Key Points

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

• Several large tech stocks reported strong earnings last week.

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

• 10 stocks we like better than Nvidia ›

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

Winning with AI

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

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

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

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

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

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

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

Driving AI

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

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

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

Before you buy stock in Nvidia, consider this:

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

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

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

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

Key Points

• Constellation's dividend yield is well above its own averages.

• Investors should look beyond the trailing P/E ratio when determining its valuation.

• 10 stocks we like better than Constellation Brands ›

Alcohol giant Constellation Brands (NYSE: STZ) has faced challenges in recent years. Although it owns distribution rights to Modelo, the best-selling beer in the U.S., concerns over tariffs and declining demand for alcohol from Gen Z have led investors to doubt the stock. Over the last five years, its returns have been flat, even when including the dividend.

However, that decline has also made its valuation more attractive, and a high-profile investment group has recently upped its stake in Constellation. Given that catalyst, is it likely to outperform the market over the next year, or should investors continue to avoid the alcohol stock?

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The state of Constellation Brands

Constellation stock looks like a desirable holding on the surface. The company owns or holds the distribution rights to many highly recognized brands, especially in the beer market. Beer makes up approximately 80% of the company's revenue, and it distributes Corona, Pacifico, and Modelo. Other brands owned by the company include Robert Mondavi wines and Casa Noble tequila.

That may have played a part in the increased investor interest from Warren Buffett's Berkshire Hathaway. Despite being a net seller of stocks in the first quarter of 2025, Berkshire increased its stake by 114%.

Buffett's team may have found opportunity among its challenges, and indeed, Constellation faces significant headwinds. Its most popular beers come from Mexico, and the threat of tariffs could reduce sales and possibly cost Modelo its market leadership.

Even more concerning are competition and consumption patterns. Alcohol companies have more competition than ever from independent breweries and distillers. Plus, alcohol consumption among Gen Z significantly lags its older counterparts, likely because of the increased prevalence of cannabis-based products. Such obstacles have likely led some investors to lose confidence in this stock.

Constellation's financials

Investors may be justified in feeling pessimistic, as net sales fell 6% yearly in Q1 of fiscal 2026 (ended May 31) to $2.5 billion. That same metric increased by slightly more than 2% annually in fiscal 2025 amid declining wine and spirits sales.

Due primarily to impairments in goodwill, intangibles, and assets held for sale, Constellation lost $375 million in fiscal Q1, down from a $392 million profit in the year-ago quarter.

Upcoming quarters point to continued struggles as it forecasts enterprise organic net-sales growth between -2% and 1% for fiscal 2026, but that includes the numbers from Svedka, a vodka brand Constellation recently sold.

With such sluggish sales, total return levels for Constellation have lagged the S&P 500 by a wide margin. Over the last year alone, the total return is down by more than 25%.

STZ Total Return Level data by YCharts.

Still, a closer look at the financials reveals the likely reason Berkshire has become increasingly interested in Constellation Brands. The goodwill and intangibles impairments temporarily left it without a price-to-earnings (P/E) ratio. However, the forward P/E ratio of 13 shows this to be a low-cost stock.

What's more, Constellation pays $4.08 per share in annual dividends. Its dividend yield of 2.4% is far above the five-year average yield of 1.5% and the S&P 500 average of 1.2%. The payout has also risen for nine consecutive years, making it likely that the annual dividend hikes will continue. That growing payout gives investors an added incentive to hold Constellation stock.

Constellation Brands in one year

Under current conditions, Constellation Brands is highly likely to deliver market-beating returns over the next year.

Admittedly, the stock is cheap for a reason in one sense, given how tariff worries and the lower interest in drinking from Gen Z weighed on net-sales growth.

Nonetheless, a closer look at the stock shows the likely reason that Buffett's team at Berkshire continues to buy. Its rising dividend offers a yield that is well above average compared to the S&P 500 and its past returns. Moreover, the forward P/E ratio, which doesn't include the asset impairments from the trailing 12 months, is 13, a level that likely factors in the company's challenges.

Thus, investors should profit from an above-average dividend yield, a probable payout hike, and a high likelihood that the stock price will begin to recover as more investors follow Berkshire's lead.

Should you invest $1,000 in Constellation Brands right now?

Before you buy stock in Constellation Brands, 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 Constellation Brands wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Will Healy has positions in Berkshire Hathaway. The Motley Fool has positions in and recommends Berkshire Hathaway. The Motley Fool recommends Constellation Brands. The Motley Fool has a disclosure policy.

Key Points

• The company's sales and earnings are growing at a healthy clip.

• Costco's business is nearly recession-proof and has a high membership renewal rate of 93%.

• As the company expands its store locations, Costco has the potential to grow its memberships.

• 10 stocks we like better than Costco Wholesale ›

Costco Wholesale (NASDAQ: COST) has been very successful at building a strong brand that continues to resonate with its customers. Whether people are looking for a good deal on electronics, shopping for back-to-school clothes, or buying groceries, Costco's discount warehouses are a popular destination.

That's made Costco's stock quite popular among investors. The company's share price is up 178% over the past three years, easily outpacing the S&P 500's gains.

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

But is the stock still a good buy right now? Here are a few reasons why Costco should be on your buy list in 2025.

1. Costco has strong sales and earnings

Many companies are experiencing big share price gains right now, but some of them don't have the revenue and earnings to back up their stock growth. That's not true for Costco.

The company's sales rose 8% in the third quarter to nearly $62 billion, and earnings jumped to $4.28 per share, a 13% increase from the year-ago quarter. Costco's also experiencing strong growth from its e-commerce business, which grew by 16% in the first 12 weeks of the year.

The result is a retailer that's very profitable and is on track for more growth. Analysts' consensus estimate for Costco's 2025 earnings is about $18 per share, which would be a nearly 12% increase from 2024.

2. Costco is recession-proof

OK, fine, no company is 100% recession-proof, but Costco is certainly recession-resilient. One of the reasons it can weather a recession, or economic downturn, well is that its members are loyal. The company enjoys membership renewal rates of 93% in both the U.S. and Canada.

When customers need to pinch pennies, Costco saves them money. A recent study found that buying groceries at Costco was 9.5% cheaper than at a comparable Walmart. Costco CEO Ron Vachris emphasized the value its Kirkland Signature brand brings to customers, saying on the Q3 earnings call:

"In times of consumer uncertainty, our Kirkland Signature brand is uniquely positioned to provide our members with great quality and great values. And during the third quarter, sales of Kirkland Signature items again outpaced our overall sales growth, with our KS sales penetration up approximately 50 basis points year-over-year."

What's more, an estimated one-third of Costco's members have a household income above $100,000. That gives the company a sizable advantage over some of its retail competitors, and it's a good indicator that even if tough economic times are around the corner, Costco members will likely stick around.

3. The company continues to open stores

While some retailers are concerned about increasing their footprint, Costco's sales and earnings success are giving it the confidence to build more stores. The company will open 27 new locations this year alone, giving it 914 warehouses worldwide.

More stores will likely mean more membership growth. That's important for the company because it makes the majority of its money from membership fees, which essentially have a 100% profit margin, with each new store potentially bringing thousands of new memberships.

Just keep this in mind about Costco stock

It's worth mentioning that Costco stock isn't exactly cheap right now. The company's shares have a price-to-earnings (P/E) ratio of 54, which is pricier compared to Walmart's P/E ratio of 42.

That doesn't mean the stock should be avoided, but investors should know they're paying a premium for it right now. However, with sales and earnings rising, high membership loyalty, and expanding store locations, Costco is well-positioned to continue growing in the years ahead.

Should you invest $1,000 in Costco Wholesale right now?

Before you buy stock in Costco Wholesale, 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 Costco Wholesale wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Costco Wholesale and Walmart. The Motley Fool has a disclosure policy.

Key Points

• This popular ETF has heavy exposure to some of artificial intelligence (AI)’s biggest beneficiaries.

• It's hard to argue with the more than fivefold total return in the past decade.

• Gaining broad diversification to the AI revolution gives investors peace of mind.

• 10 stocks we like better than Invesco QQQ Trust ›

You've become familiar with the artificial intelligence (AI) boom by now. Companies are investing huge amounts of capital to build out the infrastructure to power AI models. Users continue to navigate to chatbots for information. And investors want to find ways to make money from this trend.

One option is to choose individual stocks. However, this is time-consuming, and it may require skills that you simply don't possess.

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 »

Another, easier path is to find an exchange-traded fund (ETF) to put some money in. This passive approach can provide diversified exposure to the most powerful secular theme in recent years.

Here's the best AI ETF to invest $1,000 in right now.

Know what you own

The Invesco QQQ Trust (NASDAQ: QQQ) is a wonderful choice for investors who want to bet on AI. This ETF tracks the performance of the Nasdaq-100, which contains the 100 biggest nonfinancial companies that trade on the Nasdaq exchange. It's a more concentrated index than the S&P 500 (SNPINDEX: ^GSPC).

It's critical for investors to understand what exactly they'd be owning if they add the Invesco QQQ Trust to their portfolios. To be clear, this ETF provides a lot of exposure to the AI trend. A quick look at the top positions will prove this point.

The largest holding is Nvidia, which commands 10.2% of the ETF. There has been no greater beneficiary of all the AI spending happening than this business, which provides the graphics-processing units that power AI model training. Nvidia shares are up a whopping 1,490% in the past five years (as of Aug. 5).

Additionally, Microsoft, Amazon, and Alphabet combined make up 19.5% of the Invesco QQQ Trust. These three businesses operate the largest cloud computing platforms in the world. They're helping build out the infrastructure layer for other companies to develop their own AI applications.

Besides AI, the Invesco QQQ Trust gives investors exposure to other secular trends shaping our economy. Tech-driven themes like e-commerce, digital payments, digital advertising, and streaming entertainment will also have an impact on this ETF's performance as we look ahead.

Stellar performance at a cheap price

In the past 10 years, the Invesco QQQ Trust has generated a total return of 447%. On an annualized basis, this translates to a superb 18.5% gain. A $1,000 investment in August 2015 would be worth $5,470 today. This performance is well ahead of what investors would have achieved had they bought an ETF that tracks the S&P 500, which had a total return of 261% in the last 10 years.

It's important to compare the Invesco QQQ Trust to a well-known ETF product that has grown in popularity in the past several years. The Ark Innovation ETF, run by famed investor Cathie Wood, focuses on "disruptive innovation." Like the Invesco QQQ Trust, it emphasizes betting on big tech trends.

But in the last 10 years, it has significantly underperformed the QQQ. And even worse, its expense ratio of 0.75% is nearly four times that of the Invesco QQQ Trust's 0.20%. This is very difficult to overlook, and it speaks to the allure of putting money to work in a passive investment vehicle.

While the past decade's return has been spectacular, it's impossible to know what the future will hold. However, it's a smart idea to consider investing $1,000 in the QQQ today. As the AI revolution plays out, investors will have peace of mind knowing that they own the companies that have been, and will continue to be, direct beneficiaries of this game-changing technology.

Should you invest $1,000 in Invesco QQQ Trust right now?

Before you buy stock in Invesco QQQ Trust, 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 Invesco QQQ Trust wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Neil Patel has positions in Invesco QQQ Trust. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• The Vanguard Dividend Appreciation ETF isn’t the highest-paying dividend ETF.

• It focuses on companies that are expected to grow their dividends over time.

• The portfolio is a great combination of growth and income that long-term investors should pay attention to.

• 10 stocks we like better than Vanguard Dividend Appreciation ETF ›

With a roughly 1.7% yield as of this writing, the Vanguard Dividend Appreciation ETF (NYSEMKT: VIG) isn't exactly the highest-paying dividend ETF. Far from it.

However, the point of this ETF isn't to generate current income. Instead, it invests in an index of stocks that are likely to consistently raise their dividends over time, creating a growing income stream.

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 »

Why long-term investors should consider the Vanguard Dividend Appreciation ETF

Specifically, the Vanguard Dividend Appreciation ETF tracks the S&P U.S. Dividend Growers Index, which consists of large-cap stocks that have an established track record of growing their dividends every year. It is a weighted index, meaning that certain stocks make up more of the assets than others, and there are 337 stocks altogether.

Like most Vanguard index funds, this one has an extremely low fee structure with an expense ratio of 0.05%, which means that for every $10,000 in assets, your annual investment costs will be just $5. To be clear, this isn't a fee you have to pay -- it will simply be reflected in the performance over time.

Because it isn't focused on stocks with a high current yield, it has more exposure to fast-growing companies than most dividend ETFs. Just to name one example, the top holding of the Vanguard Dividend Appreciation ETF is Broadcom (NASDAQ: AVGO), which has a dividend yield of only about 1% today, but has increased its payout by 82% over the past five years alone. Microsoft (NASDAQ: MSFT), with its 23-year streak of dividend increases, is the No. 2 holding.

The point is that although stocks like these don't have the highest dividend yields today, they could pay much more in five years, 10 years, 20 years, and beyond. If you're still a decade or more away from relying on your stock portfolio for income, the Vanguard Dividend Appreciation ETF can help you set up a future income stream without sacrificing near-term growth potential.

Should you invest $1,000 in Vanguard Dividend Appreciation ETF right now?

Before you buy stock in Vanguard Dividend Appreciation ETF, 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 Vanguard Dividend Appreciation ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Matt Frankel has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft and Vanguard Dividend Appreciation 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.

Key Points

• Lemonade reported excellent second-quarter earnings that handily beat expectations.

• Not only is growth accelerating, but Lemonade's loss ratio continues to improve.

• If management can keep executing on the growth strategy, a $100 price tag isn't out of the question.

• 10 stocks we like better than Lemonade ›

Lemonade (NYSE: LMND) recently popped by about 25% after reporting its second-quarter results. The insurance disruptor reported better-than-expected revenue and earnings, raised its guidance, and is doing a great job of becoming more profitable. It is doing an excellent job of underwriting, and to put it mildly, the relatively new car insurance product is gaining serious traction.

However, with the stock close to a multiyear high, could Lemonade keep climbing? Here's a rundown of how the business is doing and why I think there's a realistic possibility the stock could double to $100 in the not-too-distant future.

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 »

Lemonade's excellent growth

A glance at Lemonade's second-quarter results shows why the stock jumped higher. In-force premium increased by 29% year over year to $1.08 billion and represented the seventh consecutive quarter of accelerating growth. The insurance company now has nearly 2.7 million customers, 24% more than a year ago.

Profitability is clearly moving in the right direction. Lemonade produced a $6 million positive operating cash flow compared with a $12 million loss a year ago. Both revenue and earnings per share came in better than analysts had expected, and gross profit more than doubled on a year-over-year basis.

The company's most exciting future growth vertical (Lemonade Car) is showing impressive progress, with in-force premium up by 12% sequentially and a 13-percentage-point improvement in loss ratio compared with a year ago. Plus, Lemonade's European business has emerged as a high-potential growth engine, with in-force premium roughly tripling year over year.

Starting to look like a great insurance company

My biggest complaint about Lemonade throughout most of its publicly traded history had been that the company wasn't doing a great job of underwriting. Loss ratios weren't anywhere near management's stated 75% target for a long time, and it seemed that every time a natural disaster happened, it completely derailed any progress that had been made.

However, over the past two years, the company has made tremendous progress in this area. Of course, there is some seasonality that is to be expected in the insurance business (certain disasters tend to happen in certain seasons), but on a trailing-12-month basis, the trend is clear. In fact, over the past four quarters, Lemonade's gross loss ratio is significantly below where management hoped to get it.

Quarter	Trailing-12-Month Gross Loss Ratio
Q3 2023	88%
Q4 2023	85%
Q1 2024	83%
Q2 2024	79%
Q3 2024	77%
Q4 2024	73%
Q1 2025	73%
Q2 2025	70%

Data source: Lemonade.

Could Lemonade stock reach $100?

As of this writing, Lemonade trades for right around $50 per share, which is just below a three-year high. The last time the stock had a price tag this high was in late 2021 when interest rates were still at near-zero levels.

To be perfectly clear, even though Lemonade is well below its all-time high (which was about $188 in early 2021), it is a much stronger business today. And the recent gains are well deserved.

For Lemonade to reach $100 per share implies a market cap of about $7.3 billion. While I don't necessarily think it will happen right away, if Lemonade can keep its growth going, produce strong underwriting numbers (even when natural disasters happen), and keep overall profitability heading in the right direction, it's certainly possible. After all, the market opportunity is simply massive (especially in auto insurance), and strong momentum could lead to strong stock performance.

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

Before you buy stock in Lemonade, 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 Lemonade wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Matt Frankel has positions in Lemonade. The Motley Fool has positions in and recommends Lemonade. The Motley Fool has a disclosure policy.

Key Points

• One of the companies discussed in this article is using AI to win a bigger share of the lucrative digital advertising market.

• The other company in focus in this piece is enabling the AI revolution through its semiconductor manufacturing equipment, and it seems well-positioned to accelerate its growth.

• 10 stocks we like better than Meta Platforms ›

Artificial intelligence (AI) is projected to have a profound impact on the global economy in the long run by driving up productivity levels, spurring customers and businesses to spend money on AI-related applications. According to market research firm IDC, AI could account for 3.5%, or almost $20 trillion, of the global gross domestic product (GDP) by the end of the decade.

This explains why investors have been betting big on AI stocks over the past three years, and that's why many of the names benefiting from the rapid adoption of this technology are now trading at expensive multiples. Hardware giants such as Nvidia and Broadcom sport rich earnings multiples, while software specialists such as Palantir and Snowflake are also expensive.

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

However, if you have missed the AI-fueled rally in shares of the above-mentioned companies in the past year, it would be a good time to take a closer look at Meta Platforms (NASDAQ: META) and Lam Research (NASDAQ: LRCX). These companies are making the most of the global AI rollout, and importantly, they are trading at attractive multiples right now.

Let's look at the reasons why buying these two AI stocks right now could turn out to be a smart long-term move.

1. Meta Platforms

AI is turning out to be a nice catalyst for digital advertising giant Meta Platforms, which has been offering its AI-powered advertising tools to advertisers and brands to improve audience targeting and reduce costs simultaneously. On the company's latest earnings conference call, management pointed out that AI tools have led to a 5% jump in ad conversions on Instagram, along with a 3% improvement on Facebook.

Moreover, Meta's users are now spending more time on its apps thanks to AI-powered content recommendations. The time users spent on Facebook and Instagram increased by 5% and 6%, respectively, in the previous quarter. These factors explain why Meta reported a solid increase of 22%, to $47.5 billion, in its Q2 revenue. Its bottom-line growth was even better, with adjusted earnings per share jumping by 38% year over year to $7.14 per share.

The numbers crushed Wall Street's expectations, fueling a big jump in Meta's stock price following the release of its results on July 30. Meta benefited from a 9% year-over-year jump in the average price per ad served during the quarter. Also, the AI-driven improvement in user engagement led to an 11% increase in ad impressions delivered by the company in the previous quarter.

Additionally, more advertisers on Meta's platform are now using its generative AI ad tools to create and optimize the performance of their campaigns. Meta says that almost 2 million advertisers are now using its AI video generation tools, while the adoption of its text generation tools is also improving. Looking forward, Meta's AI ad tools are likely to be adopted by more advertisers, as the company reports they significantly boost advertising returns.

A study conducted by the company earlier this year revealed that its AI advertising tools are delivering a "22% improvement in return on ad spend for advertisers." It won't be surprising to see advertisers funneling those savings back into Meta's advertising solutions to reach a bigger audience, thereby leading to further growth in the social media giant's revenue and earnings.

As such, it is easy to see why analysts have increased their earnings growth expectations for Meta.

META EPS Estimates for Current Fiscal Year data by YCharts. EPS = earnings per share.

The best part is that investors can buy this tech stock at an extremely attractive 27 times earnings, which is lower than the tech-laden Nasdaq-100 index's earnings multiple of almost 33. Buying Meta at this valuation looks like a no-brainer, as the company can gain a bigger share of the digital ad market thanks to the AI-powered gains it is delivering to advertisers.

2. Lam Research

Semiconductors are powering the AI revolution. Complex chip systems capable of tackling huge workloads are necessary to train and deploy AI models in data centers. This is why companies such as Nvidia, Broadcom, AMD, and Taiwan Semiconductor Manufacturing Company (TSMC) have seen healthy growth in their revenue and earnings in the past couple of years.

However, the chips that the companies mentioned above design and fabricate wouldn't have been possible without the semiconductor manufacturing equipment sold by the likes of Lam Research. The company sells wafer and fabrication equipment (WFE) to foundries such as TSMC and Intel and to memory manufacturers like Samsung, Micron, and SK Hynix.

These companies have been increasing their capital expenditure budgets to make more AI-focused chips. Unsurprisingly, industry association SEMI is projecting a 6.2% increase in WFE spending in 2025, followed by a bigger jump of 10.2% in 2026. It is worth noting that SEMI increased its WFE spending guidance last month.

The good part is that Lam is already benefiting from the improved spending on semiconductor equipment. The company released its fiscal 2025 results on July 30. It reported a 23% year-over-year increase in annual revenue to $18.4 billion. Its diluted earnings per share increased at a faster pace of 43% to $4.15 per share last fiscal year.

The stronger WFE spending forecast going forward explains why Lam's outlook was a solid one. It is expecting $5.2 billion in revenue in the current quarter, which is well ahead of the $4.63 billion consensus estimate. That would translate into a year-over-year increase of 25% in its top line. Lam seems capable of sustaining this healthy momentum throughout the year on the back of an increase in AI-focused semiconductor capacity.

As such, don't be surprised to see Lam's revenue growth in the current fiscal year exceeding the 8% increase that analysts are projecting. The following chart tells us that Wall Street analysts expect Lam to clock healthy double-digit earnings growth rates. That looks reasonable, considering the 24% annual growth that the AI chip market is expected to clock over the next five years, which should ideally lead to more investments in semiconductor manufacturing capacity.

LRCX EPS Estimates for Current Fiscal Year data by YCharts. EPS = earnings per share.

In the end, there is a possibility that Lam will grow at a stronger pace than Wall Street's expectations in the long run, and this should pave the way for more upside in this AI stock. With Lam trading at just 23 times trailing earnings, investors are getting a great deal on this stock right now, and they may not want to miss it, considering the AI-fueled gains it could deliver.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Intel, Lam Research, Meta Platforms, Nvidia, Palantir Technologies, Snowflake, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom and recommends the following options: short August 2025 $24 calls on Intel. The Motley Fool has a disclosure policy.

Key Points

• Wall Street found things to be disappointed about in Amazon's quarterly report despite a phenomenal quarter, but it's already overcorrected.

• This growing drive-thru chain has an edge that spells excellent long-term prospects.

• This restaurant chain has had a rough year, but a recovery could be around the corner.

• 10 stocks we like better than Amazon ›

Investors should never let market volatility scare them out of a good investment. Stocks of growing companies will usually experience greater volatility than the market average. But investors that ignore those fluctuations and keep regularly buying shares of growing companies will come out ahead over the long run.

Three fool.com contributors see great deals right now for fallen growth stocks like Amazon (NASDAQ: AMZN), Dutch Bros (NYSE: BROS), and Sweetgreen (NYSE: SG). Here's why they believe these stocks are solid investments for a long-term investor.

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

Amazon: Down 8.5%

Jennifer Saibil (Amazon): Amazon reported spectacular results for the 2025 second quarter last week, but its stock dropped on the news. While there was a lot to be excited about, the market seemed to home in on certain qualities that didn't fully meet its expectations, and that has created an excellent opportunity for investors who haven't pressed the buy button yet.

Sales growth was strong at 13% year over year, beating expectations. Let's not forget that Amazon is the second-largest company in the U.S. by sales, and to be able to still deliver double-digit sales growth is an impressive feat. It reached $167.7 billion in sales, ahead of Walmart's $165.6 billion in sales in its most recent quarter, and Amazon is on track to become the largest company in the U.S. by sales.

Operating income surged to $19.2 billion, up from $14.7 billion last year, easily topping its guidance. But that wasn't enough for Wall Street.

The market seems to have been spooked by the outlook for operating margin coming in slightly below expectations. Management is shooting for $15.5 billion to $20.5 billion in third-quarter operating income, and Wall Street is expecting $19.5 billion.

It also wasn't thrilled with the performance of Amazon Web Services (AWS), Amazon's cloud business. AWS sales were up 17.5% year over year in the quarter, but that was nowhere near the growth of its two biggest rivals, Microsoft's Azure and Alphabet, which increased 39% and 32%. However, AWS is much bigger than both of them, and in dollar amounts, its increase surpassed them.

CEO Andy Jassy made some remarks about the artificial intelligence (AI) business that may have sounded worse than he expected. He explained that it couldn't meet demand right now, which is why it's investing heavily in the platform. While that could lead clients to find somewhere else to meet their demand, the high demand implied should be great for Amazon down the line, as long as it can build out fast enough to keep it going.

Amazon stock is down 8.5% from its highs, already making its way back up as investors recognize the opportunity to buy on the dip. This was an overcorrection, and now it's a great chance to buy before it reaches new highs.

Dutch Bros: Down 33%

John Ballard (Dutch Bros): Dutch Bros has all the ingredients of a growth stock set up to deliver multi-bagger returns for patient shareholders. It's tapping into growing demand for specialty beverages. The business was founded in 1992, but it's still early in its nationwide U.S. expansion plans.

Analysts expect revenue to grow at a compound annual rate of 23% over the next few years. This is in line with the company's current pace of shop openings and same-shop sales trends, which have hovered around the low to mid-single-digit level over the last few years. It currently has over 1,000 shops in 18 states, but management sees tremendous growth potential supporting as many as 7,000 locations over the long term.

Dutch Bros is outperforming Starbucks, which has experienced problems growing sales recently. One reason for Dutch Bros' success is that it likes to hire shop managers from within the company. Even some of the company's franchise partners started out working for Dutch Bros as "broistas." This can help promote consistency throughout the company's shops, which is an important quality to look for in any restaurant chain.

Another quality that leads me to have high conviction in the future of this brand is that it is very popular among Gen Z. Dutch Bros offers a fun-loving atmosphere and a focus on the drive-thru experience, and it goes out of its way to delight customers with limited time offerings, such as the recent rubber duck giveaway with every purchase. The little things can go a long way in winning loyal customers, and Dutch Bros seems to understand this well.

The stock is currently down about 33% from its 52-week high. I would consider taking advantage of the dip and adding shares, especially for investors who are interested in finding promising new restaurant brands in the early stages of expansion.

Sweetgreen: Down 77%

Jeremy Bowman (Sweetgreen): Restaurant stocks have struggled this year as a combination of fears about tariffs and weak consumer discretionary spending have weighed on both business results and stock performance.

Sweetgreen, the promising fast-casual salad chain, has been one of the worst-performing stocks in the industry. The stock is now down 61% year to date, and is off 77% from its all-time high shortly after the company went public in late 2021.

It's understandable why Sweetgreen is down based on its recent results. In its first quarter, same-store sales declined 3.1%, and revenue rose just 5.4%. Sweetgreen has also been unprofitable throughout its history.

However, the chain is still small with roughly 250 locations, and it is popular as its restaurants generate average sales of $2.9 million. That puts it on par with Chipotle, one of the most successful restaurant stocks in history.

Sweetgreen has also been unprofitable in part because it's invested in its Infinite Kitchen program, an automated system that measures and dispenses ingredients and helps prep its salad bowls. That innovation seems likely to pay off over the long run. Management has said that restaurants with the Infinite Kitchen generate higher sales, as it helps increase throughput and customer service, in addition to saving on labor costs.

Sweetgreen's comparisons are expected to get easier in the second half of the year, which could turn comparable sales positive. The company expects to open at least 1,000 stores over the long term, meaning it has a long growth runway ahead.

Investors who take advantage of the discount are likely to be rewarded.

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

Before you buy stock in Amazon, consider this:

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

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Jennifer Saibil has positions in Walmart. Jeremy Bowman has positions in Amazon, Chipotle Mexican Grill, Starbucks, and Sweetgreen. John Ballard has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Chipotle Mexican Grill, Microsoft, Starbucks, and Walmart. The Motley Fool recommends Dutch Bros and Sweetgreen and recommends the following options: long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short September 2025 $60 calls on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.

Key Points

• Amazon is leveraging growth from numerous key sources, including its booming cloud business.

• Reddit is leaning into its flagship ad business and newer sources of growth to drive profits forward.

• Joby Aviation could revolutionize the eVTOL space, and is getting ever closer to commercialization.

• 10 stocks we like better than Amazon ›

While $1 million may be a comfortable retirement goal for some investors, it's essential to personalize your savings target based on your specific circumstances and objectives for your life in your golden years. Even as there are multiple ways of shoring up your financial life to plan for a more secure future in retirement, building up a profitable stock portfolio is one key component you shouldn't overlook.

No investment, regardless of how quality the underlying business, is totally impervious to the ups and downs of the market. However, if you have a larger amount such as $250,000 to put to work into fantastic businesses, it isn't a far stretch of the imagination that you could turn that investment capital into $1 million in roughly a decade. In fact, with a starting amount of $250,000, that would require an annualized return of roughly 15%, which is just a bit higher than the average annual S&P 500 10-year return, including dividends (approximately 13%).

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

As you look to grow your personal nest egg to or above $1 million, here are three stocks to consider for your basket of buys that could warrant part or all of a $250,000 investment. Alternatively, you could distribute that $250,000 investment capital equally across these three stocks. Diversification is key for any stock market portfolio, so you can capitalize on the maximum sources of growth in your portfolio in a variety of stock market environments.

1. Amazon

Amazon (NASDAQ: AMZN) remains a dominant force in several key markets, including online retail as well as cloud computing (AWS), and is bolstering a growing presence in newer arenas like digital advertising. Notably, AWS is the leading cloud provider and a major source of profitability for Amazon. Despite some concerns about slowing growth compared to competitors, AWS revenue continues to increase and benefits from the rising demand for cloud infrastructure and artificial intelligence (AI) capabilities.

Amazon's advertising business is expanding rapidly too, fueled by its vast customer base and integration across its ecosystem (e.g., Prime Video, Twitch). Even though this segment still represents a relatively small portion of the company's overall net sales, this is the company's fastest-growing segment and could become increasingly important for the company's overall financial health in the next decade. Of course, Amazon remains the largest online retailer globally and accounts for about 40% of U.S. retail e-commerce sales alone.

In Amazon's Q2 2025, the company delivered a 13% year-over-year increase in net sales to $167.7 billion, while operating income rose 31% to $19.2 billion. AWS saw a 17.5% year-over-year increase in revenue to $30.9 billion. While Amazon's North America segment saw an 11% increase in sales to $100.1 billion, the International segment delivered a 16% increase to $36.8 billion.

Another bright spot was Amazon's advertising business, which climbed 23% year over year to $15.7 billion. Diluted earnings per share (EPS) were $1.68, up 33% year over year.

AWS remains a dominant force in the rapidly expanding cloud computing market. This market is projected for significant growth that could reach nearly $2 trillion by 2030 globally, driven by technologies like AI and machine learning. AWS is investing heavily in AI infrastructure, with planned capital expenditures exceeding $100 billion in 2025.

This positions AWS to expand rapidly based on the increasing adoption of AI workloads and cloud-based AI solutions. It's conceivable that Amazon's role in the forefront of AI innovation, its flagship e-commerce business, and advertising presence are among the myriad of factors that could drive multibagger returns for shareholders over the next decade and well beyond.

2. Reddit

Reddit (NYSE: RDDT) is often called the "front page of the internet." As a popular social news and discussion website where users share links, posts, and images, which are then voted on and commented on within specific communities called subreddits, Reddit is known for its vast array of forums, covering almost every topic imaginable. From niche interests to general news and entertainment, the platform is a place for Redditors around the globe to converge and participate in all manner of discussion.

Reddit boasts a highly engaged global user base, with over 110.4 million daily active users as of Q2 2025. User growth has been particularly strong, with daily active unique visitors climbing 21% year over year in Q2. Reddit's efforts to expand internationally with machine translation, which is now available in 23 languages, are widening the potential reach of the platform. Advertising forms the core of Reddit's revenue at this point, generating $465 million in Q2 2025, up 84% year over year and accounting for 93% of the total revenue.

Reddit's ability to offer advertisers highly targeted audiences within specific interest-based subreddits provides a compelling value proposition, which continues to lead to increased advertiser adoption and revenue growth. Beyond advertising, Reddit is actively exploring new revenue sources, like data licensing.

The platform's vast archive of user-generated content is a valuable asset for training AI models, and Reddit has successfully forged partnerships with major players like Alphabet's Google and OpenAI to license this data. Data licensing generated $35 million in revenue for Reddit in Q2 2025, a 24% increase from one year ago.

Reddit's growing user base, robust advertising business, and valuable data assets paint a picture of a business still in the early stages of its growth story despite a company history that already spans two decades. The company's recent turn to profitability also bodes well for its financial health, bolstered by its asset-light, sticky business. All these factors could drive considerable financial growth and lead to share price appreciation in the next decade-plus.

3. Joby Aviation

While the previous two picks on this list are established businesses with well-outlined revenue and profit streams, Joby Aviation (NYSE: JOBY) definitely falls into the category of a high-risk and potentially very high-reward stock. Joby is still pre-revenue and burning significant cash, but the future for this company could be bright indeed if it achieves its long-term business ambitions.

The company is focused on manufacturing and commercializing all-electric vertical takeoff and landing (eVTOL) aircraft for air taxi services. Joby is currently developing a four-passenger, piloted aircraft designed for vertical takeoff and landing, similar to a helicopter, but transitioning to forward flight like a plane. It plans to generate revenue through multiple avenues, including operating its own air taxi service, selling aircraft to other operators, and potentially offering transportation services to government agencies.

As both an operator and a manufacturer, Joby could take a vertically integrated approach to urban air mobility. Joby already partnered with various companies, including Toyota, Delta, and Uber, to develop and deploy its air taxi service. Joby also has a significant contract with the Air Force, under which it will deliver and operate up to nine of its eVTOL aircraft to this and other federal agencies.

As of mid-2025, the company has entered the final stage for certification by the Federal Aviation Administration (FAA) for commercial passenger operations. Joby also just acquired Blade Air Mobility's passenger business to accelerate commercialization of its eVTOL aircraft, a move that provides immediate access to Blade's existing network of vertiports, customer base, and operational expertise. Blade's existing customer base, which included over 50,000 passengers in 2024, also offers a significant head start for Joby in building demand for its eVTOL services.

Joby is a leading contender in the eVTOL space, which is projected to become a trillion-dollar industry. Being an early mover with a strong technology and regulatory lead could translate to significant market share and profitability, which could also propel shares to soar a lot higher in the coming decade and beyond.

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

Before you buy stock in Amazon, consider this:

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

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Rachel Warren has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, and Uber Technologies. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

Key Points

• Arm Holdings stock dipped substantially after the release of its latest quarterly results.

• The company is investing heavily in R&D to make the most of promising growth opportunities.

• Its stock is expensive right now, but could justify its valuation by clocking strong earnings growth.

• 10 stocks we like better than Arm Holdings ›

British technology company Arm Holdings (NASDAQ: ARM) has witnessed a remarkable surge in its stock price since April 7, when its shares were trading at a 52-week low, driven by the broader rally in technology stocks.

However, its red-hot rally came to a grinding halt following the release of the company's fiscal 2026 first-quarter results (for the three months ended June 30) on July 30. Arm stock fell more than 13% in a single session. Investors weren't impressed with the company's in-line results and weaker-than-expected guidance, as they were expecting stronger numbers from the company to justify its expensive valuation.

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 »

Let's take a closer look at Arm's numbers and check if the recent slide could be a buying opportunity for investors looking to add a technology stock to their portfolios.

Arm's aggressive spending is taking a toll on its bottom line

Arm Holdings gets its revenue from selling licenses for its chip architecture. Semiconductor companies use this architecture to design and develop chips that go into various applications, ranging from smartphones to personal computers (PCs) to data centers. Arm also gets a royalty from the sale of each chip that's manufactured using its architecture and intellectual property (IP).

The company's revenue in the first quarter of its fiscal 2026 increased 12% year over year to $1.05 billion. This was driven by a solid jump of 25% in its royalty revenue, which accounted for 55% of its top line during the quarter. Arm attributed the increase in its royalty revenue to the growing adoption of its artificial intelligence (AI)-focused Armv9 architecture for manufacturing data center chips, and its compute subsystems (CSS), which are used to develop chips for custom applications.

However, the company's non-GAAP net income fell to $0.35 per share during the quarter from $0.40 per share in the year-ago period. Arm witnessed a sharp contraction in its operating margin during the quarter, which was a result of a big jump in its research and development (R&D) expenses. Specifically, Arm's R&D expenses increased by 34% on a year-over-year basis in fiscal Q1.

Arm management remarked on the company's latest earnings conference call that it will continue to invest aggressively in R&D. As pointed out by CEO Rene Haas:

We are continuing to explore the possibility of moving beyond our current platform into additional compute to subsystems, chiplets and potentially full end solutions. To ensure these opportunities are executed successfully, we have accelerated the investment into our R&D. These investments include expanding engineering delivery across multiple levels, adding to the already significant product investments we have made to date.

Arm's stance isn't surprising, since the company's architecture is now being widely used in data centers to build and deploy custom AI chips. The company says that there has been a 14x jump in the number of data center chips that are manufactured using its designs since 2021. That's not surprising, as major cloud computing companies such as Amazon, Microsoft, and Alphabet's Google are using its architecture to design custom AI silicon.

Even Nvidia has used Arm's IP to design its Grace Blackwell server processors. Smartphone giants Apple and Samsung are also Arm's customers, using the British tech giant's chip architecture to manufacture AI-capable smartphone processors. The good part is that Arm's CSS licenses are now gaining traction among customers for developing smartphone, PC, and data center chips.

Arm says that it "signed three additional CSS licenses this quarter with existing CSS customers, including two for the data center and one for PCs, more than doubling our CSS licenses from a year ago." Importantly, Arm management points out that the royalty rate of its CSS license is double that of its Armv9 architecture.

So, it's easy to see why the company is looking to push the envelope on the product development front to provide end-to-end solutions to customers to help them design advanced chips capable of tackling complex workloads. Even better, Arm's spending on R&D is bearing fruit as the company is gaining impressive share in the data center and PC processor markets. Its smartphone revenue is growing at a faster rate than the end market, thanks to the use of its IPs to manufacture processors for flagship smartphones.

However, Arm's R&D spending is going to keep its bottom line under pressure. The company's earnings estimate of $0.33 per share for the current quarter (at the midpoint of its guidance range) is lower than the $0.35 per share consensus estimate. The positive thing to note is that earnings would increase in double digits from the year-ago period's reading of $0.30 per share at the midpoint, with revenue expected to increase by more than 25%.

But then, analysts are expecting an increase of just 5% in Arm's earnings this year, which can be attributed to the investments that it is making to secure its long-term growth. That could be a problem considering its expensive valuation.

The stock is richly valued, but the long-term picture seems bright

Arm trades at an expensive 208 times earnings as of this writing. It's easy to see why investors hit the panic button following its latest quarterly report. The decline in its earnings didn't justify the rich valuation, and the single-digit earnings growth that it's expected to deliver this year doesn't help matters either.

However, Arm's forward earnings multiple of 76 is way lower than its trailing multiple. That's not surprising, as its earnings growth is expected to accelerate nicely over the next couple of years.

ARM EPS Estimates for Current Fiscal Year data by YCharts. EPS = earnings per share.

Its forward price-to-earnings (P/E) ratio based on its fiscal 2028 earnings is even lower at 49 (calculated using the earnings estimate of $2.86 per share provided in the above chart). Moreover, there is a good chance that Arm's earnings growth could eventually turn out to be better than expected, thanks to the higher royalty from its CSS licenses and the Armv9 architecture.

That's why growth investors can consider buying Arm stock on the dip. Its bottom-line pressure shouldn't last for long, thanks to the secular growth of the lucrative end markets that it's serving.

Should you invest $1,000 in Arm Holdings right now?

Before you buy stock in Arm Holdings, 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 Arm Holdings wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.

Key Points

• Space companies rushed to go public in 2020 and 2021, but many of their stocks crashed in 2022.

• The IPO market is reviving this year, and space stocks are popular again.

• Space company iRocket will take advantage of the renewed popularity of space stocks and try to go public in Q4 2025.

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

I'll say one thing for COVID-19: It sure was great for special purpose acquisition companies (SPACs). In 2020 and 2021, more than 860 separate companies conducted initial public offerings (IPOs) via reverse mergers into SPACs -- blank-check entities created and listed on the stock exchange specifically to acquire private companies and turn them public. (This was up from, for example, just one such SPAC IPO in 2003 and 10 in 2013.)

Problem is, a lot of these SPAC ideas proved half-baked. Among space stocks that went public as SPACs in those years, losses in stock prices post-IPO reached as high as 90% as early as 2022. Once burned and twice shy, investors began to shun not just SPAC companies, but space companies, too.

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 »

Until now. All of a sudden, in 2025, space stocks are red-hot again -- and momentum traders are rushing to invest in this next big thing (which was also the last big thing just a few years ago). And Wall Street is happy to take advantage of their forgetfulness.

As evidence, I present to you what looks like the first space SPAC IPO of 2025: iRocket.

Introducing iRocket

iRocket bills itself as "a next-generation reusable space rocket developer" aiming to "capture a significant share of the global launch and propulsion market" using "patented MACH-i Landing Engine technology" to create a new class of liquid-fueled reusable rockets that it calls Shockwave. Additionally, iRocket says it has expertise in solid rocket motors, which it will offer the military for use in missiles and interceptor rockets as well as using it for commercial rocket boosters.

This space start-up says it already has $1 billion in letters of intent and memoranda of understanding with several potential customers that want to launch national security and commercial satellites on its rockets. Furthermore, iRocket says it's targeting a global space economy worth $1.8 trillion over the next decade.

Up until this week, however, the number of contracts that iRocket put specific names and numbers to was considerably more modest -- one Cooperative Research and Development Agreement with the U.S. Air Force Research Laboratory worth $18 million, and another "Tactical Funding Increase" contract with the Space Force worth only $1.8 million. Both of these contracts, by the way, appear to have been signed back in 2023.

Nevertheless, with a little help from BPGC Acquisition Corp., "a special purpose acquisition company sponsored by The Hon. Wilbur Ross, the 39th U.S. Secretary of Commerce," iRocket plans to hold an IPO in the fourth quarter of 2025 to offer its stock to the public.

iRocket's SPAC IPO

iRocket values itself at $400 million pre-IPO and "before potential earnouts based on share price performance" (which will presumably accrue to BPGC and other pre-IPO investors). Helping the company reach that valuation, and helping to make the IPO a success, will be one apparently new contract iRocket just announced on Monday. Specifically, iRocket says it will provide up to 30 rockets to launch satellites for new Saudi Arabian space company SpaceBelt KSA over a period of five years -- and be paid up to $640 million for the work.

(It's unknown, however, whether SpaceBelt KSA actually has any satellites built. And iRocket does not currently have a qualified rocket to launch them.)

In an SEC 8-K filing, BPGC informs that it is a Cayman Islands company, and it's apparently not yet listed on a stock exchange. This is curious if true, because the ordinary logic behind a SPAC IPO is that it simplifies the listing process for a privately owned operating business going public by reverse-merging it into a "blank check" SPAC that doesn't actually conduct business but is already publicly traded.

Nevertheless, while some sources seem to think BPGC is publicly traded already and listed on the NYSE under ticker symbol ROSS, I can find no record of such a stock existing. Furthermore, CNBC reports the companies "intend" to list on the Nasdaq after merging -- which would appear to confirm that BPGC is not in fact already publicly traded.

This mystery is further complicated by an intricate transaction described in the 8-K, which says BPGC plans to merge with four other companies (two of which appear to be variations of iRocket), ultimately resulting in a new stock valued at $11.50 a share, or perhaps $10 with attached warrants to purchase additional shares at $11.50 each.

How much the stock actually ends up costing investors won't be known until IPO day, when the shares begin trading later this year.

Should you buy the iRocket IPO?

Which brings us to our real question today: If and when this SPAC IPO happens, should you buy iRocket stock? And my simple answer is: No.

Between the strange lack of announced contracts (up until just this week) to support iRocket's assertion that it has $1 billion in business lined up, and the overly (intentionally?) complex nature of the transaction that will bring iRocket public, this particular SPAC IPO has my Spidey senses tingling. It may all be on the up and up, but it also may not be.

Worst case, investors should lose nothing by waiting until the IPO has happened and taking a good hard look at iRocket's published financials before deciding whether to buy. If everything looks kosher at that point, by all means, go ahead and buy iRocket stock.

In the meantime, though, my advice is simply to stay away.

Where to invest $1,000 right now

When our analyst team has a stock tip, it can pay to listen. After all, Stock Advisor’s total average return is 1,047%* — a market-crushing outperformance compared to 181% for the S&P 500.

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Key Points

• V2X was formed from the merger of Vectrus and Vertex Aerospace in 2022.

• The defense stock has racked up some impressive multibillion-dollar contract wins over the last couple of years -- including one just last week.

• Analysts forecast surprisingly strong earnings growth from V2X, although it hasn't happened just yet.

• 10 stocks we like better than V2X ›

Raise your hand if you've ever heard of V2X (NYSE: VVX), the small-cap defense company formed from the merger of defense contractors Vectrus and Vertex Aerospace in 2022?

Yep. That's about what I expected. Even among investors, V2X is the farthest thing from a household name. But it's a name defense investors in particular might want to start paying attention to. Because on July 31, V2X scored a new Pentagon defense contract worth $4.3 billion -- and V2X itself costs only $1.8 billion.

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Introducing V2X

I admit, the first time this company caught my eye was on July 31, when the company's name (or rather, one of its component companies, Vertex) appeared at the very top of the list of the most valuable contracts awarded by the U.S. Department of Defense that day.

"Vertex Aerospace LLC, Madison, Mississippi, was awarded a maximum $4,322,844,989 value, indefinite-delivery/indefinite-quantity contract for the contractor operated and maintained supply service contract for the T-6 [training jet] aircraft," read the announcement, before going on to explain that V2X beat out two other bidders to win the contract, and that the $4.3 billion will be doled out over the course of the next 10 years (ending on July 31, 2034).

Further digging revealed that this isn't the only gigantic contract on V2X's plate, however. In fact, just last year, my fellow Fool Eric Volkman spotlighted a similarly significant win by V2X, when the company landed a $3.7 billion, five-year contract to provide "readiness capabilities" to the U.S. Army, by supporting the operation of training devices, simulators, and simulations.

In fact, averaging out to $740 million per year, that contract is arguably even more significant than last week's $4.3 billion win, which will be worth "only" $430 million per year over its decade duration.

"A billion here, a billion there -- pretty soon you're talking real money"

So... $4.3 billion here, and $3.7 billion there. It seems to me we're already talking about "real money" that V2X is earning off the Pentagon -- $8 billion total, won via just two contracts, over the course of just two years.

But if V2X is rolling in so much Defense Department dough, one wonders, why is it that the stock looks so seemingly cheap at a market capitalization of just $1.8 billion?

Is V2X stock cheap?

Well, let's start with sales. V2X took in $4.3 billion in revenue last year, up 9% from 2023 -- a respectable growth rate for a defense contractor, if perhaps a bit on the slow side for a small-cap defense contractor. What's more, V2X earned less than $35 million in profit on those sales.

That's a net profit margin of less than 1%. Which is to say, pretty slim.

If we apply this margin, then, to the extra $430 million a year V2X will be bringing in from its latest multibillion-dollar contract win, therefore, it's likely to boost V2X's annual earnings by less than $10 million. That's not a lot of money with which to move the needle on a $1.8 billion market capitalization.

Is V2X stock a buy?

Now, the good news is that V2X seems to be getting more profitable as its merger matures, and cost synergies between the two merged businesses, Vectrus and Vertex, work their way through the company. Over the last six months, for example, V2X earned $30.5 million, which is to say nearly as much as it earned in all of 2024. As profitability improves, analysts polled by S&P Global Market Intelligence estimate V2X might earn as much as $73 million this year, and generate $135 million in positive free cash flow.

Assuming the analysts are right, this would value V2X stock at 24 times current-year earnings, but only about 13 times current year free cash flow. That doesn't sound like a lot, but with profits only growing 9% a year, and V2X paying no dividend, it's not necessarily cheap enough to tempt me to buy the stock right now.

The big question for investors is whether V2X can continue improving its profit margin, and perhaps accelerate its earnings growth into the double digits. Many analysts believe the company can accomplish this, forecasting that per-share profits, for example, might double over the next three years -- and that free cash flow might nearly double in two.

I don't know enough about the company right now to say how likely this is, but now that I'm alerted to V2X's existence -- and impressed by its last two massive contract wins -- I'm certainly interested enough to keep following the story, and learning if V2X can deliver on these lofty predictions.

And as soon as I know the answer to that... I'll let you know, too.

Should you invest $1,000 in V2X right now?

Before you buy stock in V2X, 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 V2X wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Rich Smith 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.

Key Points

• AMD turned in mixed results, hurt by the Chinese export ban.

• With the ban expected to be lifted, this should be a temporary headwind.

• The company still has a huge opportunity in the inference market.

• 10 stocks we like better than Advanced Micro Devices ›

After being a laggard to start the year, Advanced Micro Devices (NASDAQ: AMD) has rallied strongly during the summer. However, its shares took a dip following the announcement of its second-quarter results, after earnings came in a bit light.

The stock now finds itself up about 30% year to date after the pullback, as of this writing.

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 »

Let's take a closer look to see if this decline is an opportunity to buy the stock.

Data center in focus

AMD's data center segment has been its biggest growth driver in recent quarters, but revenue rose just 14% in Q2 to $3.2 billion. The slowdown in growth largely stemmed from the company no longer being allowed to sell its MI308 graphics processing units (GPUs) in China during the quarter. This led to a year-over-year revenue decline in its artificial intelligence (AI) business. However, sales are expected to resume in the future once the U.S. government approves its export license to China.

Outside of China, the company said it saw solid progress with its MI300 and MI325 GPUs, with increasing adoption. Seven out of 10 of the top model builders and AI companies now use its GPUs. Meanwhile, AMD claimed with the launch of its MI355 GPU that it matches or exceeds the performance of Nvidia's (NASDAQ: NVDA) top B200 chip for both training and inference.

At the same time, AMD's central processing units (CPUs) continue to gain market share in the server space. Growth is also being driven by increasing demand for cloud and on-premises compute, and the investments being made in AI infrastructure.

AMD's client and gaming segment, which provides CPUs for computers and GPUs for gaming devices, saw revenue surge 69% in the quarter to $3.6 billion. The company saw strong CPU share gains during the quarter and was helped by strong sell-through for AMD-powered commercial notebooks. Meanwhile, it saw strong demand for its newly launched gaming GPUs, as well as an uptick in semi-custom chip revenue.

AMD's embedded segment, meanwhile, saw a 4% decline in revenue to $824 million. It expects sequential growth in the second half as demand improves across several key markets.

Overall, the company's revenue climbed by 32% to $7.69 billion. Adjusted earnings per share (EPS), however, plunged 30% to $0.48. Analysts were looking for EPS of $0.49 on sales of $7.42 billion, as compiled by LSEG. Note that its EPS was hurt by its $800 million inventory write-down related to Chinese export controls.

Looking ahead, AMD projected Q3 revenue to grow by 28% to $8.7 billion, plus or minus $300 million. The guidance does not include any potential revenue from MI308 shipments to China.

Should investors buy the dip?

The export restrictions on China impacted AMD's Q2 results, although given the comments from President Donald Trump, this headwind should go away in the future. With shipments to China not currently in Q3 guidance, there could be some upside if the company is allowed to begin shipping its GPUs to the country before quarter end.

Excluding China, which the company previously said would have a negative $700 million impact in Q2, its data center revenue would have grown about 39% by my calculations. That's solid, although a slowdown from Q1.

Still, AMD should have a big opportunity in the future as inference -- where it has a solid niche -- becomes a bigger part of the market. The company is also on track to introduce its M400 chip, which it is looking to compete with Nvidia's next-generation Rubin chip.

Turning to valuation, AMD stock trades at a forward price-to-earnings ratio (P/E) of 27.5 times 2026 analyst estimates. That's up significantly from where the stock traded at earlier this year, but if the company can become a meaningful player in the AI inference market, the stock could have a lot of upside in front of it.

As such, I think investors can dip a toe into the stock on its pullback.

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

Before you buy stock in Advanced Micro Devices, 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 Advanced Micro Devices wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Geoffrey Seiler has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Nvidia. The Motley Fool has a disclosure policy.

Key Points

• Palantir jumped this week after posting another massive earnings beat, topping $1 billion in revenue for the first time.

• The company also boosted its full-year guidance and signaled continued strong demand.

• Palantir's valuation demands nearly flawless execution for years to come.

• 10 stocks we like better than Palantir Technologies ›

Shares of Palantir (NASDAQ: PLTR) spiked this week, finishing up 21.2% from last Friday's close. The jump comes as the S&P 500 gained 2.4% and the Nasdaq-100 rose 3.7%. Palantir reported huge earnings earlier this week, beating Wall Street's already high expectations for the artificial intelligence (AI) juggernaut.

Palantir brought in $1 billion

It was another massive quarter for the AI darling. Palantir's second-quarter earnings showed adjusted earnings per share (EPS) of $0.16 on $1 billion in sales versus the consensus $0.14 per share on $940 million in sales.

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 »

CEO Alex Karp said there is an ongoing "efficient revolution" that will allow him to increase sales while decreasing headcount, saying that his "goal is to get 10x revenue and have 3,600 people. We now have 4,100 [people]."

The company lifted its guidance for the full year from between $3.89 billion and $3.9 billion to between $4.14 billion and $4.15 billion.

Why Palantir stock's valuation still looks risky

The company's incredible and efficient growth is undeniable, but I continue to have serious doubts about its long-term prospects. Its trailing price-to-earnings ratio (P/E) is more than 600, 10 times that of Nvidia and almost 30 times that of Alphabet. It even dwarfs Tesla, which has its own valuation issues.

The company would have to achieve near perfection for many years to justify this sort of multiple. I'm not sure it can, despite the optimism of its CEO. I would stay away from Palantir stock at this price.

Should you invest $1,000 in Palantir Technologies right now?

Before you buy stock in Palantir Technologies, 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 Palantir Technologies wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has a disclosure policy.

Key Points

• Investors looking to gain passive exposure to the market should consider buying an ETF that follows the S&P 500.

• This top ETF carries an extremely low expense ratio, which results in investors keeping more of their money over time.

• Even near record levels, it’s a smart idea to put money to work in the stock market.

• 10 stocks we like better than Vanguard S&P 500 ETF ›

The S&P 500 index has had a great run in recent memory. Since early August 2015, the benchmark has generated a total return of 261% (as of Aug. 5). Low interest rates, durable economic growth, and passive investment flows have certainly helped.

Given the impressive above-average performance of the closely watched index, investors are probably thinking about how to gain exposure. Here's what I believe is the smartest way to invest in the S&P 500 in August.

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

A look at this popular ETF

One of the best ways to invest in the S&P 500 index is to add the Vanguard S&P 500 ETF (NYSEMKT: VOO) to your portfolio. This exchange-traded fund (ETF) tracks the performance of the S&P 500, which consists of 500 large and profitable companies that trade on U.S. exchanges. This investment product is offered by Vanguard, a reputable firm in the industry with a five-decade history that manages trillions of dollars in assets.

It's important for investors in this ETF to understand what exactly they own. Yes, there are 500 different stocks. However, some of the biggest businesses have a higher weighting.

For instance, Nvidia, Microsoft, Apple, Amazon, and Meta Platforms are the top five positions. Consequently, the information technology sector has a 33.1% weighting. So, investors in the ETF should probably be bullish on key themes shaping the economy, like artificial intelligence or cloud computing.

But all 11 of the stock market's sectors are represented in the Vanguard S&P 500 ETF. This is essentially an easy method to obtain instant equity diversification in your portfolio. Investors don't need to be successful at trying to pick individual winners. They benefit from the ongoing innovation and durable growth of the American economy.

Beating the pros

Following the gains of the S&P 500, the Vanguard S&P 500 ETF has produced a total return of 260% in the past decade. This means that a $10,000 investment made a decade ago would be worth $36,000 today. This fantastic result translates to an annualized gain of 13.7%.

What's noteworthy is that this return undoubtedly outperforms the vast majority of professional money managers. These so-called experts have a terrible track record that sees them generate performance well below the benchmark.

Even better, investors who buy the Vanguard S&P 500 ETF pay an extremely low expense ratio of 0.03%. Of that hypothetical $10,000 investment, just $3 goes to Vanguard on a yearly basis. That's exactly the type of low-cost setup you should want when it comes to your investments.

Buying near record highs

As of Aug. 5, the Vanguard S&P 500 ETF trades just 1% below its peak. The market has held up well in 2025, an encouraging trend given the extreme level of macro uncertainty there has been with President Donald Trump's changing trade policies. Investors have largely brushed off any new tariff announcements, with optimism being present.

Astute investors will rightfully wonder if now is still a good time to put money to work. Wouldn't it be better to wait for a meaningful pullback to take advantage of more attractive valuations? While this line of thinking always sounds accurate in theory, timing the market correctly is impossible to do. Investors are better off buying early and often, letting compounding work its magic over several years and decades.

Despite the vote of confidence, it's still best to temper expectations. I believe the Vanguard S&P 500 ETF will continue to perform well over the long haul. However, I wouldn't be surprised if the annualized gain reverted back toward the 10% long-term average. This still makes the ETF a smart investment choice.

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:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Vanguard S&P 500 ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Neil Patel has positions in Vanguard S&P 500 ETF. The Motley Fool has positions in and recommends Amazon, Apple, Meta Platforms, Microsoft, Nvidia, 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.

Key Points

• Exchange-traded funds can be appealing options for income investors as they offer great diversification.

• The Schwab U.S. Dividend Equity ETF and iShares Core High Dividend ETF both pay a dividend yield of over 3%.

• Both funds have dozens of stocks in their portfolios and their expense ratios are less than 0.1%.

• 10 stocks we like better than Schwab U.S. Dividend Equity ETF ›

Generating recurring income for your portfolio can be a great way to grow its value and provide you with a way to generate cash flow without having to sell stocks. You can then use that money to pay bills, pad your savings, or even have it reinvested back into stocks.

What's important when investing in income-generating investments is picking ones that you can safely rely on. Chasing high yields can lead to trouble later on if those payouts don't prove to be sustainable. In some cases, it's just bad luck where a dividend stock you've invested in ran into challenges that it couldn't get itself out of, and it had no choice but to reduce its payout.

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

Some risk is unavoidable when you're investing in individual stocks. And that's why, if your goal is to generate safe recurring income, you may want to consider investing in exchange-traded funds (ETFs) that can provide you with an easy way to diversify. Two ETFs that can be ideal options in this case are the Schwab U.S. Dividend Equity ETF (NYSEMKT: SCHD) and iShares Core High Dividend ETF (NYSEMKT: HDV). They both pay above-average dividends and can be excellent investments to hang onto for years.

Schwab U.S. Dividend Equity ETF

The Schwab U.S. Dividend Equity ETF promises investors a straightforward investing strategy that prioritizes things such as low costs, fundamental strength, and quality and safety when it comes to dividends. Those are essential items to consider when investing in dividend stocks. And at 0.06%, its expense ratio does indeed make it a low-cost fund, which makes it suitable for long-term investing; its fees won't put a big dent in your overall returns, even over several years.

With 103 holdings as of Aug. 5, the fund isn't overly diversified, and there are much larger ETFs. But what makes the Schwab fund ideal for income investors is its focus on quality stocks with good fundamentals. It isn't simply investing in a wide range of dividend stocks; the ETF carefully selects safe stocks, with many of them being high-yielding investments that pay more than the S&P 500 average of 1.2%.

Big-name stocks such as Merck, Verizon Communications, and PepsiCo are among its top holdings. By focusing on such high-yielding stocks, the ETF is able to average an overall yield of around 3.9%. That's exceptional, given the diversification you're getting with the fund.

In the past 12 months, the ETF is down over 1% but when including its dividend, its total return is positive and above 2%. And in five years, its total returns are north of 70%.

iShares Core High Dividend ETF

Another solid ETF to add to your portfolio can be the iShares Core High Dividend ETF. This fund is even more selective in its portfolio as it focuses on 75 of the best high-dividend stocks.

There will be some overlap with the Schwab fund, but one key difference is that in the Schwab ETF, the largest holding accounted for approximately 4.3% of the portfolio's weight, whereas in the iShares Core High Dividend fund, there are multiple stocks above that threshold. The top three stocks in this ETF -- ExxonMobil (8.5%), Johnson & Johnson (6.7%), and AbbVie (5.8%) -- account for a combined 21%.

So you get a bit less diversification with the fund and more of a position in its largest holdings, which isn't necessarily a bad thing. It's just important to be aware of the stocks you have the most exposure to, to ensure that you're comfortable with them.

The fund's expense ratio is 0.08%, which is comparable to the other fund on this list. Its yield of 3.5% is a bit smaller, but it's still a high payout overall. The bulk of its portfolio is allocated to sectors that have a great deal of long-term stability: healthcare, energy, and consumer staples. Collectively, those sectors represent 64% of all the stocks within the ETF.

This year, as investors have been seeking out safe stocks, the iShares ETF has rallied 6% in value, and with its dividend, the total return is nearly 8%.

Should you invest $1,000 in Schwab U.S. Dividend Equity ETF right now?

Before you buy stock in Schwab U.S. Dividend Equity ETF, 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 Schwab U.S. Dividend Equity ETF wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

David Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends AbbVie and Merck. The Motley Fool recommends Johnson & Johnson and Verizon Communications. The Motley Fool has a disclosure policy.

Key Points

• Abbott Laboratories is a Dividend King with a great track record of consistency.

• You don't have to be retired to love AbbVie.

• Johnson & Johnson is a dream stock for those looking for reliability.

• 10 stocks we like better than AbbVie ›

Priorities change as you enter new seasons of life. That's especially true for your retirement years. And the changing priorities can include what you want from your investments. Income usually becomes much more important than growth when you stop receiving a paycheck.

With this in mind, three Motley Fool contributors have identified dividend stocks that they think retirees should absolutely love. Here's why they picked Abbott Laboratories (NYSE: ABT), AbbVie (NYSE: ABBV), and Johnson & Johnson (NYSE: JNJ).

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

A Dividend King with a great track record of consistency

David Jagielski (Abbott Laboratories): If you're a retiree looking for a solid income-generating stock to buy and hold, Abbott Laboratories looks like one of the best options to consider today. Not only does it offer an above-average dividend that yields 1.9% as I write this, but the company has also been increasing its dividend for 53 straight years. And since 2020, its payout has increased by 64%, from $0.36 to $0.59, which averages out to a compounded annual growth rate of 10.4%. Dividend growth allows you to generate more recurring income from the same investment, helping to offset the effects of inflation.

What's encouraging is that there's still plenty of room for Abbott to continue raising its payout. When the company last reported earnings on July 17, its diluted per-share profit for the second quarter (which ended on June 30) was $1.01. If it were to maintain that level of profitability, its payout ratio would be around just 58% of earnings.

Plus, with the company also expecting its business to grow organically (excluding COVID-19 testing sales) by at least 7.5% this year, its bottom line is likely only going to get stronger. With strong and diverse operations spanning pharmaceuticals, nutritional products, diagnostics, and medical devices, Abbott is one of the better options for both retirees and risk-averse investors.

In five years, the healthcare stock has risen by 26% and, when including its dividend, its total returns are around 38%. This is a great investment to buy and hold, as it can do well under myriad economic conditions.

You don't have to be retired to love this stock

Keith Speights (AbbVie): I think AbbVie is an ideal stock for retirees. Like its parent company, Abbott, it's a Dividend King with 53 consecutive years of dividend increases. However, AbbVie's forward dividend yield of 3.3% is even more attractive than Abbott's.

Retirees like the stocks they own to be highly resilient. AbbVie checks off this box. The company's longtime top-selling drug, Humira, lost U.S. patent exclusivity in early 2023. Sales of the autoimmune disease drug tanked in the face of biosimilar competition. But AbbVie easily weathered the storm thanks to a strong product lineup featuring newer stars.

Humira's two successors, Skyrizi and Rinvoq, are on track to generate sales of $25 billion this year. That's well above Humira's peak annual sales of $21.2 billion in 2022. It's a great sign of resilience when a drugmaker can develop replacements that eclipse the sales of its best-seller within three years of its loss of exclusivity.

You don't have to be retired to love AbbVie, though. In a stock market that's priced for perfection, the big pharma company's shares are surprisingly cheap, with a forward price-to-earnings ratio of only 16.4.

AbbVie should also have solid growth prospects. CEO Rob Michael said in the recent second-quarter earnings call that the company is "very well positioned to drive growth in this decade" with its current portfolio. He also noted, "Without any significant LOEs [losses of exclusivity] this decade, we have the flexibility to invest more in R&D and to continue to acquire external innovation, and we will absolutely do that."

This stock is a retiree's dream come true

Prosper Junior Bakiny (Johnson & Johnson): Once one hits retirement, the focus often shifts away from investing in speculative stocks and turns instead to steady, reliable corporations. That description fits Johnson & Johnson well. The company has been a healthcare leader for decades, consistently generating growing revenue and profits. Johnson & Johnson's business is diversified across pharmaceuticals and medical devices. Even within these segments, Johnson & Johnson has a vast product portfolio spanning many therapeutic areas.

Furthermore, the company routinely develops newer and better products, which enables it to navigate patent cliffs and stiff competition. The drugmaker has indeed encountered some challenges in recent years. Johnson & Johnson is dealing with thousands of lawsuits related to its talc-based products, which may have given defendants cancer. Johnson & Johnson has also faced patent expiration for some of its products, including Stelara, a medication for plaque psoriasis and other autoimmune conditions.

Despite these issues, Johnson & Johnson remains an attractive investment. The company's rock-solid balance sheet, as evidenced by its credit rating that exceeds that of the U.S. government, should enable it to address legal challenges effectively. Furthermore, it has dealt with biosimilar threats to Stelara quite effectively and even recently increased its revenue and earnings guidance for 2025, despite a decline in Stelara's sales.

That should give investors even more confidence in Johnson & Johnson's ability to overcome obstacles. Finally, the company is a Dividend King and has raised its payouts for 62 consecutive years. All these reasons make Johnson & Johnson an ideal pick for retirees.

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

Before you buy stock in AbbVie, 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 AbbVie wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

David Jagielski has no position in any of the stocks mentioned. Keith Speights has positions in AbbVie. Prosper Junior Bakiny has positions in Johnson & Johnson. The Motley Fool has positions in and recommends AbbVie and Abbott Laboratories. The Motley Fool recommends Johnson & Johnson. The Motley Fool has a disclosure policy.

Key Points

• ConocoPhillips produced lots of cash in the second quarter despite lower commodity prices.

• The oil giant is returning a large percentage of its excess cash to shareholders.

• It now expects to produce $7 billion of additional annual surplus cash by 2029, giving it even more money to send to shareholders.

• 10 stocks we like better than ConocoPhillips ›

ConocoPhillips (NYSE: COP) is already a cash-gushing machine. The oil and gas giant's low-cost operations enable it to produce significant free cash flow. This allows it to invest in growing its operations, return cash to investors through dividends and buybacks, and maintain its fortress-like financial profile.

The company's already robust cash flow will become even larger in the coming years. A combination of growth initiatives and cost savings is now on track to add $7 billion to its annual free cash flow total by 2029. That will give the oil stock even more money to return to shareholders.

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Drilling down into ConocoPhillips' second-quarter results

ConocoPhillips' ability to print cash was on full display during the second quarter. The company generated $4.7 billion in cash from operations, despite a 19% decline in the average price it realized per barrel of oil equivalent (BOE) sold during the period compared to the second quarter of last year. It was able to partially mute the impact of lower commodity prices by significantly increasing its production. Its output averaged nearly 2.4 million BOE per day in the quarter, 446,000 BOE per day higher than the year-ago period. ConocoPhillips benefited from its acquisition of Marathon Oil, as well as a 3% increase in output from its legacy operations.

The oil giant used that cash to fund $3.3 billion of capital expenditures and investments to maintain and grow its output. It also paid $1 billion in dividends, repurchased $1.2 billion of shares, and retired $200 million of debt at maturity. That brought its year-to-date total to $2.7 billion in share repurchases, $2 billion in dividend payments, and $700 million in debt reduction.

The company ended the quarter with $5.7 billion in cash and short-term investments, and $1.1 billion in long-term investments, backing its fortress A-rated balance sheet. It padded its cash position by closing the sale of $700 million of non-core assets during the quarter and $1.3 billion through the first half of this year. ConocoPhillips has recently agreed to sell an additional $1.3 billion of non-core assets, which should close early in the fourth quarter. As a result, it has exceeded its target of selling $2 billion of assets following its acquisition of Marathon.

The upcoming free-cash-flow growth wave

ConocoPhillips expects to generate significantly more free cash flow in the future. In the near term, the company expects higher cash distributions from its APLNG investment, tax benefits from the "one big, beautiful bill," and lower capital spending to boost its free cash flow in the second half of the year. That assumes oil prices remain near their current level in the $60 to $70 a barrel range.

The company also continues to expect to get a boost from its acquisition of Marathon Oil. It's on track to achieve its target of hitting $1 billion in cost savings from synergies by the end of this year, double its initial target of $500 million. Additionally, the company now expects to deliver another $1 billion in cost and margin enhancements by the end of next year.

Meanwhile, ConocoPhillips continues to anticipate its long-cycle investments in liquified natural gas (LNG) and Alaska will fuel a $6 billion uplift in its free cash flow through 2029. The company has investments in three LNG projects (Port Arthur LNG in the U.S. and Qatar's North Field East and North Field South) that should come online over the next few years. The energy company continues to secure customers for this gas. It recently signed a regasification agreement for the Dunkerque terminal in France and a sales agreement in Asia, both of which will begin in 2028. Additionally, its major Willow project in Alaska should start producing by 2029.

On top of all this, ConocoPhillips now plans to sell another $2.5 billion of non-core assets by the end of next year. These sales will give it additional cash to strengthen its fortress balance sheet or recycle into higher-quality assets.

The company's growing free cash flow and cash balance will enable it to continue returning more money to investors. ConocoPhillips aims to deliver dividend growth within the top 25% of companies in the S&P 500 in the coming years. It also aims to repurchase over $20 billion of its stock in the first three years of closing the Marathon deal.

A cash-producing juggernaut

ConocoPhillips now expects to capture another $1 billion in cost savings from its Marathon deal. It's also on track to produce $6 billion in incremental free cash flow from its investments in LNG and Alaska. That will give the oil company a lot of money to return to shareholders in the future. Its combination of growing cash flows and rising cash returns could provide the fuel to produce strong total returns in the coming years, making it an attractive oil stock to consider for the long term.

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

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Matt DiLallo has positions in ConocoPhillips. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Key Points

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

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

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

• 10 stocks we like better than Apple ›

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

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

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

Leaning into the AI opportunity

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

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

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

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

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

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

Making accurate predictions is hard

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

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

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

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

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

Before you buy stock in Apple, consider this:

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

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

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

Key Points

• Hims & Hers posted record revenue this quarter.

• It is still selling patented weight loss drugs on its platform and is now getting sued by the pharmaceutical companies.

• Investors would do best to avoid this stock until the legal battle is resolved.

• 10 stocks we like better than Hims & Hers Health ›

Shares of Hims & Hers (NYSE: HIMS) stock sank 17% this week, according to data from S&P Global Market Intelligence. The telehealth platform is delivering huge revenue growth but is at risk of a legal battle with weight loss drugmakers. Shares of the stock are down 25% from all-time highs but are up 400% in the past five years due to the platform's fast growth.

Here's why the stock sank this week.

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Fast growth but a looming lawsuit

In the second quarter of 2025, Hims & Hers' revenue grew 73% year over year to over $500 million, making it one of the fastest-growing companies in the world. This was driven by 30% growth in total subscribers to Hims & Hers products and 30% growth in spend per active subscriber. The company offers telehealth services for basic pharmaceuticals such as hair loss, sexual wellness, and weight loss drugs.

While the company is growing quickly and now generating a profit, Hims & Hers is facing a looming legal battle with Novo Nordisk. The innovator in weight loss drugs originally had a partnership with Hims & Hers but pulled out of the deal because of disagreements over Hims & Hers selling knockoffs of its weight loss drug formula. Hims & Hers was permitted to sell patented weight loss drugs while they were in shortage, but now that the shortage is over, it is breaking the law by selling patented drugs to customers at a discount.

Unsurprisingly, Hims & Hers is getting sued for this practice, which is a fast-growing part of its business. Investors are worried about the future impacts of this legal battle and how it could hurt Hims & Hers' future revenue growth and profitability.

Should you buy Hims & Hers stock?

Hims & Hers has been an incredible stock to own over the last few years, making shareholders rich. It has $2 billion in trailing revenue, up over 1,000% in the last five years. By far, it is the leading telehealth provider for drugs and medical treatments over the internet, making a ton of inroads in market share gains in the last few years.

If there were no legal battle looming, Hims & Hers would probably be a buy on this dip. However, we cannot ignore the potential legal ramifications and huge risk Hims & Hers management is putting on itself and shareholders by blatantly selling patented weight loss drugs on its website. This legal battle is not likely to end well. Don't buy the dip on Hims & Hers stock until its dispute with the weight loss drugmakers is resolved.

Should you invest $1,000 in Hims & Hers Health right now?

Before you buy stock in Hims & Hers Health, 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 Hims & Hers Health wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

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

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

See the 10 stocks »

*Stock Advisor returns as of August 4, 2025

Brett Schafer has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Hims & Hers Health. The Motley Fool recommends Novo Nordisk. The Motley Fool has a disclosure policy.