amazon in the competitive cloud field.

Further, the company's latest update provided strong guidance, indicating a growing demand for its services, despite a somewhat shaky macroeconomic environment. The smart money is on Microsoft outperforming Apple in the next few months.

Amazon, Alphabet, and Meta Platforms are also performing well, but with market caps of $2.36 trillion, $2.15 trillion, and $1.82 trillion, they are too far behind to make serious runs at the $4 trillion mark before Microsoft.

For all these reasons, Microsoft seems by far the most likely to join Nvidia in the $4 trillion single-company (for now) club next.

To $4 trillion and beyond

$4 trillion isn't a finish line. Once Microsoft reaches that point -- whenever that may be -- there will still be plenty of upside left for the company afterward. In fact, here is another prediction: Microsoft will reach a $10 trillion valuation within the next decade.

From its current levels, that would require a compound annual growth rate of at least 10.4%. That's no easy feat, but Microsoft can pull it off as the company continues to make headway within its two biggest sources of growth: AI and cloud computing.

While the company is already generating significant sales from these businesses, this is likely still the early stages of these industries' growth stories. According to Andy Jassy, CEO of Amazon, more than 85% of IT spending still occurs on-premises. Meanwhile, AI applications reached a new level a little less than three years ago with the launch of ChatGPT by OpenAI, a Microsoft-backed company. Both technologies enable businesses across all industries to reduce costs and increase efficiency.

Companies that don't use cloud computing or AI services might, eventually, become like modern businesses that don't use computers: They hardly exist. That could be the scale of the revolution investors are witnessing, and Microsoft is one of the leaders driving it. Though competition will continue to intensify, the tech giant has a strong competitive edge due to switching costs. Plus, it has already proven it can perform well despite competitive pressure from Alphabet and Amazon.

Microsoft's long-term prospects look attractive thanks to this duo of massive growth drivers. Investors shouldn't buy the stock because it could soon reach $4 trillion. They should purchase it because it will likely continue performing well long after that.

Should you invest $1,000 in Microsoft right now?

Before you buy stock in Microsoft, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Microsoft wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $671,477!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,010,880!*

Now, it’s worth noting Stock Advisor’s total average return is 1,047% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Prosper Junior Bakiny has positions in Amazon, Meta Platforms, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

In this podcast, Motley Fool Chief Investment Officer Andy Cross and senior analyst Jason Moser discuss:

• Jurassic World Rebirth delivers for Comcast.
• CoreWeave finally gets it done for Core Scientific.
• Oracle makes a deal with the federal government.
• Two stocks to look at if the market pulls back: Samsara and Howmet Aerospace.

To catch full episodes of all The Motley Fool's free podcasts, check out our podcast center. When you're ready to invest, check out this top 10 list of stocks to buy.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

A full transcript is below.

Should you invest $1,000 in Comcast right now?

Before you buy stock in Comcast, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Comcast wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $694,758!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $998,376!*

Now, it’s worth noting Stock Advisor’s total average return is 1,058% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

This podcast was recorded on July 07, 2025.

Andy Cross: Dinosaurs roar for Comcast while CoreWeave makes an acquisition. Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Andy Cross, joined by Motley Fool's Senior Analyst and advisor Jason Moser. Jason, happy Monday.

Jason Moser: Happy Monday, AC. Good to see you.

Andy Cross: Good to see you. Thanks for being here. We got confirmation today that CoreWeave is buying another AI Data Center company, and Oracle is cutting cloud prices for Uncle Sam. We'll also talk about two companies we're keeping an eye on if the price is right. But, Jason, let's start with the summer movies, Universal's Jurassic World Rebirth reportedly brought in more than 300 million globally this weekend, giving a nice wind to Comcast, the parent owner of Universal. This continues that strong summer at the box office that included how to train your dragon also from Universal and Apple's F1. Jason, is this good news for long suffering Comcast shareholders like me?

Jason Moser: [laughs] It's not bad news. Most certainly it's not bad news. Now, Comcast content and experiences studio segment brought in $11 billion in revenue in 2024, along with about $1.4 billion in operating profits. This isn't something from the revenue side that is a tremendous needle mover, but maybe it's a needle mover to the extent that we would say the same thing for Disney. This is the content space that can be very lumpy some years are better than others. If you look at the same segment, the content and experience, the studio segment, we talked about $11 billion in revenue in 2024. That was $12.3 billion in 2022. It ebbs and flows. But this is terrific news. I'm amazed. The original Jurassic Park came out back in 1993. They have pulled a Disney to an extent and have really expanded and stretched out this IP library. I think that is a good sign for Comcast shareholders.

Andy Cross: Jason, 100%. I see this again, this Comcast stock has not done that well over the past couple of years. It now yields about 3.7%. Of course, we have the spin off, the spin out of the media properties called Versant later this year, where they're going to spin off CNBC and USA, MSNBC, the Golf Channel, and a few other properties. I think that's got a lot of investors interested in Comcast, at least for me, those of us who own it. But this is the seventh film franchise of the Jurassic franchise, and that franchise is worth about $6 billion. It is a Disney play, Jason, because they're using that in their IP. They're using the theme parks. I saw promotions all around the world, all around the cable properties for the Jurassic rebirth movie. They were showing older Jurassic movies on some of those cable properties this weekend. I think from that perspective, it does help build that franchise out, and it's going to be a very competitive summer. Disney itself has its fantastic four coming out this summer. We have the much anticipated Superman movie from Warner Brothers coming out this year, but I think it does help build out that franchise that has become more and more valuable to those universal theme parks, including the one that just opened up this year.

Jason Moser: No question. This also plays into that summer blockbuster. We always look to see what the summer blockbusters are going to be. I just think it's noteworthy these results, particularly given the tepid reviews that the movie's gotten. I haven't seen it, and I take criticisms with a grain of salt, but 51% on rotten tomatoes and a cinema score of B from the opening weekend audience. That's not lighting the world on fire from a critics perspective, but clearly the audience loved it.

Andy Cross: Also, Jason, interesting notes over the weekend that Netflix, with its 300 million subscribers, they said at the Anime Expo in Los Angeles this weekend that more than half its subscribers now watch Japanese anime. I found that interesting just because it continues to show the power of the Netflix globally as a brand, and one reason why they're along with YouTube, one of the most valuable media properties out there.

Jason Moser: We've always said they do such a good job with that data. Personally, I'm not an anime consumer, but I think this is a great example for investors, where it's not necessarily wise to extrapolate one personal taste into a potential idea, just because it's not something that you like or eat or watch, it doesn't mean there isn't an opportunity there, and that 50% number globally, really does tell us something impressive about Netflix's market position.

Andy Cross: 100%. When Motley Fool Money returns, CoreWeave goes shopping.

AI infrastructure company CoreWeave announced that it will buy Core Scientific for around $9 billion in an all stock deal. That's about $20 per share based on CoreWeave stock. Now, shares of Core Scientific Jason are down around 20% today to about 15, so the market's sensing something here.

Jason Moser: This is an arms race like we haven't seen in some time. Companies are just rushing to build out their AI capabilities, and this is just another sign of that. But I think it's really noteworthy that Core Scientific shares being down so much today. There can be a number of reasons why something like that might happen. Investors don't think that it will go through, perhaps another bidder comes in. But, AC, I wonder if this doesn't have something to do with the deal structure itself and what it's saying about the market's perspective on CoreWeave, because that nine billion number that's being bandied about, let's make sure we understand. That's just based on the July 3rd share price. Core Scientific shareholders are going to receive 0.1235 shares of CoreWeave for each share of Core Scientific that they hold. But as noted in the release, and this is important. The final value will be determined at the time of the transaction closed. That's not until later in Q4, so I don't know. Do you think this is like a glass half empty view on CoreWeave and whether they can hold their valuation? Because the stock has been on fire since it went public.

Andy Cross: It went public just this year, and the stock's done just fantastically well, and Core Scientific has done very well, although it has a little spotted history. It's one of those sparks back in 2021 that when it came public out there was about $4 billion, and it basically lost almost 100% of its value, had to declare bankruptcy, defile from the markets, came back to the public markets in January 2024. Actually, CoreWeave tried to buy them last year for about $6 per share. Now they're paying far more for that. It does give CoreWeave the vertical integration, Jason, that I think that they need to build out. They're going to add 9 or 10 AI data centers of Core Scientifics give them massive gigawatts of capacity. As CoreWeave is trying to build out its own AI data centers, it does need to continue to build out that capacity. CoreWeave is Core Scientific's largest tenet, so it makes sense from a vertical integration perspective. But I think the market is just saying with a share issuance, so soon after CoreWeave became public, there are some doubts about at what price they're going to have to get Core Scientific into the CoreWeave family.

Jason Moser: Exactly. I certainly understand the market's enthusiasm around CoreWeave. When you're selling yourself as the AI hyperscaler. There is something to that, and this is clearly a company that's playing a big role in the space. They just reported revenue growth, 420% in this most recently reported quarter. But again, and you're right, vertical integration, this is going to be something that really gives CoreWeave more power over its platform and to that power. This is a power play. Through this acquisition, CoreWeave is going to own approximately 1.3 gigawatts of gross power, along with the opportunity of one plus gigawatts of potential gross power available for expansion. A gigawatt is a lot of power, AC. That power is a medium sized city, and you think about the Hoover Dam. Hoover Dam, one of our biggest hydroelectric generators here in the country. That's responsible for about two gigawatts of capacity. You can see how this could really impact CoreWeave if it goes through.

Andy Cross: Prediction time, do you think it's going to go through? Do they have to lower the price, readjust the deal terms? You think, Jason?

Jason Moser: I think it's going to go through. I think that probably the market's enthusiasm is going to remain for Core. You think the stock will ebb and flow here a little bit. My suspicion is it'll go through. Probably not going to end up at that $9 billion valuation at the end of the day because that is pretty extreme for a company like Core Scientific. That's like 18 times full year revenue in 2024. We might see some change in the price there, but my suspicion is it'll go through.

Andy Cross: There's definitely some synergies there and some cost savings, but I think it'll go through, too, but I do think they'll have to readjust the terms.

Jason Moser: [laughs] Exactly.

Andy Cross: Next up on Motley Fool Money, Oracle gives Uncle Sam a deal. Let's move over to news that Oracle is cutting cloud service prices for the US government by as much as 75% as reported this weekend by the Wall Street Journal. Jason, who's a winner here? Is this an Oracle beneficiary, a US federal government beneficiary or a little bit of A, a little bit of B?

Jason Moser: I'm going to walk the fence here and say a little bit of A, a little bit of B. It does feel like both win somewhat here. This feels a bit like taking a page out of the book of Bezos. He was always known for driving down those prices in so many cases. He's got that quote, "Your margin is my opportunity." He's taking that Uber long-term view. AC, I think for federal agencies, they're under this mandate to modernize while also managing tighter budgets at the same time. So the old saying cash is king, I think, in this case, it seems maybe cost is king, and we're seeing other cloud providers follow the same lead, Salesforce has done the same thing in regard to Slack, Google, Adobe. This isn't anything necessarily new. But then I think for Oracle, these discounts can help lock in really multi year contracts. That offers more stability for their business model and revenue prediction. If they can extend those relationships, then you can start talking a bit about maybe exercising a little bit more pricing power down the road if they do a good job. I can see both parties benefiting from that.

Andy Cross: I thought this was a little bit more beneficiary for Oracle when I first started studying it. But then I think the GSA, the General Services Administration is starting to shake their big stick here to try to get some pricing out of some of these big players. It is interesting to me that this is for the licensees, not really for the subscription, and it goes through November. The pricing option goes through November of this year. It does give Oracle a foot in. It's really the first deal the GSA cut for government wide solutions, including lots of areas where Oracle and other cloud titans provide some of those services and compete very heavily. I think it's just more evidence of CFO Safra Catz, becoming more and more competitive, trying to push Oracle into markets. Clearly Oracle has had some nice beneficiaries here in the markets and in their business as the stock is gone really well. It's up 60% the past year or 40% year to date, Jason. It's north of a $600 billion company. Thirty five times earnings. That's almost two times its five year average. What do you think about Oracle, the stock going forward?

Jason Moser: I'm glad you brought that up. It does seem like a little bit of a richer valuation, but going back to Safra Catz, he's looking at fiscal 2026 targets here, cloud revenue growth projected to grow from 24% to over 40%. Then that IAAS, that infrastructure as a service. That growth there is projected to hit about 70%. Anytime you see valuations like that, you have to just step back and say, why is the market doing that? Where's the growth? I think that's where they're seeing some of that growth. Now they just have to deliver.

Andy Cross: I think so, too. I do, again, like this licensing play because as they continue to push more subscription, this does get into the core part of what Oracle has done for so long and done so well for so many years. I think it is a nice foothold for Oracle. I guarantee that GSA is going to be issuing lots of different pricing asks of lots more providers as they continue to manage their own footprint as they push toward to be a little bit more technological savvy at the federal government. Finally, today, Jason, stocks are down a little bit, but passed through all time highs last week. Let's end things with two stocks that we're keeping fresh on our watch list if the prices are right. What are you looking at?

Jason Moser: Everybody loves stock ideas, AC?

Andy Cross: Of course.

Jason Moser: One that I just continue to keep my eye on is a company called Samsara. Ticker is IOT. It's now a $22 billion company, and Samsara operates its Connected Operations Cloud, which is a software platform that connects all of the devices that a company has and its buildings, its equipment, its cards, and other facilities. The platform then establishes this massive network of data and information specific to that company. Now the company's still working its way to profitability. Technically, it's cash flow positive, but stock-based compensation more than eats that up, which isn't uncommon for a company at this stage of its life cycle. It's around 14 times forward sales projections today. Now, when I wrecked this company in the trend service back in the beginning of 2023, it was at 13 times. It's been a bit of a bumpy ride, and the stock has pulled back a little. But when you look at the fundamentals of this business, they just reported first quarter results that exceeded all targets that leadership set a quarter ago, revenue up 32% annualized recurring revenue up 31%. They have 2,638 customers with ARR over $100,000. That's up 35% from a year ago. It is a company that continues to grow and establish a fairly dominant position in its market is what it seems. It really does seem like this is becoming the top dog at its space. I think it's also a company that possesses a lot of those hidden gems traits.

Those principles that our CEO Tom Gardner loves, he's so fond of. You get reasonable, remarkable growth into expanding markets, check. Led and owned by true long-term believers in the company, check. This is a company that is led by co-founders Sanjit Biswas and John Bicket. They own almost 70% of the voting power in a relentless curiosity toward bold technical exploration. That is a double check for a company like this. If we ever see any material pullback in this one, I certainly would be very tempted to add it to my portfolio.

Andy Cross: Jason, do you have any thoughts on these cute ticker names, IOT? [laughs] Does that tend to scare you away from a company?

Jason Moser: Not really. I never would recommend a company on the ticker alone, but you just made me think of core scientific and its ticker cores. It's like the smoky and the bandit ticker. It's funny to see those sometimes.

Andy Cross: Jason, I'm looking at Howmet symbol HWM. It's formerly part of Alcoa. Its history is steeped into high precision metalworking, 90%. It provides 90% of all structural and rotating aero engine components for the aerospace, transportation, and energy markets. These are really super high end precision airfoils and forging, forge wheels and chassis for the commercial trucking and auto space. The stock has doubled over the past year, and it's up almost 50% since the Rule Breakers team over in Stock Advisor, we recommended it just this year. It has these really serious competitive advantages that we love to see. Its patents, manufacturing, the history behind it, its core clients. You don't really want to mess around with replacement parts for these kinds of really high precision manufactured items. It does have some opportunities in the energy space because it provides the blades for the engine turbines that power a lot of the energy that goes into supporting data centers. I do love this business.

It's just the stock has done so well, and while the Stock Advisor team, as well as our Rule Breakers team love buying into strength, I just want to see, I'm not going to criticize anybody for adding this great business to their portfolio. But for me, I'm just looking for a little bit of maybe a market breather before I start looking at Howmet symbol HWM just a wonderful business, $73 billion. It's not small, and it has a lot of room to grow in the aerospace market.

Jason Moser: Plenty of examples in my investing life where patience tends to pay off.

Andy Cross: 100%. [laughs] There you have those two high quality companies in Samsara and Howmet that we're watching. If the markets go on a little bit of a tailspin here in the dog days of summer, maybe they go added to our portfolio. That's a rap for us today here at Motley Fool Money. Jason Moser, thanks for joining me here.

Jason Moser: Thanks for having me.

Andy Cross: Here at the Motley Fool we love hearing your feedback, to be part of that feedback or to ask a question, email us at [email protected]. That's [email protected]. As always, people on the program may have interest in the stocks they talk about and the Motley Fool may have formal recommendations for or against. Don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool Editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. For all of us here at Motley Fool Money, thanks for listening, and we'll see you tomorrow.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Andy Cross has positions in Adobe, Alphabet, Apple, Comcast, Netflix, Salesforce, and Warner Bros. Discovery. Jason Moser has positions in Adobe and Alphabet. The Motley Fool has positions in and recommends Adobe, Alphabet, Apple, Netflix, Oracle, Salesforce, and Warner Bros. Discovery. The Motley Fool recommends Comcast, Howmet Aerospace, and Samsara. The Motley Fool has a disclosure policy.

Key Points

• Apple stock provided steady growth from 1985 through 2005.

• Over the past two decades, shares of Apple have performed exceedingly well as the company produced several tech innovations.

• Those looking for tech exposure would be well advised to consider picking up shares of Apple.

• 10 stocks we like better than Apple ›

Twenty years ago, life looked a little different. While cellphones were fairly common sights, it was nothing compared to what would happen in 2007 when Apple (NASDAQ: AAPL) introduced the first iPhone. With the numerous iterations of the iPhone that followed, as well as other innovations including the iPad and AirPods, Apple grew to become the first company with a $1 trillion market cap.

Those who had the wherewithal to scoop up Apple stock a couple of years before the iPhone's debut -- and who have held their positions -- have similarly seen their investments flourish.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

What a difference an iPhone could make

Those who were cautious about investing in initial public offerings (IPOs), but who were also attracted to Apple stock, likely took their time after the company appeared on public markets in 1980. If they had bought $10,000 in Apple stock in July 1985 and kept their position for the next 20 years, they'd have recognized an impressive 304% gain that resulted in a position worth about $40,000.

On the other hand, investors who first bought Apple stock in July 2005 and have not trimmed their positions have recognized extraordinarily impressive growth. An initial investment of $10,000 20 years ago would now be worth about $1.546 million.

Will the next two decades provide the same growth?

Implementing a walled-garden approach, Apple has developed an ecosystem that contributes to its formidable competitive advantage among tech stocks. This, along with its fierce customer loyalty, has resulted in Apple evolving into an industry stalwart over the past 20 years.

Whether the company has any transformative tech innovation waiting in the wings remains to be seen. Similarly, it will take another 20 years before we can look back and see if Apple stock was able to replicate the performance it provided from 2005 through 2025. What is certain, however, is that Apple stock remains a worthy consideration for any investor seeking tech exposure.

Should you invest $1,000 in Apple right now?

Before you buy stock in Apple, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Apple wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $694,758!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $998,376!*

Now, it’s worth noting Stock Advisor’s total average return is 1,058% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple. The Motley Fool has a disclosure policy.

Key Points

• The artificial intelligence trend will be a huge growth engine for Amazon's cloud computing division.

• Efficiency improvements should help expand profit margins for its e-commerce business.

• Anticipation of the company's earnings growth could help drive the shares higher in 2025's second half.

• 10 stocks we like better than Amazon ›

Only three stocks so far have ever achieved a market capitalization of $3 trillion: Microsoft, Nvidia, and Apple. Tremendous wealth has been created for some long-term investors in these companies -- only two countries (China and the United States) have gross domestic products greater than their combined worth today.

In recent years, artificial intelligence (AI) and other technology tailwinds have driven these stocks to previously inconceivable heights, and it looks like the party is just getting started. So, which stock will be next to reach $3 trillion?

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

I think it will be Amazon (NASDAQ: AMZN), and it will happen before the year is done. Here's why.

The next wave of cloud growth

Amazon was positioned perfectly to take advantage of the AI revolution. Over the last two decades, it has built the leading cloud computing infrastructure company, Amazon Web Services (AWS), which as of its last reported quarter had booked more than $110 billion in trailing-12-month revenue. New AI workloads require immense amounts of computing power, which only some of the large cloud providers have the capacity to provide.

AWS's revenue growth has accelerated in recent quarters, hitting 17% growth year-over-year in Q1 of this year. With spending on AI just getting started, the unit's revenue growth could stay in the double-digit percentages for many years. Its profit margins are also expanding, and hit 37.5% over the last 12 months.

Assuming that its double-digit percentage revenue growth continues over the next several years, Amazon Web Services will reach $200 billion in annual revenue within the decade. At its current 37.5% operating margin, that would equate to a cool $75 billion in operating income just from AWS. Investors can anticipate this growth and should start pricing those expected profits into the stock as the second half of 2025 progresses.

Automation and margin expansion

For years, Amazon's e-commerce platform operated at razor-thin margins. Over the past 12 months, the company's North America division generated close to $400 billion in revenue but produced just $25.8 billion in operating income, or a 6.3% profit margin.

However, in the last few quarters, the fruits of Amazon's long-term investments have begun to ripen in the form of profit margin expansion. The company spent billions of dollars to build out a vertically integrated delivery network that will give it operating leverage at increasing scale. It now has an advertising division generating tens of billions of dollars in annual revenue. It's beginning to roll out more advanced robotics systems at its warehouses, so they will require fewer workers to operate. All of this should lead to long-term profit margin expansion.

Indeed, its North American segment's operating margin has begun to expand already, but it still has plenty of room to grow. With growing contributions to the top line from high-margin revenue sources like subscriptions, advertising, and third-party seller services combined with a highly efficient and automated logistics network, Amazon could easily expand its North American operating margin to 15% within the next few years. On $500 billion in annual revenue, that would equate to $75 billion in annual operating income from the retail-focused segment.

AMZN Operating Income (TTM) data by YCharts.

The path to $3 trillion

Currently, Amazon's market cap is in the neighborhood of $2.3 trillion. But over the course of the rest of this year, investors should get a clearer picture of its profit margin expansion story and the earnings growth it can expect due to the AI trend and its ever more efficient e-commerce network.

Today, the AWS and North American (retail) segments combine to produce annual operating income of $72 billion. But based on these projections, within a decade, we can expect that figure to hit $150 billion. And that is assuming that the international segment -- which still operates at quite narrow margins -- provides zero operating income.

It won't happen this year, but investors habitually price the future of companies into their stocks, and it will become increasingly clear that Amazon still has huge potential to grow its earnings over the next decade.

For a company with $150 billion in annual earnings, a $3 trillion market cap would give it an earnings ratio of 20. That's an entirely reasonable valuation for a business such as Amazon. It's not guaranteed to reach that market cap in 2025, but I believe investors will grow increasingly optimistic about Amazon's future earnings potential as we progress through the second half of this year, driving its share price to new heights and keeping its shareholders fat and happy.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $694,758!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $998,376!*

Now, it’s worth noting Stock Advisor’s total average return is 1,058% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Brett Schafer has positions in Amazon. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Shares of Taiwan Semiconductor Manufacturing Co. (TSMC) and IBM have crushed the S&P 500's returns over the last one year, three years, and five years.

• And TSMC stock has absolutely pulverized the broader market over the 10-year period.

• Shares of TSMC and IBM are currently yielding 1.26% and 2.31%, respectively.

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

Artificial intelligence (AI) is the biggest secular growth trend today. The global AI market will soar from $189 billion in 2023 to $4.8 trillion by 2033 -- a 25-fold increase in a decade -- according to a recent projection by the United Nations Conference on Trade and Development.

As with technology stocks in general, the vast majority of stocks that could be considered AI stocks either do not pay dividends or pay very small ones.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Continue »

While they are relatively rare, there are some top-performing AI stocks that pay decent dividends and have a good dividend payment history. These include the world's largest semiconductor (or "chip") foundry Taiwan Semiconductor Manufacturing Corp., or TSMC (NYSE: TSM), and International Business Machines, or IBM (NYSE: IBM), one of the world's oldest large tech companies.

So, folks who like dividend-paying stocks and want to invest in AI -- forgive the cliché -- can have their cake and eat it too.

2 Top AI stocks that pay decent dividends

Company	Market Cap	Dividend Yield	Forward P/E Ratio	Wall Street's Projected Annualized EPS Growth Over Next 5 Years	5-Year Return
Taiwan Semiconductor Manufacturing	$963 billion	1.26%	24.2	22.7%	296%
IBM	$270 billion	2.31%	26.7	6.3%	223%
S&P 500	N/A	1.24%	N/A	N/A	112%

Data sources: Finviz.com and Yahoo! Finance. P/E = price to earnings. EPS = earnings per share. Data as of July 8, 2025.

TSMC: The world's largest chip foundry

Taiwan Semiconductor Manufacturing produces chips for companies that contract out all or some of the manufacturing of chips that they design. As the world's largest chip foundry, TSMC is the dominant company in the production of advanced AI chips, so it's been significantly benefiting from the growth of the AI market and should continue to benefit.

TSMC's customers includes most of the big names in chip companies -- such as Nvidia, Broadcom, and Arm Holdings. It also produces chips for big tech companies that have designed their own chips, including Apple, which is widely considered TSMC's largest customer, followed by Nvidia.

The company is off to a great start in 2025. In the first quarter, its revenue jumped 35% year over year to $25.5 billion, driven by continued strong AI-related demand. Better yet, its EPS surged 54% to $2.12. Its EPS growing faster than its revenue reflects its expanding profit margin.

On the Q1 earnings call, management reaffirmed its 2025 guidance that its revenue from AI accelerators will double year over year.

TSMC started paying cash dividends in 2004 and has never halted or reduced its dividend per share.

TSMC stock is trading at 24.2 times its forward projected EPS, which is reasonable for a stock of a company that Wall Street expects will grow EPS at an average annual rate of nearly 23% over the next five years.

IBM: Successfully transitioning to AI and other high-growth markets

IBM has been in a years-long transitioning mode, divesting of legacy businesses and investing in growth markets, notably cloud computing and AI. This transitioning resulted in its revenue declining, which in turn caused its profits and cash flows to also decrease. But Big Blue is back in growth mode.

In 2024, IBM's revenue increased 3% in constant currency to $62.8 billion, driven by a 9% rise in software revenue, offset by declines of 1% and 3% in its consulting and infrastructure segments, respectively. Adjusted earnings per share (EPS) from continuing operations was up 7% year over year. Free cash flow (FCF) rose 13% year over year to $12.7 billion.

IBM's generative AI book of business ended the year at $5 billion inception to date. (Generative AI enables users to quickly generate new content based on a variety of inputs. It's the type of AI that's largely powering the AI boom.)

The AI business is growing fast, increasing $2 billion from the third to the fourth quarter 2024. Moreover, it tacked on another $1 billion-plus in the first quarter of 2025 to bring its total to more than $6 billion. About one-fifth of this business comes from software and four-fifths from consulting, CEO Arvind Krishna said on the Q1 earnings call.

The company expects revenue growth to accelerate in 2025. For the year, it guided for annual revenue growth of at least 5% in constant currency and FCF of about $13.5 billion, or over 6% growth year over year.

IBM has a great dividend history. It's increased its quarterly cash dividend for 30 consecutive years.

IBM stock is trading at 26.7 times forward projected EPS. This might seem quite pricey for shares of a company that Wall Street expects will grow EPS at an average annual pace of 6.3% over the next five years. However, investors can expect to pay a premium for stocks of companies that have great track records of raising their dividends.

Moreover, the stock might turn out to be less pricey than it currently seems. IBM has solidly beat the analyst consensus estimate for earnings in the last four quarters, with two of the beats being quite large. Given how fast the company's AI business is growing, it could continue to solidly surpass earnings estimates.

Mark your calendars

TSMC is slated to release its Q2 2025 results before the market open on Thursday, July 17.

IBM is scheduled to release its Q2 results after the market close on Wednesday, July 23.

Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?

Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $687,764!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $980,723!*

Now, it’s worth noting Stock Advisor’s total average return is 1,048% — a market-crushing outperformance compared to 179% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

Beth McKenna has positions in Nvidia. The Motley Fool has positions in and recommends Apple, International Business Machines, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

Key Points

• Amazon and Microsoft are the two largest cloud computing companies.

• Microsoft Azure has been growing more quickly, but a strained relationship with OpenAI leaves some questions.

• Amazon's AWS, meanwhile, has a vertical integration advantage.

When it comes to cloud computing, Amazon (NASDAQ: AMZN) and Microsoft (NASDAQ: MSFT) are the clear leaders. Both are seeing strong growth, both are leaning heavily into artificial intelligence (AI), and both are investing billions to meet increasing demand.

But if I had to pick just one stock to own right now, I'd go with Amazon. Let's break down why.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

Amazon

While best known for its e-commerce operations, Amazon basically invented the cloud computing industry due to its own struggles trying to scale up its infrastructure. Today, Amazon Web Services (AWS) is the largest cloud computing provider in the world, with nearly 30% market share.

AWS is also both Amazon's most profitable segment and fastest-growing, with revenue climbing 17% last quarter. AI has been a big reason for this. Customers are using AWS solutions like Bedrock and SageMaker to help them build and run their own AI models and apps. Bedrock gives companies access to foundation models they can customize, while SageMaker is more of an end-to-end solution. Once these models are built, they then run on AWS infrastructure, locking customers into a recurring, high-margin business.

On top of that, Amazon has built its own custom AI chips through its Annapurna Labs unit. Trainium is designed to train large language models (LLMs), while Inferentia handles inference. These chips are optimized for performance and cost, consuming less power and delivering better results than general-purpose graphic processing units (GPUs) for specific AI tasks. This gives Amazon a cost advantage over rivals like Microsoft and should lead to better operating leverage as usage scales.

Beyond the cloud, Amazon is also using AI to improve its e-commerce business, as well. The company is now using agentic AI to power autonomous warehouse robots. These robots continue to become more sophisticated and can perform multiple tasks. Some can even spot damaged goods before they're shipped, improving customer satisfaction and reducing costly returns. It recently just surpassed 1 million robots in its warehouses.

It's also using AI to improve efficiency in its logistics operations. AI is helping map out better routes, while mapping tools like Wellspring can help delivery drivers better navigate complicated drop-offs at places like large apartment complexes.

Amazon is also using AI tools to help third-party sellers better market products and target customers more effectively. It's worth noting that its sponsored ad business has become one of the largest digital ad platforms in the world and is growing quickly.

Microsoft

There's no denying that Microsoft is a powerhouse. The company has long been the dominant player in worker productivity software with programs such as Word, Excel, and PowerPoint, and its Windows operating system powers most non-Apple computers.

However, Microsoft's cloud computing unit Azure has been its big growth driver, with AI accelerating that momentum. Last quarter, Azure revenue jumped 33% year over year (35% in constant currency), with AI services making up nearly half of the growth.

Azure is currently firing on all cylinders, but Microsoft has been running into capacity constraints. To address that, Microsoft plans to increase its capital spending in fiscal 2026. It will also shift more investment into shorter-lived assets like GPUs and servers, which it said are more directly tied to revenue.

Microsoft made an early and aggressive investment in OpenAI, and the ability to give customers access to the start-up's leading LLM is one of the biggest reasons why Azure has been taking market share in the cloud computing space. Microsoft has also deeply integrated OpenAI's technology into its own products. For example, the technology is used to help power its AI assistant copilots in Word, Excel, and other productivity tools. At $30 per month per enterprise user, Microsoft's copilots have been a nice growth driver for the company.

Microsoft has also expanded AI beyond Office 365. It's added new copilots focused on cybersecurity and even launched Muse, an AI model designed to help develop and preserve older video games. Meanwhile, its GitHub Copilot has been one of its best-performing, helping drive solid growth for its code-hosting and collaboration platform.

However, the company's relationship with OpenAI has become strained. Microsoft is no longer the exclusive data center provider for the company, and the two have been fighting over the terms of Microsoft's investment, including whether it will get access to the intellectual property of OpenAI's pending acquisition of Windsurf.

Microsoft's investment in OpenAI is one of the most attractive parts of its story. It's currently entitled to 49% of OpenAI Global LLC's profits, capped at roughly 10 times its nearly $10 billion investment. But OpenAI is looking to renegotiate the deal as it looks to restructure into a for-profit company.

The better buy

Both Amazon and Microsoft are great companies with strong cloud computing platforms and big AI opportunities. However, Amazon has the edge.

Amazon's biggest advantage is that its cloud computing platform is vertically integrated. It can provide a wide range of services from custom chips to infrastructure to high-margin services. Its Inferentia and Trainium chips are helping lower its cloud computing costs, and AWS offers a wide array of foundation AI models, both from itself and other leading tech companies.

Microsoft, meanwhile, is reliant on expensive chips from Nvidia and AI models from OpenAI, with whom tensions have been growing. Microsoft is looking to develop its own AI chips, but it was recently reported that its next-generation Maia AI chip has been delayed. Azure has been growing more quickly than AWS, but it faces a lot more unanswered questions at the moment.

Microsoft is a solid stock to own long-term, but right now, Amazon is the better buy.

Should you invest $1,000 in Amazon right now?

Before you buy stock in Amazon, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $699,558!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $976,677!*

Now, it’s worth noting Stock Advisor’s total average return is 1,060% — a market-crushing outperformance compared to 180% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.