Key Points

• Datadog offers a growing portfolio of tools to help businesses track the cost and performance of their artificial intelligence (AI) models.

• The proportion of Datadog's revenue attributable to AI customers nearly tripled year over year during the second quarter of 2025.

• Datadog stock remains 32% below its 2021 high, but Wall Street is very bullish on its potential.

• 10 stocks we like better than Datadog ›

Datadog (NASDAQ: DDOG) is a leader in cloud observability. Its platform monitors digital infrastructure around the clock, and immediately alerts businesses to technical glitches so they can be fixed before impacting customers. Whether a business operates in retail, entertainment, or even financial services, this is a critical tool in the digital age because the competition is always one click away.

Last year, Datadog applied its expertise in cloud observability to launch a series of new tools for businesses using artificial intelligence (AI) applications. Based on the company's operating results for the second quarter of 2025, these new products are generating rapid growth.

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Datadog stock peaked in 2021, when a frenzy in the tech sector drove it to an unsustainable valuation. It's trading 32% below its record high as I write this, but the overwhelming majority of analysts tracked by The Wall Street Journal are extremely bullish on its prospects from here. Thirty-one of 46 rate it a buy.

Image source: Getty Images.

Datadog's new AI products are experiencing rapid adoption

Datadog had around 31,400 customers at the end of the second quarter of 2025, which was a modest 8% increase from the year-ago period. However, 4,500 of those customers were using at least one of its AI products, a count that soared by a whopping 80%.

One of those products is called LLM Observability, and it helps developers track costs, identify technical issues, and even evaluate the quality of the outputs from their large language models (LLMs). These models are at the foundation of consumer-facing AI software applications, and as they grow more complex, observability tools are becoming a necessity rather than an option.

Datadog also offers a monitoring product for businesses using third-party LLMs from OpenAI, which is one of the industry's leading AI developers. It helps them track usage, costs, and error rates across their organization, giving them full visibility when deploying the GPT family of LLMs. Building a model from scratch requires significant financial resources and technical expertise, so more businesses are turning to third-party developers like OpenAI, which will create significant demand for this product over time.

Datadog's revenue growth accelerated in the second quarter

Datadog generated $827 million in total revenue during the second quarter of 2025, obliterating the high-end of management's guidance by $36 million. It represented a 28% increase year over year, which was an acceleration from the 25% growth the company delivered in the first quarter. AI-native customers accounted for 11% of Datadog's Q2 revenue, almost tripling from 4% in the year-ago period, which was a key reason for the solid performance.

The Q2 result prompted management to increase its 2025 revenue forecast by $92 million, to $3.317 billion at the midpoint of its guidance range.

Datadog also had another good quarter on the bottom line, with its adjusted (non-GAAP) net income growing by 7% year over year to $163.8 million. The company's operating costs surged by 36% during Q2, led by a sharp increase in research and development spending, which is why its adjusted profit grew at a much slower pace compared to its revenue.

Datadog will have to spend aggressively if it wants to continue releasing new AI products, which could impact its bottom line for the foreseeable future. This won't be a problem if it leads to accelerating revenue growth over the long term, because it would create an opportunity to generate even higher profits.

Wall Street is bullish on Datadog stock

The Wall Street Journal tracks 46 analysts who cover Datadog stock, and 31 have given it a buy rating. Eight others are in the overweight (bullish) camp, while six recommend holding as I write this. Only one analyst recommends selling.

The analysts have an average price target of $163.66, which implies a potential upside of 25% over the next 12 to 18 months. The Street-high target of $230 points to an even greater potential return of 75%, and while that seems ambitious in the short term, it's certainly on the table in the long run.

Datadog stock is down 32% from its 2021 high, when a frenzy in the tech market -- fueled by pandemic-related stimulus -- drove its price-to-sales (P/S) ratio to an unsustainable level over 60. But the decline in the stock since then, combined with the company's rapid revenue growth, has pushed its P/S ratio down to 15.6. That's a 10% discount to its three-year average of 17.4 (which excludes the exuberant levels from 2021).

DDOG PS Ratio data by YCharts

Datadog looks like an attractive investment right now in August on that basis, and if the momentum in the company's AI revenue persists, the stock might even surpass $230 over the next few years.

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

Before you buy stock in Datadog, 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 Datadog 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!*

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*Stock Advisor returns as of August 11, 2025

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog. The Motley Fool has a disclosure policy.

Key Points

• The exercise equipment maker is coming off four years of declining revenue due to sluggish demand.

• On a more positive note, Peloton is now turning a profit thanks to a series of drastic cost cuts.

• Peloton stock is down 95% from its 2021 peak, but that doesn't necessarily mean it's cheap.

• 10 stocks we like better than Peloton Interactive ›

Peloton Interactive (NASDAQ: PTON) went public in 2019 at $29 per share, and by December 2020 it had more than quintupled to a peak of around $163. Consumers were lining up to buy the company's at-home exercise equipment at the height of the pandemic so they could stay fit while lockdowns and social restrictions were in effect.

But Peloton experienced a collapse in demand when society returned to normal, which led to plummeting revenue and surging losses at the bottom line. The company was even fighting for survival at one point, until management made a series of changes to slow the bleeding.

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Peloton isn't totally out of the woods just yet, but its recent financial results suggest the company will live to fight another day. With the stock down 95% from its all-time high, could this be a good time for investors to buy?

Image source: Peloton Interactive.

Let's start with the bad news

Peloton has two sources of revenue. First, it sells exercise equipment such as stationary bikes, treadmills, and rowing machines. Second, it sells subscription products that offer virtual classes and other benefits to help fitness enthusiasts extract the most value out of that equipment.

Peloton generated $2.5 billion in total revenue during its fiscal year 2025 (ended on June 30), marking the fourth-straight year that revenue declined after peaking at $4 billion in fiscal 2021. Management's guidance suggests a fifth annual decline could be in the cards, with revenue expected to come in as low as $2.4 billion during fiscal 2026.

Weak equipment sales have been the main source of Peloton's issues. They came in at $3.1 billion in fiscal 2021, but were down to just $817 million in fiscal 2025. Management tried to revive sales by introducing payment plans to create a cheaper entry point for consumers, and by tapping into third-party retailers like Dick's Sporting Goods and Amazon, but these strategic moves haven't offset the raw decline in demand.

Subscription revenue, on the other hand, doubled between fiscal 2021 and 2025 to over $1.6 billion, but the dollar increase wasn't enough to offset the sharp decline in equipment revenue. Plus, Peloton's connected fitness subscriber base (which includes customers who own Peloton's equipment and pay to access virtual classes) is steadily shrinking.

There were 2.8 million members at the end of fiscal 2025, down 6% from the year-ago period. Management is forecasting further declines to start fiscal 2026. Shrinking businesses can't create value for shareholders over the long term, so investors typically avoid them, which is the main reason Peloton stock is down 95% from its all-time high.

Now, here's the good news

In fiscal 2022, Peloton was spending money as if its business would continue to grow. When its revenue actually declined that year instead, it resulted in a staggering $2.8 billion net loss on a GAAP (generally accepted accounting principles) basis. With a dwindling cash balance, the company was on the fast track to bankruptcy at that point, unless it could return to growth or dramatically slash costs.

Since we know Peloton's revenue never returned to growth, cost cuts were the only way to secure survival. Its operating costs totaled $1.3 billion in fiscal 2025, representing a 62% reduction from fiscal 2022, led by cuts to everything from marketing to research and development.

Peloton still lost $118 million on a GAAP basis in fiscal 2025, but the company was actually profitable after stripping out one-off and non-cash expenses like stock-based compensation, generating adjusted (non-GAAP) EBITDA of $403 million for the year.

This is great news because it means Peloton is no longer at risk of going out of business. However, management will eventually run out of costs to cut, so the company's profitability won't be sustainable over the long run unless its revenue starts growing again (or at least stops shrinking).

Is Peloton stock a buy?

Peloton recently laid out a fresh growth plan that includes opening new microstores (small retail locations, usually inside malls) and expanding its pre-owned equipment business to more cities, which helps customers join Peloton at a lower price point. Given the company's track record over the last few years, I would adopt a wait-and-see approach to these changes because there is no guarantee they will yield results.

Until Peloton proves it can deliver sustainable sales growth, it remains a shrinking business, and that will keep a lid on its stock price. Plus, the company's new growth plan also involves cutting operating costs by another $100 million in fiscal 2026, which could actually hurt its ability to grow from here, especially if money is sucked out of areas like marketing.

Therefore, Peloton stock isn't necessarily cheap just because it's down 95% from its all-time high. Investors might want to sit on the sidelines until the company proves it can deliver sustainable growth.

Should you invest $1,000 in Peloton Interactive right now?

Before you buy stock in Peloton Interactive, 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 Peloton Interactive 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!*

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*Stock Advisor returns as of August 11, 2025

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon and Peloton Interactive. The Motley Fool has a disclosure policy.

Key Points

• Palo Alto Networks is the world's largest cybersecurity vendor, but it has to innovate to keep the top spot.

• The company is weaving AI into its products to automate threat detection and incident response.

• Palo Alto reports earnings on Aug. 18, which will give investors a valuable update on its progress.

• 10 stocks we like better than Palo Alto Networks ›

Palo Alto Networks (NASDAQ: PANW) is the world's largest cybersecurity vendor, but with competitors like CrowdStrike (NASDAQ: CRWD) nipping at its heels, the company is investing heavily in innovations like artificial intelligence (AI) to deliver the best possible protection for its 70,000 enterprise customers and maintain its position at the top.

This strategy led to an acceleration in Palo Alto's revenue growth during its fiscal 2025 third quarter. The company is scheduled to release its operating results for its more recent fiscal 2025 fourth quarter (which ended on July 31) on Aug. 18, which will give investors a valuable update on its expanding portfolio of AI products. Is it a good idea to buy Palo Alto stock ahead of the report? Read on to find out.

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Image source: Getty Images.

Palo Alto offers an expanding portfolio of AI products

Palo Alto operates three cybersecurity platforms covering cloud security, network security, and security operations. Each one includes a growing number of individual products, and the company is weaving AI into as many of them as possible to automate everything from threat detection to incident response.

Palo Alto believes human-led cybersecurity processes are too slow and inefficient to deal with modern-day threats, which results in more critical incidents. Cortex XSIAM is one example of how Palo Alto is using AI to solve this problem. It's a security operations platform that relies on AI and machine learning to autonomously identify, investigate, and eliminate threats, shifting critical workloads away from human cybersecurity managers.

One customer -- a healthcare provider -- now resolves 90% of incidents with automation, compared to just 10% before adopting XSIAM. Palo Alto said the platform's annual recurring revenue (ARR) tripled year over year during the fiscal 2025 third quarter. Moreover, it had already accumulated over $1 billion in bookings despite launching just three years ago.

XSIAM is one of Palo Alto's fastest-growing products, so investors should look for an update on its progress on Aug. 18.

Palo Alto is seeing accelerating revenue growth

Palo Alto generated $2.3 billion in total revenue during the third quarter. It was a year-over-year increase of 15%, which marked an acceleration from the 14% growth it delivered during the second quarter three months earlier.

AI played a major role in the strong result. The company's ARR from its next-generation security (NGS) segment -- which is where it accounts for sales of its AI products -- soared by 34% to $5.1 billion. This is one of the key numbers investors will watch on Aug. 18.

A trend called "platformization" also contributed to the solid Q3 result. The cybersecurity industry is quite fragmented, meaning businesses typically use multiple vendors to build a complete security stack. Palo Alto is becoming a one-stop shop that protects the entire enterprise, so it's encouraging customers to consolidate their spending and ditch other vendors, and it's offering them fee-free periods to make the transition affordable.

Palo Alto believes this strategy will make each customer far more valuable over the long term. Around 1,250 of its top 5,000 customers were platformed at the end of Q3, which rose by a whopping 39% year over year. This is another important number for investors to watch on Aug. 18, because a high growth rate is a sure sign that Palo Alto's strategy is working.

Should you buy Palo Alto stock before Aug. 18?

Despite Palo Alto's leadership position in the cybersecurity industry, its stock is actually much cheaper than that of its main rival, CrowdStrike. It's trading at a price-to-sales (P/S) ratio of 13.3, compared to CrowdStrike's 25.4:

Data by YCharts.

CrowdStrike's revenue grew by 20% during its recent quarter, so its business is expanding at a faster overall pace than Palo Alto's business, which means it would normally deserve a premium valuation. However, Palo Alto's NGS ARR of $5.1 billion amounts to more than CrowdStrike's total ARR, and it grew by 34% during the recent quarter. Therefore, I think Palo Alto stock might be too cheap relative to its main competitor.

One quarter is unlikely to change Palo Alto's positive long-term trajectory, so there probably isn't an urgent need to buy its stock ahead of Aug. 18. However, it's trading 20% below its record high right now, so this might be a great opportunity to scoop it up at a discount. As long as investors maintain a long-term view of five years or more, they could do well from here.

Should you invest $1,000 in Palo Alto Networks right now?

Before you buy stock in Palo Alto Networks, 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 Palo Alto Networks 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

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends CrowdStrike. The Motley Fool recommends Palo Alto Networks. 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.

Image source: The Motley Fool.

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.

See the 10 stocks »

*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

• This company operates the world's largest digital language education platform and AI is playing a growing role in the learning experience.

• Its revenue growth accelerated in the second quarter and it's on track for a milestone year in 2025.

• The stock has doubled over the last 12 months but it could still be an attractive buy for long-term investors.

• 10 stocks we like better than Duolingo ›

When investors think of surging artificial intelligence (AI) stocks, Palantir Technologies and Nvidia are probably the first two that come to mind. Palantir is a leader in AI software and its stock is up by a whopping 530% over the last 12 months. Nvidia supplies the world's best AI data center chips and its stock has climbed by 74% over the same period.

But more and more companies are using AI to supercharge their legacy businesses. Duolingo (NASDAQ: DUOL), for instance, operates the world's largest digital language education platform, and it offers a growing portfolio of AI features designed to accelerate the learning experience. Its stock has more than doubled over the past year on the back of the company's stellar operating results, which have been boosted by AI.

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Is there still time to buy Duolingo stock? Read on to find out.

Image source: Getty Images.

AI is creating new opportunities for Duolingo

Duolingo owes its success to its mobile-first, gamified approach to education. It takes learning out of the classroom and places it at the fingertips of anyone with a smartphone, enabling them to move at their own pace.

Duolingo had more than 128 million monthly active users during the second quarter of 2025 (ended June 30), which was a 24% increase from the year-ago period. The platform monetizes them in two ways: It shows ads to free users, and it sells subscriptions to those who want to unlock more features to accelerate their progress. A record 10.9 million users were subscribed in Q2, which was up 37% year over year.

Duolingo Max is the platform's most expensive subscription tier, and it offers a growing list of AI features as a selling point. There is Explain My Answer, which provides users with personalized feedback after each lesson, and Roleplay, which uses a chatbot-style interface to help users practice their conversational skills in a language of their choice. Duolingo also launched a new tool for Max subscribers last year called Video Call, which features a digital avatar named Lily who helps users practice their speaking skills.

Max subscribers represented a record 8% of the platform's total paying members during Q2, up from 7% in the first quarter just three months earlier. Its AI features are a step toward Duolingo's long-term goal to deliver a learning experience that rivals a human tutor, so expect penetration to continue to grow.

Duolingo's revenue growth is accelerating

Duolingo generated a record $252.3 million in revenue during Q2, which crushed even the high end of management's forecast of $241.5 million. The figure represented a 41% increase compared to the year-ago period, which marked an acceleration from the 38% growth the company delivered during the first quarter. Simply put, the business is carrying a ton of momentum right now.

On the back of the strong Q2 result, management increased its full-year revenue forecast for 2025 to more than $1 billion. This would be the first year in the company's history that revenue crosses the billion-dollar milestone.

Duolingo also delivered a blistering second quarter at the bottom line. The business generated $44.8 million in net income, which was up by an eye-popping 84% from the year-ago period. Not many tech companies can deliver accelerating revenue growth without burning truckloads of cash at the bottom line, so Duolingo's consistent (and growing) profitability is an incredibly impressive achievement, and it's a key reason for its soaring stock price.

Duolingo stock presents an opportunity for long-term investors

Duolingo's business is certainly firing on all cylinders right now, but investors will have to pay a premium if they want to own a slice. Its stock is trading at a price-to-sales (P/S) ratio of 20, which is a 22% premium to its long-term average of 16.4, dating back to when it went public in 2021:

DUOL PS Ratio data by YCharts

Since Duolingo is consistently profitable, investors can also value its stock using the price-to-earnings (P/E) ratio -- but it looks even more pricey by that metric. Based on the company's $2.40 in trailing-12-month earnings per share (EPS), its P/E ratio is currently an eye-popping 152.3. That makes the stock five times more expensive than the Nasdaq-100 technology index which trades at a P/E ratio of 32.9.

The stock looks a little more attractive if it is valued based on its future potential EPS. Wall Street's consensus estimate (provided by Yahoo! Finance) suggests Duolingo could generate $6.64 in EPS during 2025, placing its stock at a forward P/E ratio of 55.7. Analysts then expect $8.34 in EPS during 2026, which translates to a forward P/E ratio of 44.4:

DUOL PE Ratio data by YCharts

The stock still isn't cheap on a forward basis, but investors who are willing to hold on to it for five years or more could still do well if they buy it at the current price, purely because the company's earnings are growing so quickly.

Short-term investors who are looking for quick gains over the next 12 months or so should probably steer clear of Duolingo stock, but it could be an attractive buy for those with a longer-term outlook.

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

Before you buy stock in Duolingo, 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 Duolingo 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

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia and Palantir Technologies. The Motley Fool recommends Duolingo. The Motley Fool has a disclosure policy.

Key Points

• Advanced Micro Devices (AMD) is catching up to Nvidia in the coveted market for artificial intelligence (AI) data center chips.

• AMD plans to launch a powerful new lineup of GPUs in 2026 called the MI400 series, which could obliterate the competition.

• Wall Street anticipates significant earnings growth for AMD next year, making its stock look very attractive at the current price.

• 10 stocks we like better than Advanced Micro Devices ›

Advanced Micro Devices (NASDAQ: AMD) is one of the world's largest suppliers of semiconductors. Its chips can be found in popular consumer products like Sony's PlayStation 5, Microsoft's Xbox, and even the infotainment systems inside Tesla's electric vehicles.

However, AMD's biggest opportunity right now is in the data center. The company is planning to launch a new lineup of graphics processing units (GPUs) for AI development in 2026, which could blow the competition -- including Nvidia (NASDAQ: NVDA) -- out of the water.

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 »

AMD stock is up 34% in 2025 already, but it's still below its all-time high just north of $200, which was set last year. Should investors scoop it up while it's still trading at a discount? Read on to find out.

Image source: Advanced Micro Devices.

AMD is catching up to Nvidia in the data center space

AMD launched its flagship MI300X data center GPU at the end of 2023, more than a year after Nvidia's industry-leading H100 GPU hit the market. Despite being behind, AMD still managed to attract some of Nvidia's largest customers, including Microsoft, Oracle, and Meta Platforms.

While Nvidia continues to leap ahead of the competition with new GPU architectures like Blackwell and Blackwell Ultra, AMD is quickly closing the gap. It just started shipping its MI350 series GPUs, which are based on a new architecture the company calls Compute DNA (CDNA) 4. These new chips offer 35 times more performance than CDNA 3 versions like the original MI300X, placing them on par with Nvidia's Blackwell lineup.

In fact, the latest MI355 offers comparable performance to Nvidia's Blackwell GB200 GPU, and it delivers up to 40% more tokens (words, symbols, and punctuation) in AI inference workloads for the same cost. In other words, it's much cheaper to run over the long term without sacrificing any processing power, which is why it's attracting hyperscalers and even leading AI start-ups like OpenAI.

But customers' attention is already turning to 2026, when AMD plans to release its MI400 series. These new chips will be combined with specialized software and hardware systems to create a fully integrated AI data center rack called Helios, which will supercharge their performance. AMD CEO Lisa Su believes these MI400-based Helios systems will be the most powerful in the world when they launch, offering a staggering 10 times more performance over the MI350 series.

Simply put, 2026 could be the year that AMD overtakes Nvidia in the AI data center space, at least in terms of technological capability.

AMD's AI data center revenue hit a speed bump in Q2

AMD generated a record $7.7 billion in total revenue during the second quarter of 2025, which was a 32% increase from the year-ago period. The data center segment was responsible for $3.2 billion of that revenue on its own, but it only mustered 14% growth, which was somewhat disappointing given the competitive, high-stakes nature of the GPU market.

Export restrictions were recently imposed by the U.S. government, and they wiped out AMD's AI GPU sales to China, which was the main reason for the underperformance in its data center segment. However, the company says it has applied for licenses to resume sales, and they are currently under review by the Trump administration.

But there was great news in other areas of AMD's business, like its client segment, where revenue soared 67% year over year to $2.5 billion. This is where the company accounts for sales of its Ryzen AI chips for personal computers, which come with a built-in GPU, central processing unit (CPU), and neural processing unit (NPU). They are installed in a growing number of computers from leading brands like Dell, HP, Acer, and Asus.

AMD's gaming business also roared back to life in Q2, with revenue surging by 73% to $1.1 billion. Revenue declined in this segment last year, and also during the first quarter of 2025, but demand for some of the company's core products is starting to rebound. Console manufacturers are increasing their inventories in preparation for the holiday season, and AMD said demand for its new Radeon 9000 series desktop GPUs is exceeding supply.

Should you buy AMD stock while it's under $200?

Despite the temporary regulatory headwind in AMD's data center business, Lisa Su is as optimistic as ever about its potential. She believes the company's AI revenue will scale into the tens of billions of dollars per year over the long term, driven by the MI400 GPU, which is already experiencing strong customer interest even though it won't hit the market until next year.

On that note, is AMD stock a buy while it's still below its record high? The company generated $3.45 in non-GAAP (adjusted) earnings per share (EPS) over the last four quarters, placing its stock at a price-to-earnings (P/E) ratio of 46.8. That means it's notably cheaper than Nvidia stock, which is sitting at a P/E ratio of 55.7.

Moreover, Wall Street's consensus estimate (provided by Yahoo! Finance) suggests AMD could deliver $5.97 in EPS during 2026, placing its stock at a forward P/E ratio of just 27.1. That leaves room for significant upside, because the stock would have to soar by 73% over the next 18 months just to maintain its current P/E ratio of 46.8.

It's possible AMD stock will perform even better if the MI400 series blows the competition out of the water next year, like Su expects, so it could be a great addition to any diversified portfolio right now.

Should you invest $1,000 in Advanced Micro Devices right now?

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, HP, Meta Platforms, Microsoft, Nvidia, Oracle, and Tesla. 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

• Nvidia recently became the world's largest company, thanks to booming sales of its data center chips.

• Some of Nvidia's biggest customers are on track to spend a record amount of money on AI data center infrastructure and chips this year.

• Nvidia will release its fiscal 2026 second quarter financial results on Aug. 27, and all signs point to another blowout result.

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

Nvidia (NASDAQ: NVDA) stock has soared by 1,100% since the beginning of 2023, which is when the artificial intelligence (AI) revolution really started to gather momentum. It's now the largest company in the entire world thanks to its market capitalization of $4.3 trillion, but I think its stock still has room for upside.

Nvidia supplies the world's most powerful graphics processing units (GPUs) for data centers, which have become the gold standard for AI development. Tech giants like Alphabet and Meta Platforms recently told shareholders they plan to spend more on AI data center infrastructure this year than originally anticipated, and they are among the chipmaker's largest customers.

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Nvidia is scheduled to release its financial results for its fiscal 2026 second quarter (ended July 30) on Aug. 27. Here's why I think the report could be a catalyst for more upside in its stock.

Image source: Nvidia.

AI infrastructure spending continues to climb

Nvidia's H100 GPU was the hottest data center chip for AI training and AI inference workloads in 2023, when large language models (LLMs) started going mainstream. Those LLMs were great at delivering one-shot responses, which created a fast and convenient way for users to find information, but they were sometimes inaccurate.

The latest generation of AI models focuses on "reasoning," which means they spend more time operating in the background to weed out errors before rendering responses. According to Nvidia CEO Jensen Huang, these models consume up to 1,000 times more tokens (words, symbols, and punctuation) than the old one-shot LLMs, so they require substantially more computing capacity.

Nvidia developed the Blackwell and Blackwell Ultra GPU architectures to deliver that capacity. Blackwell Ultra GPUs like the GB300 offer up to 50 times more performance than the H100 in certain configurations, and these chips were forecast to start shipping in the second half of calendar year 2025. Since Nvidia's fiscal Q2 2026 included July, investors should expect a sales update in the company's upcoming earnings report on Aug. 27.

All signs point to astronomical demand, because many of Nvidia's largest customers continue to ramp up their data center infrastructure spending. Alphabet, for instance, just raised its 2025 capital expenditures (capex) forecast from $75 billion to $85 billion. Meta Platforms also increased the low end of its capex guidance from $64 billion to $66 billion, but the company says it could spend up to $72 billion.

Amazon, on the other hand, allocated $55.7 billion to capex during the first two quarters of 2025, and its guidance suggests that its full-year spending could top a whopping $118 billion. Most of that will go toward AI data center infrastructure and chips.

Nvidia's upcoming report could be another blockbuster

Nvidia's guidance suggests that its total revenue came in at around $45 billion in Q2 of fiscal 2026, which would be a 50% increase from the year-ago period. If previous quarters are any indication, the data center segment likely represented around 90% of total revenue, led by GPU sales.

Wall Street's consensus estimate (provided by Yahoo! Finance) suggests that the company also delivered earnings of around $1 per share during the quarter, which would be a 47% jump year over year. This number can influence Nvidia's valuation, and hence the direction of its stock, so it's an important one for investors to watch.

Wall Street will also focus on management's forecast for the upcoming fiscal 2026 third quarter, because it's likely to reflect demand for the new Blackwell Ultra GPUs. Analysts will be looking for revenue guidance of around $52 billion, so any number above that could be very bullish for Nvidia stock.

Nvidia stock could soar after Aug. 27

Nvidia reported its financial results for the first quarter of fiscal 2026 on May 28, and its stock is up 33% since then. I think the Q2 report on Aug. 27 will be another upside catalyst, as long as the company's results don't fall short of expectations.

Nvidia stock is trading at a price-to-earnings (P/E) ratio of 60.1 as of this writing. That's right in line with its 10-year average, suggesting it's at fair value. However, the picture looks very different if we value the stock based on the company's future potential earnings.

Wall Street predicts that Nvidia will deliver earnings of $4.30 per share during fiscal 2026 overall, which places its stock at a forward P/E ratio of just 43. In other words, the stock would have to climb by 40% over the next six months just to maintain its current P/E ratio of 60.1.

NVDA PE Ratio data by YCharts.

Since so many of Nvidia's top customers have increased their capex forecasts for this year, I think the company will easily meet expectations on Aug. 27, and potentially even exceed them. Either of those scenarios will lay the groundwork for more upside in its stock from here.

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Key Points

• The Federal Reserve cut interest rates three times between September and December last year, but it hasn't made a move in 2025 just yet.

• Inflation is hovering near the Fed's target and the jobs market is deteriorating, so Wall Street thinks rate cuts will resume in September.

• Lower interest rates can be good for the stock market, but there could be some short-term volatility as recession fears loom.

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

The U.S. Federal Reserve lowered the federal funds rate (overnight interest rate) three times between September and December last year, reversing some of its aggressive hikes from 2022 and 2023. The rate cuts were justified because inflation -- as measured by the Consumer Price Index (CPI) -- cooled from its 2022 levels, when it hit a 40-year high of 8%.

The Fed has held interest rates steady this year, but with the CPI now a stone's-throw away from its annualized target of 2%, and the jobs market showing signs of weakness, Wall Street is betting that another cut is on the way in September.

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Although lower interest rates are typically good for the stock market, history suggests they could trigger some short-term volatility. Here's what it means for the benchmark S&P 500 (SNPINDEX: ^GSPC) index.

Image source: Getty Images.

Interest rate cuts could resume in September

The inflation surge in 2022 was driven by a combination of factors stemming from the pandemic. The U.S. government injected trillions of dollars into the economy during 2020 and 2021 to offset the negative effects of lockdowns and social restrictions. At the very same time, the Fed slashed the federal funds rate down to a historic low of 0.13%. The central bank also launched a multi-trillion-dollar quantitative easing (QE) program to support the financial system.

To top things off, everyday products were in short supply as factories closed all over the world to stop the spread of the virus, which sent prices surging.

The Fed started raising the federal funds rate in March 2022, and it reached a two-decade high of 5.33% at the time of the last hike in August 2023. The central bank hoped this policy shift would bring inflation down by reducing economic activity, and it seems to have worked. The CPI increased by 4.1% in 2023 and then by 2.9% in 2024, so it was clearly trending toward the Fed's 2% target.

That's why the central bank felt confident in cutting interest rates three times between September and December last year, bringing the federal funds rate down to 4.33%. But with the CPI now at an annualized rate of 2.7%, the CME Group's FedWatch tool suggests that there could be additional rate cuts in September, October, and December this year.

In fact, FedWatch suggests that Wall Street is pricing in an 81.5% chance of a cut in September, up from a 64% chance just one month ago. What changed? On Aug. 1, the Bureau of Labor Statistics (BLS) released its monthly non-farm payrolls report, showing that the U.S. economy added just 73,000 jobs during the month of July.

It was much lower than the 110,000 jobs economists were expecting, and to make matters worse, the BLS revised the May and June numbers down by a combined 258,000 jobs. In other words, the U.S. economy might be performing far worse than most Wall Street analysts and economists thought, hence the growing calls for lower interest rates.

Interest rate cuts often send jitters through the stock market

Conventional wisdom suggests lower interest rates are good for the stock market. They allow companies to borrow more money to fuel their growth, and smaller interest payments can boost their profits. Moreover, declining interest rates reduce the yield on risk-free assets like cash and Treasury bonds, pushing investors into growth assets like stocks. All of these things are tailwinds for the S&P 500.

However, a rapid decline in interest rates can also make investors nervous, because it would be a sign of weakness in the economy. Businesses might halt capital investments in that scenario, especially if they see cracks in consumer spending. That would be bad news for corporate earnings and potentially send the stock market lower.

In fact, every time the Fed cut interest rates sharply over the last 25 years, a correction in the S&P 500 followed.

^SPX data by YCharts.

There were unique circumstances surrounding each of the above easing cycles from the Fed. The dot-com internet bubble burst in 2000, followed by the global financial crisis in 2008, and then the pandemic in 2020, so interest rate cuts didn't cause the stock market declines. However, it's clear that many investors will temporarily exit the market in the face of economic uncertainty, even with interest rates coming down.

Look out for more economic weakness

Economic crashes are difficult to predict, and so are garden variety recessions. But economists at JPMorgan Chase recently said a decline in labor demand of the magnitude we saw in the July jobs report on Aug. 1 -- along with the revisions for May and June -- is a recession warning signal.

Economist Mark Zandi from Moody's Analytics is even more concerned, saying outright that the U.S. economy is on the precipice of a recession following last week's employment report. He also points to flat consumer spending, and declines in construction and manufacturing spending, to support his view.

If those experts are right, then the Fed is likely to continue cutting interest rates in September. If the economic weakness flows through to corporate earnings, then we could see a sharp correction in the S&P 500 at the very same time.

I'm not suggesting investors should sell stocks right now. The index enters a bear market (a decline of 20% or more) once every six years, on average, so volatility is a normal part of the investing journey. History proves that the S&P always recovers to set new highs given enough time. So any weakness will probably be a buying opportunity for long-term investors, rather than a reason to panic.

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JPMorgan Chase 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 JPMorgan Chase. The Motley Fool recommends CME Group. The Motley Fool has a disclosure policy.

Key Points

• Confluent developed an industry-leading data streaming platform that helps companies create live digital experiences for their customers.

• Confluent is tapping into a new opportunity in the artificial intelligence (AI) space, which could be a major growth driver over the long term.

• Confluent stock is down 81% from its 2021 record high, and it's the cheapest it has ever been by one popular valuation metric.

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

Data streaming powers a growing number of our digital experiences every day. Retailers use it to provide us with live inventory information on their websites so we know whether a product is in stock in real time. Investing and sports betting platforms, on the other hand, use it to feed live prices and odds directly to our smartphones.

Confluent (NASDAQ: CFLT) developed an industry-leading data streaming platform, which is now also becoming a critical tool in artificial intelligence (AI) applications, creating a whole new opportunity for the company.

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Confluent stock plunged by 30% after it released its operating results for the second quarter of 2025 (ended June 30) last week, and it's now down by 81% from its record high from 2021. But The Wall Street Journal tracks 36 analysts who cover Confluent stock, and the overwhelming majority remain bullish. Therefore, here's why its poor performance could be a long-term buying opportunity.

Image source: Getty Images.

Data streaming is revolutionary

If you wanted to watch a movie at home 20 years ago, you would have to buy or rent a DVD. Today, streaming platforms like Netflix store movies in data centers and feed them directly to your television using the internet. This created a more convenient viewing experience by eliminating the need for DVDs, DVD players, and even movie rental chains like Blockbuster.

Data streaming is conceptually similar. Businesses used to store data in physical servers on-site, and they would analyze it at a later date. Cloud computing providers like Amazon reduced the need for that hardware by allowing them to store their information in centralized data centers, where they can access it online at any time. Data streaming platforms like Confluent enable that information to be ingested, analyzed, and processed in real time, to create unique live experiences.

Retail giant Walmart synced all of its physical and digital sales channels, and it uses data streaming to monitor inventory levels in real time. Therefore, customers can trust Walmart's website when it says a product is in stock. And since the retailer knows the moment a product is sold, it can replenish inventories before they run dry, which ensures customers always find what they are looking for in its physical stores as well.

Shifting gears to AI, businesses can use Confluent to create data pipelines that they can plug into ready-made large language models (LLMs) from developers like OpenAI. In other words, Confluent provides the plumbing that can turn a generic AI chatbot into a tailored assistant that is capable of handling highly specific requests from customers.

Moreover, Confluent says one of its AI customers is an international sports network that is ingesting data from live matches and using it to instantly generate commentary in real time. This wouldn't be possible without high-performance data pipelines.

Confluent beat expectations during the second quarter

Confluent went into the second quarter of 2025 expecting to deliver up to $268 million in subscription revenue (its primary source of revenue). It topped that estimate with $270.8 million, which represented a 21% increase from the year-ago period.

A couple of things contributed to the strong result. First, Confluent's net revenue retention rate was 114%, and while that ticked lower from the previous quarter, it meant existing customers were spending 14% more money with the company than they were a year ago. Second, Confluent attracted new customers of all sizes. The number of customers spending at least $100,000 annually grew by 10% year over year, and the number of customers spending at least $1 million jumped by 24%.

But it wasn't all good news. In his prepared remarks to investors, CEO Jay Kreps said some of Confluent's largest customers continued to optimize their spending, and one AI-native customer is moving away from the platform entirely because it wants to handle its data management internally. Kreps said this will lead to slower revenue growth than initially anticipated in the second half of this year, which is why Confluent stock plunged last week.

With that said, the overall outlook is still positive because management actually increased the low end of its 2025 revenue forecast by $5 million

Wall Street is bullish on Confluent stock

The Wall Street Journal tracks 36 analysts who cover Confluent stock, and 21 have given it a buy rating. Five others are in the overweight (bullish) camp, and nine recommend holding. One analyst has given the stock an underweight (bearish) rating, but none recommend selling.

The analysts have an average price target of $25, which suggests Confluent stock could climb by 45% over the next 12 to 18 months. The Street-high target of $36 implies even more potential upside of 108%.

However, I think the stock could do even better over the long term. Confluent expects production AI use cases to soar tenfold this year among just a few hundred of its customers. It's an early sign that companies are starting to deploy AI software into the real world, and Confluent will benefit as this adoption ramps up.

Moreover, the company values its addressable market at $100 billion across its entire product portfolio, and it barely scratched the surface of that opportunity based on its current revenue.

Confluent's price-to-sales (P/S) ratio soared to an unsustainable level of around 60 when its stock peaked during the tech frenzy in 2021. But the 81% decline in its stock, combined with the company's steady revenue growth over the last few years, has pushed its P/S ratio down to just 5.2. That's officially the cheapest level since the stock went public.

CFLT PS Ratio data by YCharts

Therefore, investors who are willing to take a long-term view could be rewarded by buying Confluent stock at the current price. However, they will probably have to endure some volatility along the way.

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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.

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Netflix, and Walmart. The Motley Fool recommends Confluent. The Motley Fool has a disclosure policy.

The S&P 500 (SNPINDEX: ^GSPC) has almost fully recovered from its recent 19% drop, which was triggered by President Donald Trump's "Liberation Day" tariffs in April. But not every stock is following along -- in fact, many enterprise software stocks still haven't reclaimed their record highs from 2021.

Datadog (NASDAQ: DDOG) and Workiva (NYSE: WK) are two of those stocks. They were incredibly overvalued when they peaked a few years ago, and they are still down by 36% and 57%, respectively, from those lofty levels. But they're starting to look quite attractive.

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The majority of the analysts tracked by The Wall Street Journal who cover Datadog stock and Workiva stock have assigned them the highest possible buy rating. Here's why their optimism might be justified.

Image source: Getty Images.

The case for Datadog

Datadog developed an observability platform that monitors cloud infrastructure around the clock, alerting businesses to technical issues and outages which they might not have discovered until customers were affected or sales were lost (at which point it's too late). Over 30,500 businesses are using Datadog, and they operate in many different industries, including gaming, manufacturing, financial services, retail, and more.

Last year, Datadog expanded into artificial intelligence (AI) observability with a new tool that helps developers troubleshoot technical issues, track costs, and assess the outputs of their large language models (LLMs). During the recent first quarter of 2025 (ended March 31), the company said that the number of customers using this new tool more than doubled compared to just six months earlier, which suggests it's gaining serious traction.

Datadog also offers other AI products, like a monitoring solution for businesses using ready-made LLMs from OpenAI, and an AI-powered virtual assistant for its flagship observability platform. Overall, the company said that 4,000 customers were using at least one of its AI products in Q1, which also doubled year over year.

On the back of a strong first-quarter result, Datadog raised the high end of its full-year revenue forecast for 2025 to $3.235 billion, up $40 million from management's original guidance. It would represent growth of 21% from the company's 2024 result, but it would still be a drop in the bucket compared to the $53 billion addressable opportunity in the observability space alone.

Datadog was trading at a price-to-sales (P/S) ratio of around 70 when it peaked in 2021. But the 36% decline in the stock since then, in combination with the company's revenue growth, has pushed its P/S ratio down to 15.5. It's still elevated compared to many other enterprise software stocks, but it's much closer to the cheapest level since Datadog went public than it is to its lofty 2021 peak.

DDOG PS Ratio data by YCharts.

The Wall Street Journal tracks 46 analysts who cover Datadog stock, and 31 have assigned it the highest possible buy rating. Seven others are in the overweight (bullish) camp, and the remaining eight recommend holding. No analysts recommend selling. Their average price target of $140.72 implies a potential upside of 15% over the next 12 to 18 months, but investors who hold the stock for the long term could do far better as Datadog's AI products gather momentum.

The case for Workiva

Modern businesses often use dozens, or even hundreds, of digital applications to run their day-to-day operations. This is a nightmare for managers who are tasked with tracking workflows across all that software, but Workiva built an elegant solution to ease the burden.

Workiva's platform integrates with most storage applications, systems of record, and productivity software, allowing managers to pull data from all of them onto one dashboard. This saves them from having to open hundreds of individual applications, and it also reduces human error, which is common when copying mountains of data manually. Once data is loaded into Workiva, managers can select from several different templates so they can rapidly compile regulatory filings or reports for senior executives.

Workiva is also becoming a key player in the ESG (environmental, social, and governance) reporting space, offering a product that allows businesses to track their effect on all key stakeholders, not just those with a financial interest. With Workiva's ESG platform, organizations can create frameworks, track data, and compile reports on everything from their carbon emissions to the diversity of their workplace.

Workiva had 6,385 total customers at the end of Q1 2025, which was a 5% increase from the year-ago period, but its highest-spending cohorts are growing significantly faster. For example, the number of customers with annual contract values of at least $100,000 grew by 23%, and those with annual contract values of at least $500,000 soared by 32%. In other words, larger organizations with more complex operations seem to be flocking to Workiva.

The company expects to generate up to $868 million in total revenue in 2025, which would be a 17.5% increase compared to 2024. That would be a modest acceleration from the 17.3% growth it delivered last year.

As is the case with Datadog, Workiva's P/S ratio is currently down significantly from its 2021 peak. It's at 4.8 as of this writing, which is near the cheapest level since the stock went public.

WK PS Ratio data by YCharts.

The Wall Street Journal tracks 13 analysts who cover Workiva stock, and 11 of them have given it a buy rating. The remaining two are in the overweight camp, with none recommending to hold, let alone sell. Simply put, the analysts have reached a very bullish consensus.

Their average price target of $97.64 implies an eye-popping potential upside of 44% over the next 12 to 18 months. But the stock could do even better over the long term, since Workiva has barely scratched the surface of its $35 billion addressable market.

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

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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 $658,297!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $883,386!*

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Datadog and Workiva. The Motley Fool has a disclosure policy.

Warren Buffett is the CEO of the Berkshire Hathaway holding company, where he oversees a number of wholly owned subsidiaries and a $281 billion portfolio of publicly traded stocks and securities. He plans to step down at the end of 2025, capping off a stellar run of success that dates back to 1965.

Had you invested $1,000 in Berkshire stock when Buffett took the helm 60 years ago, you would have been sitting on a whopping $44.7 million at the end of 2024. But he's a seasoned expert who knows exactly what to look for when he's buying stocks, so the average retail investor might struggle to replicate his returns.

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Therefore, Buffett often recommends buying low-cost exchange-traded funds (ETFs) that track indexes like the S&P 500 (SNPINDEX: ^GSPC). The Vanguard S&P 500 ETF (NYSEMKT: VOO) is one he's suggested by name in the past, and it's one of the most cost-effective options.

The Vanguard S&P 500 ETF tracks the S&P 500 by investing in exactly the same companies, and if history is any guide, it could turn $500 per month into $1 million over the long term. Here's how.

Image source: The Motley Fool.

A great index fund for investors of all experience levels

The S&P 500 is made up of 500 different companies, and they have to meet strict criteria to be included. Each company must have a market capitalization of at least $20.5 billion, and the sum of their earnings (profits) must be positive over the most recent four quarters. But even after ticking every box, a special committee has the final say over which companies make the cut.

The 500 companies in the S&P 500 come from 11 different sectors of the economy. Some sectors have a higher representation than others because the index is weighted by market capitalization, which means the largest companies have a greater influence over its performance than the smallest.

That's why the information technology sector has a massive weighting of 30.4%. It's home to the world's three largest companies -- Microsoft, Nvidia, and Apple, which have a combined market cap of $10 trillion.

The table below breaks down the top five sectors in the Vanguard S&P 500 ETF, their weightings, and some of the popular stocks within them:

Data source: Vanguard. Portfolio weightings are accurate as of April 30 and are subject to change.

Artificial intelligence (AI) is a dominant theme in the stock market right now because it's impacting almost every sector of the S&P, especially information technology, thanks to companies like Nvidia and Microsoft. But Amazon, Tesla, Alphabet, Meta Platforms, and even Netflix are using AI in unique ways to supercharge their various businesses.

But diversification is the main reason the S&P 500 is the most widely followed U.S. stock market index. Per the above table, the financial and healthcare sectors make up a combined 25% of the S&P, and the index also offers investors exposure to the industrial, energy, and even real estate sectors.

As I mentioned earlier, the Vanguard S&P 500 ETF is one of the cheapest ways to invest in the benchmark index. It features an expense ratio of just 0.03%, meaning an investment of $10,000 will incur an annual fee of just $3. Vanguard says the average expense ratio of similar ETFs across the industry is a whopping 25 times higher at 0.75%, which can detract from investors' returns over the long run.

Turning $500 per month into $1 million

The S&P 500 plunged by 19% from its record high earlier this year on the back of simmering global trade tensions that were triggered by President Trump's tariffs. But volatility is a normal part of the investing journey because the index suffers a decline of 10% or more every two and a half years, on average, and investors can expect a bear market decline of 20% every six years or so (according to Capital Group).

But even after accounting for every sell-off, correction, and bear market, the S&P 500 has delivered a compound annual return of 10.3% (including dividends) since it was established in 1957.

Based on that return, investors who deploy $500 per month into the Vanguard S&P 500 ETF could join the millionaires' club within 30 years:

Calculations by author.

Past performance isn't a reliable indicator of future results, so there is no guarantee the S&P will continue to deliver annual returns of 10.3%. But forces like AI could add trillions of dollars in market cap to some of the most influential companies in the index, which would support further gains.

Nvidia CEO Jensen Huang predicts AI data center spending will reach $1 trillion per year by 2028, which is great news for his company and every other semiconductor stock in the S&P. Then there are AI subsegments like autonomous driving and robotics, which could be trillion-dollar opportunities on their own.

But even if it takes a little longer than 30 years to turn $500 per month into $1 million, the S&P 500 is still likely to be significantly higher by then, so investors who start their investing journey today will almost certainly be better off than those who remain on the sidelines.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 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 $657,871!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $875,479!*

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JPMorgan Chase is an advertising partner of Motley Fool Money. 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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Berkshire Hathaway, JPMorgan Chase, Meta Platforms, Microsoft, Netflix, Nvidia, Pfizer, Tesla, Vanguard S&P 500 ETF, and Visa. The Motley Fool recommends 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.

Nvidia (NASDAQ: NVDA) CEO Jensen Huang thinks that data center operators will spend $1 trillion every year on chips and infrastructure by 2028 to meet growing demand for computing capacity from next-generation artificial intelligence (AI) models.

That spending will be an enormous tailwind for Nvidia, which supplies the world's most powerful data center chips for AI development. But the benefits will also flow through to the company's competitors, not to mention suppliers of other data center hardware components. There is an opportunity for investors to profit from this tech revolution, and buying an exchange-traded fund (ETF) might be the simplest way to do so.

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The iShares Semiconductor ETF (NASDAQ: SOXX) invests exclusively in suppliers of chips and components, and its top holdings happen to be three of the biggest names in AI: Nvidia, Broadcom (NASDAQ: AVGO), and Advanced Micro Devices (NASDAQ: AMD). The ETF has outperformed the broader stock market since its establishment in 2001, and here's how it could turn an investment of $250,000 into $1 million within the coming decade.

Image source: Getty Images.

The biggest names in AI hardware in one ETF

Some ETFs hold thousands of different stocks, but the iShares Semiconductor ETF holds just 30. It aims to offer investors exposure to companies that design, manufacture, and distribute semiconductors, primarily those that stand to benefit from megatrends such as AI.

Since the ETF was established in 2001, it has helped investors successfully navigate several tech revolutions driven by the internet, enterprise software, smartphones, and cloud computing. It's now heavily geared toward AI, and its top five holdings are among the biggest names in the hardware side of the industry:

Data source: iShares. Portfolio weightings are accurate as of June 4, 2025, and are subject to change. ETF = exchange-traded fund.

Nvidia's graphics processing units (GPUs) are the most popular data center chips among AI developers. The company's latest GPU architectures, Blackwell and Blackwell Ultra, are designed for a new generation of AI models capable of 'reasoning,' which means they spend time thinking in the background to generate the most accurate responses.

Jensen Huang says some of these models consume up to 1,000 times more computing capacity than traditional one-shot large language models (LMs), hence his lofty spending forecast mentioned earlier.

Amazon, Microsoft, and Alphabet are three of Nvidia's biggest customers. They are seasoned data center operators because of their industry-leading cloud platforms, but they are now racing to build AI infrastructure to meet surging demand from developers.

But these companies are also trying to diversify their hardware portfolios by designing their own chips in collaboration with suppliers like Broadcom, which helps with the design and manufacturing processes. Broadcom is targeting a $90 billion market opportunity for its custom AI accelerator chips by 2027, with just three customers already on board and more in the pipeline. Plus, the company is a leading supplier of networking equipment, which helps to extract the most performance from AI chips.

Then there is AMD, which released a line of GPUs to compete directly with Nvidia in the data center. This year, the company will start shipping its latest chips based on its CNA (Compute DNA) 4 architecture, which was designed to rival Blackwell. AMD is also already a leader in AI chips for personal computers, which could be a major growth area in the future.

Investors will also find other leading AI chip stocks, such as Micron Technology, Taiwan Semiconductor Manufacturing, and Arm Holdings, outside the top five holdings in the iShares ETF.

Turning $250,000 into $1 million in the next decade

The iShares Semiconductor ETF has delivered a compound annual return of 10.4% since its establishment in 2001, outperforming the average annual gain of 7.9% in the S&P 500 over the same period. But the ETF has delivered an accelerated annual return of 20.9% over the past decade, driven by the accelerating adoption of technologies like cloud computing and AI.

If the iShares ETF continues to deliver annual gains of 20.9%, it could turn a $250,000 investment into over $1.6 million in the next decade. It won't be easy, but if AI infrastructure spending grows to $1 trillion per year by 2028, as Jensen Huang expects, it certainly isn't out of the question.

However, even if the ETF averages an annual gain of 15.6% over the next 10 years, that would be enough to turn $250,000 into $1 million:

Calculations by author.

Last year, Huang said data center operators could earn $5 over four years for every $1 they spend on Nvidia's AI chips and infrastructure by renting the computing capacity to AI developers. If those economics are accurate, data center operators like Amazon, Microsoft, and Alphabet are likely to continue investing heavily in new infrastructure long into the future.

Plus, every new generation of AI models typically requires even more computing capacity than the last, so it's possible that Huang's spending forecasts will prove to be conservative when we look back on this moment. In any case, the iShares ETF could be a great addition to a diversified portfolio.

Should you invest $1,000 in iShares Trust - iShares Semiconductor ETF right now?

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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 $669,517!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $868,615!*

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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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Microsoft, Nvidia, Qualcomm, Taiwan Semiconductor Manufacturing, Texas Instruments, and iShares Trust-iShares Semiconductor ETF. The Motley Fool recommends Broadcom 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.

The S&P 500 (SNPINDEX: ^GSPC) delivered back-to-back annual gains of over 25% in 2023 and 2024 (when including dividends). The only other time the index had such a strong two-year run was during the dot-com internet boom in 1997 and 1998. As was the case back then, stocks in the technology and tech-adjacent industries drove most of the upside this time around.

The "Magnificent Seven" is a group of seven companies that lead different segments of the tech space. They earned the nickname for their enormous size and their tendency to outperform the broader S&P 500. In fact, investors who didn't own them during 2023 and 2024 likely underperformed the index by a very wide margin:

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Data by YCharts.

However, the S&P 500 is off to a bumpy start to 2025 due to global trade tensions, which were sparked by President Donald Trump's "Liberation Day" tariffs. All of the Magnificent Seven stocks are trading down from their all-time highs, presenting long-term investors with a compelling opportunity. Shares of Meta Platforms (NASDAQ: META) and Amazon (NASDAQ: AMZN) are down 9% and 15%, respectively, from all-time highs hit in early 2025 (as of this writing).

Here's why investors might want to buy the dips.

Image source: Getty Images.

The case for Meta Platforms

Meta is the parent company of social networks like Facebook, Instagram, and WhatsApp, which serve over 3.4 billion people every single day. Acquiring new users is becoming harder because nearly half the planet is already using those platforms, so the company is trying to boost engagement instead. The longer each user spends online, the more ads they see, and the more money Meta makes.

Meta uses artificial intelligence (AI) in its recommendation engine to learn what type of content Facebook and Instagram users enjoy viewing, and it uses that information to show them more of it. During the first quarter of 2025, CEO Mark Zuckerberg said this strategy led to a 6% increase in the amount of time users were spending on Instagram over the last six months, and a 7% increase for Facebook.

But Meta is also using AI to help businesses craft better ads. Soon, Zuckerberg says a business will simply have to tell Meta its goals (like brand awareness or selling a specific product) and its budget, and an AI assistant will handle the rest -- that includes designing the creative (the text, image, or video) and defining the audience. Most small businesses don't have their own marketing teams, so this could be a powerful tool that boosts Meta's share of the digital advertising market.

Meta AI is another innovation from the social media giant. It has become one of the most popular chatbots in the world with almost 1 billion monthly active users, despite only launching last year. It's built on Meta's Llama family of large language models (LLMs), which are now among the most intelligent in the AI industry. Meta plans to spend up to $72 billion on data center infrastructure and chips this year, most of which will be geared toward advancing Llama even further and meeting inference demand for Meta AI.

Meta has generated $25.64 in earnings per share (EPS) over the last four quarters, so based on its current stock price of around $650, it trades at a price-to-earnings (P/E) ratio of 25.2. That makes it the second-cheapest Magnificent Seven stock ahead of only Alphabet, which is battling a series of regulatory issues:

Data by YCharts.

Because of Meta's progress in AI, its solid (and growing) profits, and its valuation, I think the company is on its way to the exclusive $2 trillion club.

The case for Amazon

E-commerce remains the single biggest contributor to Amazon's overall revenue, but investors are currently more focused on the Amazon Web Services (AWS) cloud computing platform. It offers hundreds of solutions to help businesses navigate the digital world, but it's also trying to dominate the three core layers of AI: hardware infrastructure, LLMs, and software.

AWS operates data centers filled with chips from leading suppliers like Nvidia, and it rents the computing capacity to AI developers for a profit. But Amazon also designed its own chips, and the new Trainium2 can save developers up to 40% on AI training costs compared to competing hardware.

AWS also developed a family of LLMs called Nova, which includes the new NovaSonic speech-to-speech model for conversational AI applications. Ready-made models eliminate the need for developers to create their own from scratch, so using them can significantly accelerate their AI software projects. The Nova family is available on Amazon Bedrock, along with other LLMs from leading third parties like Meta and Anthropic.

On the software front, AWS now offers an integrated virtual assistant called Q, which can write computer code to help developers create software more quickly. It can also analyze internal data to provide businesses with actionable insights. In addition, Amazon developed a separate virtual assistant for Amazon.com called Rufus, which helps shoppers compare products and make more informed decisions.

Amazon generated $155.6 billion in total revenue during the first quarter of 2025. AWS accounted for just 19% of that total ($29.2 billion), yet it was responsible for 63% of the entire company's operating income. Segments like e-commerce operate on razor-thin margins, so AWS is the profit engine behind the whole organization, which is why investors monitor it so closely.

AWS has become a leader in AI infrastructure and services, and I think that will be Amazon's golden ticket to the ultra-exclusive $3 trillion club in the next couple of years, where it could sit alongside Microsoft, Apple, and Nvidia.

Should you invest $1,000 in Meta Platforms right now?

Before you buy stock in Meta Platforms, 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 Meta Platforms 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 $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $828,224!*

Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 171% 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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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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. 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.

Dogecoin (CRYPTO: DOGE) was founded as a joke by two friends in 2013 who used the famous "Doge" meme as inspiration. Little did they know, it would go on to reach a peak of $0.73 per token in 2021, which translated to an eye-popping market capitalization of almost $90 billion.

A lot of that value was created on the back of Elon Musk's support, which has been ongoing since 2019. In fact, Dogecoin's most recent rally was sparked by Musk's involvement in the Trump administration, where he temporarily ran an external government agency with a name that references the meme token.

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But Musk's time at the White House has officially come to an end, so investors might be wondering what to do next. Is Dogecoin still a buy, or is this a sure sign to run for the hills?

Image source: Getty Images.

A timeline of Musk's Dogecoin support

Between 2019 and 2021, Musk regularly shared Dogecoin-related memes on social media and participated in friendly banter with other enthusiasts. Investors started to think he had a plan to create real value for the meme token, and that speculation reached a fever pitch in the lead-up to his appearance on Saturday Night Live.

During the show on May 8, 2021, Musk participated in a Dogecoin-themed comedy skit, which ended with him calling the meme token a "hustle." While it was a light-hearted joke, investors started to realize that Musk had no concrete plans to create value outside of his support on social media, so Dogecoin peaked at $0.73 per token that very night.

It plunged over the next 12 months, losing more than 90% of its value by mid-2022. It stayed dormant during 2023 and for most of 2024, until the U.S. presidential election. Musk threw his cash and his influence behind Donald Trump, who campaigned on a series of pro-crypto policies, and Dogecoin soared (along with most cryptocurrencies) when Trump eventually won the presidency.

A short time later, Trump announced plans to appoint Musk to run an external government agency tasked with reducing America's national debt by slashing spending. Musk named the agency the Department of Government Efficiency, or DOGE for short, which was a clear reference to his favorite cryptocurrency. However, to this day, Dogecoin has played no actual role in the agency, so its post-election rally was purely speculative.

Musk's time at the White House has now come to an end. He was classified as a "special government employee," which means he can only work within the administration for 130 days per year -- and Jan. 20 (Trump's Inauguration Day) to May 30 was exactly 130 days.

Dogecoin has serious fundamental issues

Dogecoin has plummeted by 59% from its recent 52-week high, but Elon Musk's departure from the DOGE agency isn't the biggest reason. The meme token has struggled to find a use case in the real world, and if consumers, businesses, and investors don't have a tangible reason to own it, then it's impossible to create sustainable value.

According to Cryptwerk, just 2,096 businesses around the world accept Dogecoin as payment for goods and services. If consumers can't spend Dogecoin at their favorite stores, then they have no reason to buy it. Businesses probably won't warm up to the meme token anytime soon, because its extreme volatility would make cash-flow management a nightmare.

Dogecoin also has a supply issue. There are 149.5 billion tokens in circulation as of this writing, and although there is a cap on how many more can be "mined" each year, there is no end date. In other words, new tokens will enter the market until the end of time. I've never seen an investment-grade asset with an unlimited supply that rises in value over the long term.

It might be time to run for the hills

Dogecoin's post-election rally peaked at $0.47, which was well below its 2021 high of $0.73. That suggests investors were less willing to buy into the Musk-driven hype this time around. But the meme token is now trading at just $0.19, and there could still be plenty of room to fall if history is any guide.

Dogecoin bottomed at around $0.06 in 2022, which might be the level to watch. It implies there could be 68% downside from the current price, and with Musk now out of the White House and no improvements to the meme token's fundamentals, that might be the path of least resistance.

As a result, I think it might be time to abandon Dogecoin and run for the hills.

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

Before you buy stock in Dogecoin, 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 Dogecoin 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 $651,049!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $828,224!*

Now, it’s worth noting Stock Advisor’s total average return is 979% — a market-crushing outperformance compared to 171% 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 2, 2025

Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

C3.ai (NYSE: AI) was at the vanguard of artificial intelligence (AI) when it was founded in 2009, so it saw this technological revolution coming from a mile away. It now offers over 130 ready-made and customizable applications to help businesses accelerate their adoption of AI, which is very useful for those without the resources or expertise to develop the technology from scratch.

C3.ai stock is trading significantly below its all-time high from 2020, but its valuation is starting to look attractive, especially in light of the company's rapid revenue growth and its enormous addressable market, which could top $1.3 trillion by 2032.

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The company is scheduled to report financial results for its fiscal 2025's fourth quarter (which ended on April 30) on May 28, when it will provide an update on its business and a forecast for the new fiscal year. Should investors buy C3.ai stock ahead of the report?

Image source: Getty Images.

A unique AI software company

C3.ai's applications are used by businesses in 19 different industries, including the oil and gas sector, transportation, telecommunications, healthcare, manufacturing, and more. The company offers a series of ready-made applications tailored specifically to those industries, but it can also deliver a custom solution within six months on an initial customer briefing.

Oil and gas giant Shell has over 100 AI applications at various stages of production. They help the company conduct preventive maintenance, predict equipment failures, and even reduce carbon emissions.

At one liquefied natural gas plant, Shell deployed C3.ai's Real Time Production Optimization application to improve efficiency, which reduced carbon emissions by 355 tons per day. On an annualized basis, that is the equivalent of taking 28,000 cars off the road.

Customers can access C3.ai's applications through leading cloud platforms like Amazon Web Services (AWS), Microsoft Azure, and Alphabet's Google Cloud. Businesses can leverage the computing capacity available through those cloud providers to scale up their C3.ai applications, meaning they don't have to maintain any of their own data center infrastructure. This is a very attractive proposition, especially for smaller businesses with limited financial and technical resources.

Revenue growth is gathering momentum

C3.ai generated $98.7 million in total revenue during the fiscal 2025 third quarter (ended Jan. 31), which was a 26% increase from the year-ago period. It was the second-fastest growth rate in almost three years, next to the company's 29% increase in the fiscal 2025 second quarter three months earlier.

This strong momentum is attributable to a change in its business model. In the first quarter of fiscal 2023 (ended July 31, 2022), the company decided to abandon its subscription revenue model in favor of consumption-based pricing, meaning customers would only pay for what they use.

This shift eliminated lengthy negotiating periods and allowed C3.ai to get new customers on board far more quickly. It led to a temporary (but expected) decline in the company's revenue growth while customers scaled up their consumption, but investors are now seeing the payoff.

Management forecast $113.6 million in revenue for the fiscal 2025 fourth quarter (at the high end of the guidance range), which would represent 31% year-over-year growth. C3.ai stock would likely move higher if the company delivers on that number or beats it when the quarterly report is released on May 28.

Should investors buy C3.ai stock before May 28?

As I mentioned earlier, enterprise AI could be a $1.3 trillion opportunity for C3.ai and its competitors by 2032 (based on a report by Bloomberg that was cited by CEO Thomas Siebel). Therefore, investors should keep their eyes on the long-term prize rather than placing too much focus on any single quarter.

If you believe in the potential of AI, C3.ai stock might be a great buy right now because of its valuation. It is down 85% from its all-time high, which was set during the tech frenzy in 2020, when its price-to-sales ratio (P/S) soared above 75. Simply put, that level was completely unsustainable.

But its P/S is now just 8.3, which is a 14% discount to its three-year average of 9.6, despite the fact the company is currently growing its quarterly revenue at the fastest rates since it shifted to consumption pricing:

AI PS Ratio data by YCharts.

The bottom line presents one key risk to consider. The company lost $209 million on the basis of generally accepted accounting principles (GAAP) through the first three quarters of fiscal 2025, as it continued to invest heavily in growth. On the plus side, that net loss was only $30.4 million on a non-GAAP basis, which excludes non-cash expenses like the $174 million in stock-based compensation it issued to its employees during the period.

According to management's guidance, the company might have lost another $40 million on a non-GAAP (adjusted) basis during the fourth quarter, so investors won't want to see a number larger than that in the May 28 report.

The company has around $724 million in cash, equivalents, and marketable securities on hand, so it can continue to lose money at the current pace for a few more years, but it will have to prioritize profitability eventually if it wants to avoid diluting existing shareholders by raising more money.

But based on C3.ai's current valuation and the sizable AI opportunity ahead, now might be a good time to take a long-term position in the stock irrespective of the upcoming May 28 report.

Should you invest $1,000 in C3.ai right now?

Before you buy stock in C3.ai, 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 C3.ai 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 $635,275!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $826,385!*

Now, it’s worth noting Stock Advisor’s total average return is 967% — a market-crushing outperformance compared to 171% 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 May 12, 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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool recommends C3.ai 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.

The "Magnificent Seven" is a group of seven American companies with leadership positions in various segments of the technology industry. They got the nickname in 2023 because of their incredible size and their ability to consistently outperform the rest of the stock market.

The Magnificent Seven companies have a combined value of $16.7 trillion, which represents 31.6% of the entire value of the S&P 500 (SNPINDEX: ^GSPC), so they have an enormous influence over the performance of the index.

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Market Cap data by YCharts.

When Microsoft (NASDAQ: MSFT), Nvidia (NASDAQ: NVDA), Apple (NASDAQ: AAPL), Amazon (NASDAQ: AMZN), Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL), Meta Platforms (NASDAQ: META), and Tesla (NASDAQ: TSLA) are moving higher as a group, investors who don't own them will generally underperform the S&P 500.

I'm going to introduce you to an exchange-traded fund (ETF) that has more than half of the entire value of its portfolio invested in the Magnificent Seven stocks. It's the Vanguard Mega Cap Growth ETF (NYSEMKT: MGK), and it has consistently beaten the S&P 500 every year since it was established in 2007. Here's why investors might want to buy it for the long term.

Image source: Getty Images.

A concentrated ETF filled with America's highest-quality companies

Some ETFs hold hundreds or even thousands of different stocks. But the Vanguard Mega Cap Growth ETF holds just 69, and the Magnificent Seven account for 54.9% of the total value of its portfolio:

Data source: Vanguard. Portfolio weightings are accurate as of April 30, 2025, and are subject to change.

Artificial intelligence (AI) could fuel the next phase of growth for each of the Magnificent Seven companies, but in very different ways. Apple, for example, designed a series of chips for its latest iPhones, iPads, and Mac computers to run its new Apple Intelligence software. It provides a suite of AI features, including writing tools and a more powerful version of the Siri voice assistant, which transform the user experience for people with Apple devices.

Tesla is another consumer "hardware" company that has turned its attention to AI. The electric vehicle (EV) giant continues to improve its AI-powered full self-driving software, which could be active on public roads as soon as this year.

Nvidia supplies the world's best data center chips for developing AI models. Apple Intelligence wouldn't be possible without it, nor would Tesla's self-driving software. Microsoft, Amazon, and Alphabet are also some of Nvidia's top customers -- they fill their cloud data centers with AI chips and rent the computing power to developers for a profit.

Their cloud platforms also offer access to the latest ready-made large language models (LLMs) to help accelerate their customers' AI software ambitions.

Then there is Meta Platforms, which uses AI in its recommendation algorithm to show users more of the content they enjoy seeing on its Facebook and Instagram. It also launched an AI assistant last year called Meta AI, which already has nearly a billion users. The company's Llama family of LLMs that power Meta AI have become the most popular open-source models in the world.

Although the Magnificent Seven stocks dominate the Vanguard ETF, it does offer some diversification. Large-cap non-technology stocks like Eli Lilly, Visa, Costco Wholesale, and McDonald's are also among the ETF's top 20 positions.

This Vanguard ETF can help investors beat the S&P 500

The Vanguard Mega Cap Growth ETF delivered a compound annual return of 12.5% since its inception in 2007, comfortably beating the average annual gain of 9.6% in the S&P 500 over the same period.

But the ETF has a highly concentrated portfolio, which can be a recipe for volatility. For example, the S&P 500 fell by as much as 18.9% from its all-time high earlier this year as economic and political uncertainty surged due to President Donald Trump's "Liberation Day" tariffs. However, the ETF was down by 22.3% at the same time, because it has much larger positions in the high-flying Magnificent Seven stocks, which pulled back more sharply than the rest of the market amid the chaos.

As a result, investors shouldn't put all of their eggs in one basket. Instead, they should buy the ETF as part of a balanced portfolio, where it has the potential to boost overall returns.

For example, using the returns cited earlier, a $10,000 investment in the S&P 500 would be worth $15,814 in five years. But if you invest $5,000 in the S&P and $5,000 in the Vanguard ETF, your $10,000 could be worth $16,917 instead.

One thing is for certain: Investors will want exposure to the Magnificent Seven, not only because of their excellent long-term track record, but also because they are leading the way when it comes to new technologies like AI.

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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. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Costco Wholesale, Meta Platforms, Microsoft, Nvidia, Tesla, and Visa. 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.

Uber Technologies (NYSE: UBER) operates the world's largest ride-hailing network, along with popular food delivery and commercial freight services. It relies on 8.5 million drivers and couriers to fulfill demand from its 170 million monthly active customers, but the company is on the cusp of a major shift that could transform its financial results.

Uber has signed partnerships with 18 companies that develop autonomous cars, robots, and even aircraft, and that list is growing. Since human drivers are the company's largest cost, these deals could result in billions of dollars in savings every year, which will flow through to Uber's revenue and its bottom line.

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In fact, I think Uber stock could soar fivefold within the next decade thanks to autonomous technologies. Here's how it could turn a $200,000 investment into $1 million by 2035.

Image source: Getty Images.

Autonomous driving could reshape Uber's business

During the first quarter of 2025 (ended March 31), Uber reported $42.8 billion in gross bookings, which was the dollar value of every trip, food order, and commercial delivery the platform facilitated on behalf of its customers. The $18.6 billion drivers and couriers earned during the quarter was the single-largest component of the gross bookings figure.

After deducting a further $12.9 billion in merchant payouts (money paid to restaurants for customers' food orders, as an example), Uber was left with $11.5 billion in revenue. Then, once the company factored in operating costs like marketing and research and development, its net income (profit) for the quarter came in at $1.7 billion on a generally accepted accounting principles (GAAP) basis.

In other words, Uber doesn't get to keep a whole lot of the money customers spend on its platform. That's why autonomous vehicles have the potential to transform its economics -- if self-driving cars and robots reduce Uber's reliance on human drivers, the company could pocket an additional $18.6 billion from its gross bookings each quarter (based on its Q1 result).

Uber would have to pay some of that money to the companies deploying their self-driving cars into its network, but since they can operate 24/7, the economics are still likely to be significantly better than using human drivers. Plus, Uber could choose to buy a fleet of autonomous vehicles and operate them itself, which would be even more profitable over the long term.

A growing list of autonomous partnerships

In his prepared remarks to shareholders for the 2025 first quarter, CEO Dara Khosrowshahi said Uber had partnerships with 18 different providers of autonomous vehicles, up from 14 just six months earlier. Simply put, developers want to deploy their vehicles into the mobility network with the most users so they can maximize their revenue, which gives Uber a distinct advantage over the competition.

Many of those partnerships are already producing results, because Uber is now facilitating around 1.5 million autonomous trips per year (annualized based on its Q1 results). Many of those are attributable to Alphabet's Waymo, which is completing over 250,000 paid autonomous trips per week -- some through its own ride-hailing service, and some through Uber.

Waymo has been operating in Phoenix, Los Angeles, and San Francisco, but it entered Austin, Texas, in March as part of an exclusive deal with Uber. It has 100 autonomous vehicles available in that market right now, and Uber says they are busier than 99% of the platform's human drivers in the area. The two companies will deploy hundreds more driverless cars in Austin over the next few months, and they plan to expand into Atlanta.

Waymo is already a raging success, but Uber wants to help its other autonomous partners commercialize their technologies more quickly, because they have so much potential to save the company money on human drivers. As a result, it entered a unique partnership with Nvidia earlier this year, which is the world's leading supplier of chips and software for artificial intelligence (AI) development.

Uber will use Nvidia's DGX Cloud supercomputer platform to process data from the billions of trips it facilitates each year, which will help its autonomous partners create more powerful self-driving models. Uber will also use Nvidia's Cosmos foundation models to create real-world training simulations, which will speed up the development process even further.

Turning $200,000 into $1 million by 2035

Based on Uber's trailing-12-month revenue of $45.3 billion and its market capitalization of $174 billion, its stock trades at a price-to-sales (P/S) ratio of around 4, as of this writing. That's a slight discount to its average of 4.2, dating back to when the company went public in 2019:

UBER PS Ratio data by YCharts

If we assume Uber's P/S ratio remains constant at 4, the company will need to generate around $226.5 billion in annual revenue by 2035 to justify a fivefold return in its stock. That translates to a compound annual growth rate of 17.5% over the next decade. Between 2017 and 2024, Uber actually grew its revenue at a much faster annual rate of 27.7%, which suggests it should have no trouble hitting the mark.

However, it becomes harder for Uber to grow that quickly as its revenue base becomes larger. According to Wall Street's consensus estimate (provided by Yahoo! Finance), the company is expected to grow its revenue by just 14% annually for the next two years. If that trend continues, it could take much longer than a decade for Uber stock to turn an investment of $200,000 into $1 million.

But remember this: Uber stands to pocket an extra $18 billion every quarter if it can eliminate human drivers completely. It certainly won't happen overnight, but the gradual shift toward autonomous vehicles could be a monumental tailwind for its revenue for the next several years. In fact, Khosrowshahi thinks the autonomous opportunity will be worth over $1 trillion to Uber in the U.S. alone.

Therefore, while it's possible Uber delivers below-trend revenue growth for the next couple of years, it could accelerate later this decade (and beyond) as more self-driving cars hit the road. As long as the company's revenue growth averages 17.5% over the next 10 years, it will lay the foundation for a fivefold return in its stock.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Nvidia, and Uber Technologies. The Motley Fool has a disclosure policy.

Workiva (NYSE: WK) developed a unique software platform that helps organizations bring their data together so they can create detailed reports for executives, investors, and even regulators like the Securities and Exchange Commission (SEC). The company just reported its financial results for the first quarter of 2025 (ended March 31), and it beat expectations on the top and bottom line.

Despite continued strength across its business, Workiva stock remains 55% below its record high set during the tech frenzy in 2021. It was overvalued back then (as were many enterprise software stocks), but it looks like a relative bargain at the current level.

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Wall Street seems to agree. The Wall Street Journal tracks 13 analysts who cover Workiva stock, and the overwhelming majority assigned it the highest-possible buy rating. Plus, not a single analyst recommends selling. Here's why investors might want to add Workiva to their portfolio.

Image source: Getty Images.

A critical platform for increasingly complex organizations

Technologies like cloud computing allow companies to operate online, where they can reach a much larger customer base and tap into a global workforce. But it also creates challenges for managers that have to monitor employees who are often working across dozens of different digital applications, especially if they are located on the other side of the world.

Workiva's platform eases that burden by integrating with most cloud storage solutions, systems of record, and accounting software, so managers can pull all of the organization's data onto one dashboard. That means they don't have to open each individual piece of software to find the information they need, which saves a significant amount of time and also prevents human errors associated with manually copying data into reports.

Once data is aggregated into Workiva, managers can choose from hundreds of different templates to help accelerate their reporting workflows. This is great for managers who regularly present key information to their executive teams, or those who are responsible for submitting filings to regulatory agencies.

Workiva is seeing rapid growth in its highest-spending customer cohorts

Workiva generated $206 million in revenue during the first quarter of 2025. It was a 17% increase compared to the year-ago period, and it was also above the high end of management's guidance of $205 million.

Workiva had a total of 6,385 customers at the end of the quarter, representing a modest year-over-year increase of 5%. However, the company experienced significantly faster growth among its highest-spending customer cohorts, namely those with annual contract values of $100,000; $300,000; and $500,000:

Image source: Workiva.

Workiva also beat expectations on the bottom line. While it lost $0.38 per share during the quarter on a generally accepted accounting principles (GAAP) basis, that was better than management's forecasted loss of $0.45 per share.

The company was actually profitable to the tune of $0.14 per share on a non-GAAP basis, which excludes one-off and non-cash expenses like stock-based compensation, and that was double management's forecast of $0.07 per share.

However, it's worth noting that both Workiva's GAAP loss and its non-GAAP profit were worse than the year-ago results, primarily because the company ramped up its operating expenses. It was a clear attempt to drive growth, because sales and marketing costs saw the biggest jump. CEO Julie Iskow said she continues to see broad demand across Workiva's product portfolio, so management might be leaning into that trend to capture as many new customers as possible.

Trying to acquire new customers is an especially good strategy right now, because Workiva's net revenue retention rate dipped to 110% during the first quarter (from 111% in the year-ago period), suggesting existing customers weren't increasing their spending as quickly as they have in the past. This might be one of the reasons Workiva stock declined following the release of its Q1 report.

Investors were also somewhat disappointed with Workiva's forward guidance. Although management expects revenue growth to hold steady at 17% in the second quarter, the company's bottom-line results appear set to worsen on both a GAAP and non-GAAP basis. Workiva has a solid balance sheet with $767 million in cash, equivalents, and marketable securities on hand, so it can comfortably continue to invest in growth, but investors would still prefer to see the company trending toward profitability.

Wall Street is bullish on Workiva stock

As I mentioned before, analysts who cover Workiva stock are bullish on its prospects. The analysts have an average price target of $102, which implies a potential upside of 54% over the next 12 to 18 months. The Street-high target of $112 suggests Workiva stock could deliver an even greater return of 70% instead.

The 55% decline in the stock from its 2021 high, combined with the company's consistent revenue growth since then, has pushed its price-to-sales (P/S) ratio down to just 4.9. It's close to the cheapest level in five years, and it's also a 49% discount to its average P/S ratio of 9.6 over that period:

WK PS Ratio data by YCharts

Over the longer term, it's possible Workiva stock delivers even more upside than Wall Street expects. The company values its addressable market at $35 billion, so it has barely scratched the surface of that opportunity based on its current revenue. Plus, considering Workiva's market capitalization is just $3.7 billion, that leaves a lot of room for growth.

As a result, this stock could be a great long-term addition to any portfolio.

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Before you buy stock in Workiva, 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 $623,685!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $701,781!*

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Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Workiva. The Motley Fool has a disclosure policy.

The U.S. Federal Reserve reduced the federal funds rate (overnight interest rate) in September, November, and December last year, for a total reduction of 100 basis points. It reversed some of the aggressive rate hikes from 2022 and 2023 when the central bank was trying to tame a four-decade high in the Consumer Price Index (CPI) measure of inflation.

The CPI continues to decline toward the Fed's 2% annualized target, and since the U.S. economy faces significant uncertainty right now in the face of simmering global trade tensions, Wall Street is forecasting several more rate cuts this year.

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According to the CME Group's FedWatch tool, which calculates the probability of the central bank's potential decisions based on the interest rate futures market, there could be four cuts before 2025 is over. This would have significant implications for the S&P 500 (SNPINDEX: ^GSPC) index but not in the way you might expect.

Image source: Getty Images.

Tariffs are creating a headache for the Fed

In March, the CPI increased at an annualized rate of 2.4%, the slowest pace since 2021. Given that reading was a stone's throw from the Fed's 2% inflation target, it would normally clear the way for further interest rate cuts.

However, on April 2, President Donald Trump announced plans to impose tariffs on all imported goods from America's trading partners, which threw a giant wrench into the works.

Trump enacted a sweeping 10% tariff on imports from every country, in addition to a series of much higher "reciprocal tariffs" on imports from specific countries that have large trade imbalances with the U.S. The reciprocal levies are now under a 90-day pause pending negotiations, except those placed on many Chinese imports, which currently stand at 245% for some products.

Tariffs can increase the price of goods for consumers, so Fed policymakers now have to wait for additional CPI data in the coming months before they can be sure interest rate cuts are the right move.

With that said, tariffs could also drive a sharp slowdown in economic activity, which might give the Fed a reason to cut rates even if inflation remains sticky. According to Reuters, seven top Wall Street banks raised their chances of a recession in the U.S., specifically because of the tariffs.

Goldman Sachs believes there is a 45% chance of a recession in the next 12 months (up from 35% before the tariffs), and JPMorgan Chase places the probability at 60% (up from 40% previously).

As a result, some Wall Street banks also reduced their 2025 forecast for the federal funds rate, implying more rate cuts than initially expected by the end of the year. According to the CME Group's FedWatch tool, the central bank could cut rates by 25 basis points four times: once in each of its policy meetings in June, July, September, and December.

Rate cuts often foreshadow stock market volatility

Interest rate cuts are typically good for the corporate sector because they allow companies to borrow more money to fuel their growth, and they reduce the cost of debt, which can boost profits. Plus, lower rates encourage investors to move away from risk-free assets like cash in favor of growth assets like stocks, which can drive the market higher.

However, the start of every rate-cutting cycle since the early 2000s foreshadowed a correction in the stock market, and this time is no different. The S&P 500 is currently down 12% from its recent all-time high, despite the benefit of three rate cuts at the end of 2024:

Data by YCharts.

Simmering global trade tensions (and their potential to weaken the economy) are the main reason for the recent decline in the S&P 500, not last year's interest rate cuts. But the timing is certainly interesting because the Fed tends to cut rates when the economy is showing signs of weakness, and the above chart suggests the first few rate cuts in a given cycle might be a good predictor of temporary stock market declines.

Moreover, the Fed has a documented history of being late to the party. The chart below shows how recessions (represented by the gray-shaded areas) often follow periods of rising interest rates. This indicates the Fed often hikes rates too far, or is too slow to reduce them in the face of economic weakness:

Data by YCharts.

Recessions can be bad news for stocks

Whether or not the recent correction in the S&P 500 turns into a full-blown bear market could hinge on the economic data over the next few months. If the U.S. economy slips into a technical recession -- indicated by two consecutive quarters of shrinking gross domestic product -- investors would likely trim their exposure to stocks even further.

Simply put, the long-term performance of the stock market is driven by corporate earnings, and companies make less money during recessions due to factors like higher unemployment and less consumer spending, thus sending stock prices lower.

Further interest rate cuts should help pull the economy out of any potential slump, and since the stock market is a forward-looking machine, they might even entice longer-term investors to start buying up a bargain or two. After all, despite facing the dot-com bust, the global financial crisis, and the COVID pandemic over the last 25 years alone, the S&P 500 still consistently climbed to new record highs.

This time probably won't be any different, especially since several countries are already negotiating new trade deals with the Trump administration. As a result, any further weakness in the stock market can still prove to be a great long-term buying opportunity.

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JPMorgan Chase 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 Goldman Sachs Group and JPMorgan Chase. The Motley Fool recommends CME Group. The Motley Fool has a disclosure policy.

The S&P 500 index (SNPINDEX: ^GSPC) is made up of 500 companies from 11 different sectors of the economy, so it's the most diversified of the major U.S. stock market indexes. It's currently down 12.5% from its record high, placing it firmly in correction territory, amid simmering global trade tensions that were sparked by President Trump's "Liberation Day" on April 2.

The president announced a sweeping 10% tariff on all imported goods from America's trading partners, in addition to much higher "reciprocal tariffs" on goods from specific countries that have large trade surpluses with the U.S. The reciprocal tariffs have been paused for 90 days (except those on Chinese goods) pending negotiations, but investors are still concerned about a potential economic slowdown, hence the stock market sell-off.

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 »

But this isn't the first time President Trump has ventured down this policy path, and history suggests the stock market is likely to recover in the long run. The Vanguard S&P 500 ETF (NYSEMKT: VOO) is an exchange-traded fund (ETF) which directly tracks the performance of the S&P 500 -- here's why investors might want to buy it on the dip.

Image source: Getty Images.

A diversified, low-cost index fund suitable for most investors

Companies have to meet a strict criteria to gain entry into the S&P 500. For example, the sum of their earnings must be positive over the most recent four quarters, and they must have a market capitalization of at least $20.5 billion. But ticking all the boxes isn't always enough, because inclusion is at the discretion of a special committee that meets once per quarter to rebalance the index.

Although 11 different economic sectors are represented in the S&P 500, the information technology sector alone makes up 29.3% of the total value of the index. It's home to the world's three largest companies: Apple, Microsoft, and Nvidia, which have a combined market capitalization of $8.3 trillion. They are likely to continue creating value for investors long into the future as they battle for leadership in different segments of the artificial intelligence (AI) boom.

The financial sector is the second-biggest component of the S&P 500, representing 14.7% of its total value. It includes investment banking giants like JPMorgan Chase and Goldman Sachs, in addition to Berkshire Hathaway, which is the $1 trillion holding company managed by legendary investor Warren Buffett.

Healthcare is the third-largest sector, with a 10.9% weighting, followed by consumer discretionary at 10.2%. The latter is home to giants like McDonald's, Home Depot, Amazon, and Tesla.

Vanguard isn't the only firm that offers an S&P 500 ETF -- investors can also buy State Street's SPDR S&P 500 ETF Trust, for example, which holds exactly the same stocks. But the Vanguard S&P 500 ETF is among the cheapest with an expense ratio of just 0.03%, which is much lower than the industry average of 0.75% (according to Vanguard).

That means a $10,000 investment would incur just $3 in fees each year, instead of $75 (on average) for competing funds, so investors get to pocket significantly more of their gains over the long run.

A stellar track record of performance

The S&P 500 might be down 12.5% from its all-time high right now, but history is proof that corrections are a normal part of the investing journey. According to Capital Group, declines of 10% or more happen once every two-and-a-half years (on average), so they are simply the price we pay for an opportunity to earn much higher returns over the long term compared to sitting on cash or other risk-free assets.

On that note, the S&P 500 has delivered a compound annual return of 10.3% since it was established in 1957, even after factoring in every sell-off, correction, and even bear market. The table below displays how much investors could earn over the long run by parking $10,000 in the index compared to holding cash:

Calculations by author.

Past crashes in the S&P 500 were triggered by a variety of economic shocks. There was the dotcom internet crash in the early 2000s, followed by the Global Financial Crisis in 2008, and then the COVID-19 pandemic in 2020.

But back in 2018, President Trump imposed five sets of tariffs on America's trading partners, covering around 12.6% of the country's total imports. The move sparked fears of a global trade war which sent the S&P 500 plunging by as much as 19.8% that year, so investors who were around back then might be feeling a sense of déjà vu.

But over time, America's trading partners came to the table for negotiations which led to fairer deals, and even exemptions from the levies in some cases. As a result, the S&P 500 bounced back with a vengeance in 2019, soaring by a whopping 31.5%. Since we know the Trump administration is currently trying to strike trade deals with Japan, Europe, and China, I wouldn't be surprised if the worst of the decline in the S&P 500 is over.

As a result, the Vanguard S&P 500 ETF could be a great buy during the correction, especially for investors who plan to hold for the long term.

Should you invest $1,000 in Vanguard S&P 500 ETF right now?

Before you buy stock in Vanguard S&P 500 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 $591,533!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $652,319!*

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*Stock Advisor returns as of April 21, 2025

JPMorgan Chase is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Anthony Di Pizio has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Apple, Berkshire Hathaway, Goldman Sachs Group, Home Depot, JPMorgan Chase, Microsoft, Nvidia, Tesla, and Vanguard S&P 500 ETF. 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.