Key Points

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

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

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

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

TSM EPS Estimates for Current Fiscal Year data by YCharts

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

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

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

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

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

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*Stock Advisor returns as of July 21, 2025

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

Key Points

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

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

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

• 10 stocks we like better than GitLab ›

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

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

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Alphabet

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

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

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

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

GitLab

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

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

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

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

Salesforce

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

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

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

ServiceNow

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

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

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

SentinelOne

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

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

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

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

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

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

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*Stock Advisor returns as of July 15, 2025

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

Key Points

• The cloud software company recently launched new AI agents.

• Earlier this month, the company acquired Kraftful, an AI startup.

• At a market cap of $1.5 billion, Amplitude still has considerable upside potential.

• 10 stocks we like better than Amplitude ›

Amplitude (NASDAQ: AMPL) caught a lot of attention from investors when it debuted in 2021.

At the time, the cloud software company, which is focused on product analytics, was growing rapidly and tech stocks were still booming from the pandemic-driven tailwinds. However, Amplitude tumbled in the tech crash in 2022. The stock plunged and growth has slowed as many of its customers realized that they overestimated their need for its services, much like they did with most other software products, as the tech industry lost some of its primacy in the economic reopening following the pandemic lockdowns.

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The company was forced to lay off employees and retrench, and after some acquisitions and with the headwinds from the customer spend rationalization finally rolling off, Amplitude looks as strong as it's been in a long time.

In fact, the stock has surged of late, up 56% over the last year as investors have responded to the company's momentum in its product lineup. However, there's one thing investors should be watching now.

What can Amplitude do with AI?

Amplitude, which still trades in a small-cap range at a market cap of less than $2 billion, is arguably as well-positioned as any company of its size to capitalize on AI technology.

The company helps businesses discover and understand how customers use their digital products, like websites, apps, and other devices so they can learn what's working and make improvements.

In the digital era, that's a valuable tool, and it could be greatly enhanced with artificial intelligence, which has the power to automate insights that now require a human to glean through data analysis.

The company introduced its new Amplitude AI agents in June, which will do things like pull dashboards, run queries, test hypotheses, and determine which leads are the most promising.

Among the specific AI agent templates are website conversion agents, onboarding agents, feature adoption agents, and monetization agents, which help improve the nuts-and-bolts points of engagement that most businesses are trying to accomplish online.

Amplitude followed that up in July with its acquisition of Kraftful, an AI-native Voice of the Customer (VoC) start-up. Amplitude will capitalize on Kraftful's proprietary large language model (LLM), which can process massive amounts of user feedback data. The acquisition will help Amplitude further lock the capabilities in the data its software is uncovering, making its product suite even more valuable for customers.

What's next for Amplitude

In its first quarter, Amplitude reported 12% annual recurring revenue growth and 10% overall revenue growth, an improvement from recent years.

The company has seen a jump in remaining performance obligations as well, which rose 30% to $325.9 million, showing that its customers are committing to longer contracts. That's a good sign that growth momentum is returning after years of elevated churn coming off the pandemic.

Amplitude has a large base of more than 4,000 customers, ranging across industries from tech to consumer to industrials, and that includes 27% of the Fortune 100, showing it's landing large companies as well.

Seeing a bump from the new AI agents could take time, but the new products will almost certainly help accelerate Amplitude's growth over the long term.

The company was recently rated No. 1 in product analytics by G2, a research firm, and it has gained market share from larger competitors like Google Analytics and Adobe Analytics, which are more focused on marketing analytics rather than product analytics.

As a leader in an emerging niche in software at a market cap of just $1.5 billion, Amplitude has a lot of upside potential. If its new AI agents gain traction, the stock could soar.

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

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

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

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

See the 10 stocks »

*Stock Advisor returns as of July 15, 2025

Jeremy Bowman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Adobe. The Motley Fool has a disclosure policy.

Key Points

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

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

• Investors shouldn't blindly follow Buffett.

• 10 stocks we like better than Apple ›

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

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

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

Passing Buffett's filter is a valuable endorsement

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

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

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

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

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

Is Apple stock a buy now?

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

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

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

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

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

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

Before you buy stock in Apple, consider this:

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

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

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

See the 10 stocks »

*Stock Advisor returns as of July 15, 2025

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

Key Points

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

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

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

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

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

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

What happened

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

What else to know

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

Top holdings after the filing:

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

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

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

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

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

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

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

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

Company overview

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

Company snapshot

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

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

Serves organizations, enterprises, and individual consumers globally.

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

Foolish take

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

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

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

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

Glossary

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

Where to invest $1,000 right now

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

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

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*Stock Advisor returns as of July 14, 2025

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

Key Points

• TSMC has become the undisputed foundry leader.

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

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

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

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

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

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The foundry leader

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

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

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

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

TSMC's business risks

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

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

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

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

Time to buy the stock

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

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

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

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

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

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

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

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

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

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

Key Points

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

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

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

• 10 stocks we like better than Microsoft ›

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

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

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

Why Microsoft has the clear edge

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

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

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

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

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

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

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

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

To $4 trillion and beyond

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

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

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

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

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

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

Before you buy stock in Microsoft, consider this:

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

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

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

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

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

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

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

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

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

A full transcript is below.

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

Before you buy stock in Comcast, consider this:

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

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

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

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

This podcast was recorded on July 07, 2025.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Jason Moser: [laughs] Exactly.

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

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

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

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

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

Jason Moser: Everybody loves stock ideas, AC?

Andy Cross: Of course.

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

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

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

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

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

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

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

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

Jason Moser: Thanks for having me.

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

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

Key Points

• Apple stock provided steady growth from 1985 through 2005.

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

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

• 10 stocks we like better than Apple ›

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

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

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

What a difference an iPhone could make

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

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

Will the next two decades provide the same growth?

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

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

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

Before you buy stock in Apple, consider this:

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

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

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

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

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

Key Points

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

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

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

• 10 stocks we like better than Amazon ›

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

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

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

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

The next wave of cloud growth

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

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

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

Automation and margin expansion

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

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

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

AMZN Operating Income (TTM) data by YCharts.

The path to $3 trillion

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

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

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

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

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

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

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

Key Points

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

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

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

• 10 stocks we like better than Taiwan Semiconductor Manufacturing ›

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

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

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

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

2 Top AI stocks that pay decent dividends

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

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

TSMC: The world's largest chip foundry

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Mark your calendars

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

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

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

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

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

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

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

See the 10 stocks »

*Stock Advisor returns as of July 7, 2025

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

Key Points

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

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

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

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

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

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Amazon

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

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

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

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

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

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

Microsoft

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

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

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

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

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

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

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

The better buy

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

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

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

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

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

Before you buy stock in Amazon, consider this:

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

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

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

Key Points

• Planet Labs shares rose after announcing a major multiyear satellite imaging deal with the German government.

• The 240 million euro agreement expands Planet Labs’ role in European defense and security, building on recent contracts with U.S. agencies.

• The company occupies a unique niche with high growth potential, but investors should be aware of risks such as possible share dilution.

Shares of Planet Labs (NYSE: PL) climbed on Thursday, closing up 11.2% as of the 1 p.m. ET early market close for the Fourth of July holiday. The rise comes as the S&P 500 (SNPINDEX: ^GSPC) and Nasdaq Composite (NASDAQINDEX: ^IXIC) gained 0.8% and 1%, respectively.

Planet Labs, a satellite imaging company, signed a major deal earlier this week that is continuing to boost shares.

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Planet Labs inks major deal

The company announced on Tuesday that it has signed a deal with the German government to provide satellite imagery and geospatial data "in support of European peace and security." The multiyear, 240 million euro agreement also includes artificial intelligence (AI)-powered intelligence from the imagery and data Planet Labs provides.

The deal marks a major step in the company's push into Europe and defense and security-related applications. In a statement, Will Marshall, CEO and co-founder of Planet Labs, said of the deal, "With the changing geopolitical landscape, the demand for sovereign access to geospatial intelligence is more urgent than ever before, and Planet's satellite services model is uniquely designed to enable large area security monitoring."

This could be the first of many such deals, as countries across Europe commit to increasing defense spending after last month's NATO summit.

Although the contracts are smaller in scope, this month saw the company announce several other significant contracts with the U.S. Department of Defense and the U.S. Navy.

Planet Labs is growing

Although the stock is not cheap and investors should be aware of possible dilution as the company raises money to fund growth, I think Planet Labs is a good pick for those with a high risk tolerance. The company operates in a unique niche that has a lot of potential.

Should you invest $1,000 in Planet Labs Pbc right now?

Before you buy stock in Planet Labs Pbc, 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 Planet Labs Pbc 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 $692,914!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $963,866!*

Now, it’s worth noting Stock Advisor’s total average return is 1,049% — a market-crushing outperformance compared to 179% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

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*Stock Advisor returns as of June 30, 2025

Johnny Rice 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.

In this video, I will talk about four interesting companies that could provide significant upside for long-term investors. I chose a mix of companies in different industries. Watch the short video to learn more, consider subscribing, and click the special offer link below.

*Stock prices used were from the trading day of June 30, 2025. The video was published on July 1, 2025.

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

Before you buy stock in Alphabet, 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 Alphabet 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 $692,914!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $963,866!*

Now, it’s worth noting Stock Advisor’s total average return is 1,050% — a market-crushing outperformance compared to 179% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Neil Rozenbaum has positions in Alphabet, PayPal, and UnitedHealth Group. The Motley Fool has positions in and recommends Alphabet, PayPal, and Qualcomm. The Motley Fool recommends UnitedHealth Group and recommends the following options: long January 2027 $42.50 calls on PayPal and short June 2025 $77.50 calls on PayPal. The Motley Fool has a disclosure policy. Neil is an affiliate of The Motley Fool and may be compensated for promoting its services. If you choose to subscribe through his link, he will earn some extra money that supports his channel. His opinions remain his own and are unaffected by The Motley Fool.

In this podcast, Motley Fool Chief Investment Officer Andy Cross and contributor Jason Hall discuss:

• Why Nike stock rallied after its latest earnings report.
• Home Depot buying GMS for $5.5 billion.
• Will F1: the Movie drive Apple's stock?

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

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A full transcript is below.

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

Before you buy stock in Nike, 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 Nike 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 $692,914!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $963,866!*

Now, it’s worth noting Stock Advisor’s total average return is 1,050% — a market-crushing outperformance compared to 179% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 30, 2025

This podcast was recorded on June 30, 2025.

Andy Cross: Nike is back in the race, Motley Fool Money starts now. Welcome to Motley Fool Money. I'm Andy Cross, joined here by Motley Fool contributor Jason Hall. On the docket today are earnings from Nike, Jason, Home Depot's latest acquisition, and we're lifting the hood on F1 The Movie and what it means for Apple. Jason, let's dive right into it. Nike's fourth quarter earnings were last week. The stock jumped 15% on that Friday after the footwear giant expressed confidence that it's turn around, that Elliott Hill, the CEO, who joined eight months ago, is moving along even though the quarter continues to show that challenge. Jason, is that investor enthusiasm warranted?

Jason Hall: Honestly, I think I would have framed it in a different way. The stock jumped on earnings, but if you look over the past five years, Nike stock has fallen after earnings far more often than it's gone up. The stock's still down a quarter from where it was five years ago, and it's down almost 60% from the high. I don't think this is about enthusiasm as much as it is investors reframing and resetting their expectations, and seeing the company with those lower expectations and the fact that this turnaround is going to take a while, there are some signs that it's starting to work.

Andy Cross: Jason, the sales down 12% year over year, still ahead of some estimates, earnings per share were down 86%, beating consensus a little bit. The big thing was on the gross margins down 440 basis points to 40%. If you look a few quarters ago, gross margins were around 45%. We're seeing this impact on the inventories for Nike. I think that's a big story that investors are focused on with this turnaround.

Jason Hall: There's no doubt about it. One of the big parts of the Nike struggles over the past few years is trying to figure out their go-to-market strategy. They heavily prioritize their own digital channels, alienated a lot of the wholesale market, which is the retail channel, and they're having to come back around to that, a little bit with hat in hand, and they're starting to see a little bit of signs of improvement. We know that Dick's big acquisition that they're working on. With Foot Locker, that hopefully is going to be positive for Nike. Maybe the big thing is the e-commerce presence of finally accepting that they need to be part of the Amazon ecosystem. There's some limited release products that are going to be showing up there this fall. Those are things that the market wants to see. The company has to embrace customers wherever they are, and then try to have a little bit of exclusivity with its own e-commerce. I think that that's a successful formula. I think the market agrees too.

Andy Cross: One thing, Jason, about their five "Win Now" principles, which is they're like, right now we are focused on Elliott Hill. Again, coming back in, he's a long term veteran, joined about eight months or so ago, trying to get the branding back for Nike Build Back, the Nike goodwill, focus on things like culture, product, marketing, the ground game being, as you were saying, where customers are on the ground, focusing in key sports, rightsizing those important brands that have those legacy brands. What I really like is they're restructuring the team and the whole focus back around sport chase, and they're focused back on cross-functional teams focused on specific sports. I think that is a really important focus for this Nike turnaround. While we're not seeing it in the earnings or the performance right now, I think that, what I consider enthusiasm, and I think the stock is actually pretty attractive here, even after that jump, I think the enthusiasm is warranted because of the way that Elliott Hill is going about refocusing the Nike brand, and importantly the Nike culture.

Jason Hall: I think that's right. Focusing on the brand, I'll start there. I've talked to a ton of people across sports that say that a lot of Nike's success right now is selling things that they were selling 30 years ago. Obviously, it's not exactly the truth, but it feels that way. They've certainly lost their innovative edge against on running other brands that have taken share, and having that hyper focus back on the products for that individual performance for that particular sport, I think is something that Nike has not done as well with. If they can show that and say, "Look, we can still innovate. We can come out with products that are going to be better, not just the fit, but the performance," that's where Nike can reestablish itself as a leader.

Andy Cross: It's interesting. They're going to do a little bit of surgical pricing, they mentioned, tied to Amazon a little bit later this fall. They do have a big tariff impact of about $1 billion because of all the sourcing they do overseas. Although they're trying to change that, they're going to move a little bit away from China, and they think as a percentage of sales that will drop going forward, but they do still have those impacts, and it's going to show up in the gross margin over the next quarter or two. But the expectations, Jason, is that it's going to improve throughout the year.

Jason Hall: That's right. Andy, everybody in apparel and footwear is dealing with the impact of tariffs, the potential impact. That story is going to continue to be part of the background for some time to come. I'm taking all of that with a grain of salt, that I think the supply chain is probably going to look more like it did five years ago than change going forward, but the company does have to take some financial steps to make sure it's prepared for whatever happens there.

Andy Cross: Jason, how about the stock here, about $71, $106 billion market cap. You get a little dividend, 2.2%. Hopefully, bottomy on the earnings side that you look going forward are going to be meaningfully higher. Do you find this stock attractive?

Jason Hall: I do. I did a video for the Motley Fools website a couple of weeks ago, and I said that there were signs that the turnaround was working. We'd get more information once earnings came out, and they just did. Again, probably things are going to maybe take a little longer than we expected, but I think even with the stock up from where it was a couple of weeks ago, I think there are definitely signs that it's worth maybe starting a position, following things out in. It's not super cheap right now, but I think if the trend continues under Elliott's leadership, then this is going to work out to be a good price.

Andy Cross: Certainly not on current earnings, but hopefully on the future earnings.

Jason Hall: Exactly.

Andy Cross: In agreement there, I think Nike looks attractive here. After the break, Home Depot go shopping. You're listening to Motley Fool Money. Specialty building products distributor GMS is up about 11% today after announcing that Home Depot had won the bidding battle to acquire the company for 5.5 billion. Jason, GMS has been on the auction block probably for the past month or so since QXO, another building products supplier and technology company, put out an offer for about $95 per share. Home Depot's paying $110 per share. Did Home Depot win the acquisition battle here but lose the capital allocation war?

Jason Hall: I think that's the question that I have. Home Depot, about a year ago, got into the distribution business that I think dropped $18 billion to buy a distributor, and part of the long term strategy was, look, this is an area we can consolidate, and these are builders and customers that are not coming into Home Depot no matter how well we work with them. It's big distribution. The plan had been to do that. Now, at the same time, you mentioned QXO, so that's Brad Jacobs. Brad Jacobs is the M&A master. This is somebody that has build a career on multibagger businesses, that he's made a lot of people a lot of money finding industries that are ripe for consolidation, that are low tech, that a layer of technology can make a tremendous amount better. QXO fired the opening salvo, as you said, with an unsolicited offer to buy GMS. Then Home Depot, we hear is getting involved. The question that I'm going to continue to ponder is, did Home Depot win it, or did Brad Jacobs and team just walk away because it got too pricey for them? If you look at the numbers, I believe 10 or 11 times EBITDA. Not crazy expensive, but certainly more expensive than the discipline price you would see a Jacobs-run business want to pay.

Andy Cross: Sorry, about one times sales, as you mentioned, 10 to 11 times EBITDA. EBITDA's been down a little bit for the past year or so, but also because of the housing market, we know. But GMS, which by the way stands for Gypsum Management and Supply, runs 320 distribution centers selling things, including things like wallboard and ceilings, steel framings. It runs about 100 tool sales, rental, and service centers. Together, you're going to put together 1,200 locations, 8,000 trucks, making tens of thousand deliveries to job sites every day. What I like, Jason, as you mentioned, is these acquisitions for distribution scale matters, and this is a very fragmented business. I see this acquisition by Home Depot, this is a 5.5 billion dollar acquisition by Home Depot. Home Depot is a massive company, so Home Depot has about 45 billion of debt on the balance sheet. It's not going to add a ton more debt to the account. They have a $1.5 billion of cash, almost. I think from a management perspective, it's fairly attractive to Home Depot, and I can see why GMS would choose Home Depot versus QXO, even with Brad Jacobs' intelligence. But it does see when I look at the ability for Home Depot get a little bit more from every distribution node. I think it's attractive, and that multiple, as you mentioned, for Home Depot, I think, is not all that high. I think they're getting a good deal here.

Jason Hall: I think it probably works out so long as this remains a part of the strategy for Home Depot consolidating this fragmented distribution industry that's very different from its retail business. I will also make a prediction that Brad Jacobs and QXO made a big splash when they acquired Beacon Roofing as the first, looks like, $11 billion deal, so getting in the roofing business, one of the big roofing suppliers. My prediction is that we're going to see Home Depot and its distributor segment and Brad Jacobs' QXO going head to head on more acquisitions over the next 5-10 years, and probably both do well in consolidating because there's so much room to consolidate this market.

Andy Cross: That's the thing. It's so fragmented, so I think they can both be winners here. Brad Jacobs, if you look at his acquisition or look at his history of running companies with XPO and others, have done very well over the years. Like you said, he has this down to a science, the Beacon Roofing acquisition. That SRS acquisition by Home Depot, as you mentioned, for a little bit more than $18 billion, got them back into the distribution game, and so they're trying to cobble up that together. Both of these companies are trying to serve the contractor market, which is, as we mentioned, very fragmented, trying to increase the value of that network. For Home Depot, I think it's a good acquisition, I think, at a reasonable price, and I think Brad Jacobs was like, "Listen, there's going to be other opportunities. I'll let this one go. Home Depot, you can take this, and I'll focus my attention elsewhere." I do have a question, Jason, which is, if you think about either Home Depot stock or QXO stock, obviously GMS is going to be, if it all goes through, part of Home Depot, is there anyone that stands out as more attractive to you?

Jason Hall: There's my answer, and then there's the answer that people listening need to think about individually. For me, I think QXO is really attractive because I'm a big believer in Brad Jacobs and the track record, and the process when it comes to being disciplined and finding these industries to consolidate, starting from a really small size, this can be a massive compounder. Now, again, that's what I'm looking for. I think investors that are looking for maybe the higher floor of an industry dominant leader, like a Home Depot, that has a pretty solid dividend growth, and can continue to do well for investors over time, if you want something that's a little more stable, a little less volatile, then I think Home Depot's a pretty compelling investment right here. What about you? What do you think?

Andy Cross: Well, QXO at $14 billion, I think the upside is a lot higher. I own Home Depot, it's a large position in my portfolio. The stock hasn't done all that well over the past year or so. I think this is a nice bolt-on acquisition for them. Doesn't add a ton more goodwill to the balance sheet, maybe 2.5 billion or so on top of their 20 billion they have. I think it's reasonable. I think it's a decent price. I think they'll be able to get more out of it and continue to grow the GMS side of the business tied to SRS. It's just that Home Depot, like you said, is probably the high single digit per year grow or not, one that's going to light anything on fire going forward, Home Depot that is.

Jason Hall: Well, their leverage is there is going to be buying back shares. That's how you boost per share return there too.

Andy Cross: A hundred percent. Coming up next on Motley Fool Money, will F1 The Movie drive Apple stock higher? You're listening to Motley Fool Money. Brad Pitt's new movie F1, made by Apple Original Films, hit the theaters this weekend to positive reviews and decent amount of money, Jason. But here's my question, why is a $3 trillion company like Apple focused so much on making a film like F1, even with Brad Pitt.

Jason Hall: Because they can. They found the money on the couch cushions, and they saw it like a fun vanity project.

Andy Cross: They don't want to buy back more stock, and they've got plenty of places to invest that capital.

Jason Hall: In all seriousness, we're both being a little bit glib here, and it's Apple TV+, and their studios business has actually created some exceptionally high quality content. It's still a bit of an also ran, compared to the big players in the space, like the Netflixes of the world, but to me, I think it's a reminder that Apple is focusing on quality more necessarily than quantity as part of its strategy with streaming and media content real large.

Andy Cross: Does that mean the other ones are focused more on the quantity side, less on the quality side, do you think?

Jason Hall: I think a little bit both. I think all of them, there's a tension between the two, and it's where are you leveraging more toward. If you're a Netflix, for example, this is your entire business. You have to put out lots of content that's going to attract lots of people, and it's got to be very good quality. If you're an Apple, where does this fit in your entire ecosystem of things, and what you're looking to do maybe is a little bit different than say what Amazon is looking to do with Amazon Prime TV, or Amazon Prime Video, I should say. Where Apple does seem, if you look at the content that they've produced, certainly it doesn't have the volume that you see at some of these other large players, but what it does provide is an additional layer of stickiness to the platform.

Andy Cross: Do you think that they will up the quantity game to be more competitive? I think about this with Apple, right? Stories and reports are surfacing, 200 million to 300 million more on the entire cost to make this film, and Apple financed a chunk of change of that. Are you saying they have exclusive rights once it hits Apple TV? They'll be there. They splash marketing budgets all over the place. They had it in Apple stores. They had it featured in Apple Music, Apple Maps app. They had a big marketing push toward it, obviously, to show that they can be competitive in this space. I'm thinking like this, Apple generates about $400 billion or so in revenue. They generate, gosh, $100 billion in profits. Almost about a quarter or so of their business is tied to services. When I think about Apple building out that ecosystem, Jason, and the glue that they're putting together, as you mentioned, things like streaming to be competitive against likes of not just Netflix, but also the likes of Amazon, and the likes of YouTube, for a company that has middling growing, that continued growth in the services side of the business is important. I think that's one reason why they are now recognizing that because they generate such great returns on their investment, this is a place they can splash some capital.

Jason Hall: Netflix here, they want your eyes, they need you. They need as much as many people's time as they can get because this is their entire business. Amazon wants your wallet, and the bottom line is that nobody's going to cancel or subscribe to Amazon Prime just for prime video. It's a bolt-on thing that keeps you in the ecosystem and drives you there. Now, if you're Apple, think about some of the things they've done with content. One example is they own the rights to the Charlie Brown content. Think about Ted Lasso, shows like this. I think where Amazon wants your wallet and Netflix wants your eyes, Apple want your heart. They want you drawn to these things that you remember from your childhood. Brad Pitt headline products are very compelling. Ted Lasso, it's become a cultural touchstone. I think if they focus more on those, almost like the HBO model of the 2000s, of developing just a few really high quality contents that are strong enough to keep you attached, that's where this fits in with Apple, and where Apple can win with this. Whether this part of the business is necessarily profitable on its own basis, I think eventually they want to see that. But if it creates value for the entire ecosystem, I think that's the most important thing for Apple here.

Andy Cross: Is Apple attractive from a stock perspective? Again, I mentioned before, the growth has slowed. The stock has not been a super performer here, and now it sells in that 27-28 times earnings perspective, is with a lot of share buybacks, as you mentioned, in exceptionally profitable ways to invest, but still playing catch-up on the AI side. Is Apple attractive to you right now?

Jason Hall: Not at all. I love the business. I love the products. I'm a deep user of Apple products, and one of those people that signed up for Apple TV+ for Ted Lasso, and hasn't canceled it because there's so many other good unexpected programs that they have there. But the bigger concerns for me around a company like Apple's it's so fully valued, it's not growing. AI, I don't know that it's necessarily a concern right now, but at some point, they're trailing in that race for AI powered products, could potentially sneak up and hurt the company. They lack a real catalyst for the next leg of growth. Nothing is lined up to drive growth that would make 27, 28 times earnings or higher compelling to me. I think there's more risk of underperformance. I don't think investors are going to lose a ton of money here. There's a bigger risk of underperformance if you're making this a substantial portion of your portfolio.

Andy Cross: I agree. I think it's probably more in the money making category than adding to here. I'm an owner of it, and I'm just sitting on my shares, but not one that jumps to the top of my buy list right now, Jason. I do want to see a little bit more innovation from them, yet to come. I like the movies, but I do want to see innovation into the product cycle. That's a wrap for us today here on Motley Fool Money. Jason Hall, thanks for being here.

Jason Hall: Absolutely. This was fun. We'll do it again sometime soon.

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

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Andy Cross has positions in Amazon, Apple, and Home Depot. Jason Hall has positions in Qxo. The Motley Fool has positions in and recommends Amazon, Apple, Home Depot, and Nike. The Motley Fool has a disclosure policy.

The first half of the year has been somewhat of a rollercoaster ride for stocks -- and investors. Though all three major indexes have now crossed into positive territory, that wasn't the story just a few weeks ago. The S&P 500 index, the Dow Jones Industrial Average, and the Nasdaq Composite each sank in the early months of the year amid concerns that President Donald Trump's import tariff plan would hurt the economy, earnings, and stock performance.

Since then, positive signs, such as initial trade deals and strong earnings reports, have eased investors' minds, and as a result, the indexes rebounded. Still, certain growth stocks, such as some artificial intelligence (AI) players, remain in the doldrums and are heading for a first-half decline. Let's take a look at two that could be poised for a big second-half comeback.

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1. Apple

As Trump announced his tariff plan, investors worried about what it could mean for Apple (NASDAQ: AAPL), in particular, because the company produces most of its iPhones in China, a country most highly targeted by tariffs. Though the president exempted electronics products, this exemption is temporary. He even threatened Apple recently with a 25% tariff on all imported iPhones.

Apple made a move to diversify its manufacturing base, promising that most U.S.-destined iPhones would soon be made in India, but that country faces tariffs, too. All this tariff uncertainty weighed on Apple stock, pushing it down by about 20% so far this year.

So, why should we expect a comeback in the second half? While Trump is serious about bringing manufacturing back to the U.S., it's unlikely that he and his administration would make moves to destroy some of the country's top companies, including Apple. We've seen signs of flexibility in initial U.S. trade deals with the U.K. and China, so it's reasonable to expect a compromise with tech companies that won't limit their growth.

Meanwhile, Apple is a well-established player with a strong financial situation. The company has more than $48 billion in cash and marketable securities. So, it has the resources to address challenges. At the same time, the smartphone giant has a newish growth engine in the form of services. Services revenue, thanks to Apple's huge base of installed devices, has reached record levels quarter after quarter. This growth should continue as loyal Apple users continue to rely on the company for data storage, digital entertainment, and more.

All this means that today, Apple looks like a bargain, trading at 27 times forward earnings estimates, down from more than 35 times late last year. These levels offer it plenty of room to run, and it may do just that on any good news in the second half.

2. SoundHound AI

SoundHound AI (NASDAQ: SOUN) is a specialist in voice AI, with its technology powering voice systems in cars and restaurant ordering systems, to mention just two examples. The stock has plummeted 50% so far this year, but I see this as more of a buying opportunity than a reason to worry, and here's why.

First, after a 150% increase in SoundHound shares over the past year, it's not surprising that some investors may have locked in gains in recent times. Second, growth companies -- particularly young growth companies -- may struggle to expand during rough economic times, so investors' concerns earlier this year led to a sell-off of these sorts of players.

Today, it's important to look at SoundHound's earnings performance and long-term prospects. The company is in high-growth mode, with revenue soaring 150% in the latest quarter as it expands its customer base across various sectors. This is key because use across industries lowers risk, meaning if one customer or industry suffers, SoundHound won't necessarily suffer alongside it.

SoundHound has numerous patents protecting its technology, a system that immediately translates speech into meaning without the speech-to-text step. This results in speed and improved quality.

SoundHound's rapid growth and revenue of $29 million in the quarter, along with the forecasted $140 billion AI voice market size, suggest that much more growth could be ahead for this voice specialist.

All this means that as uncertainty about the general economy lifts and SoundHound continues to deliver growth, the stock could roar higher in the second half of the year.

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Adria Cimino 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.

Warren Buffett is widely regarded as one of the greatest investors of all time. He has a public track record of over 70 years to back that up, generating massive market-trouncing returns over that time.

His company, Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has continued to outperform the S&P 500 (SNPINDEX: ^GSPC) in 2025. That's despite the fact that Buffett's retirement announcement in May has somewhat deflated the premium investors are willing to pay for shares. That speaks to the strength of Buffett's portfolio of investments, including owned and operated businesses, marketable equities, private issues, and bonds.

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While Buffett expects everything his company buys to outperform over the long run (why else would he buy it?), one of Berkshire's biggest holdings looks particularly well-positioned to do so in the near term. That's backed up by analysis from Morgan Stanley's team of market analysts led by Lisa Shalett.

Here's the Buffett investment that could outperform over the rest of the year.

Buffett's selling many of his top stocks

It's worth pointing out that Buffett has had a hard time identifying great opportunities in the stock market recently. Not only that, but he's consistently sold many of Berkshire's biggest marketable equity holdings, including Apple (NASDAQ: AAPL), Bank of America (NYSE: BAC), and Citigroup (NYSE: C).

That said, Buffett hasn't said that he sees significant challenges developing at any of those companies. Apple notably remains Berkshire's largest marketable equity holding, accounting for about 21% of the portfolio. Bank of America remains third in line with more than 10% of the $283 billion portfolio invested in the bank stock. Buffett did cut Citi entirely, though.

The challenge for Buffett in holding those stocks appears to be a matter of valuation. Apple's price-to-earnings ratio when Buffett made Berkshire's initial investment in the stock was between 10 and 11.3. Today, it trades for 31 times trailing earnings, and it consistently traded higher throughout the second half of last year.

When it comes to bank stocks, Buffett has mentioned that the new accounting rules requiring banks to mark assets to market make it difficult to assess the financial reality of their balance sheets. As a result, he's less comfortable holding companies like Citi, and he's slowly selling off harder-to-value financial stocks.

It's not just those three that Buffett's been selling. In fact, Berkshire's been a net seller of stocks for 10 straight quarters. Total sales during that period add up to more than $174 billion in excess of Berkshire's stock purchases. While some of that cash went toward paying a record corporate tax bill last year, the vast majority has gone into a single investment vehicle: short-term U.S. Treasury bills.

Berkshire Hathaway held over $314 billion of U.S. Treasury bills as of the end of the first quarter. Morgan Stanley analysts think that's a smart place to stash cash in the current financial market environment. In fact, they think there's a good chance T-bills outperform the S&P 500 through the end of the year.

An extremely low-risk bet to beat the market

One of the biggest reasons analysts think government bonds offer a better investment than the S&P 500 right now is that the premium investors get for taking on the risk of equities is extremely low. Shalett and her team say the equity-risk premium sits near a 20-year low.

With the earnings yield (the inverse of the price-to-earnings ratio) on the S&P 500 sitting around 4.7%, that's not a lot higher than the 4.3% investors can receive on 10-year Treasuries. One-month to six-month yields also range between 4.1% and 4.3% as of June 25. Meanwhile, there seems to be a lot of risk involved with buying equities right now, considering the ongoing conflicts in the Middle East and unpredictable U.S. trade policies.

Further supporting the short-term value of Treasury bills are proposed regulatory changes, says Shalett. The Federal Reserve proposed adjusting the supplementary leverage ratio for banks. If banks can take on more Treasury bills on their balance sheets, it should support a higher debt ceiling without a rise in interest rates (thus supporting the value of current bond issues). Additionally, the Genius Act supports the creation and issuance of stablecoins, which are typically backed by U.S. Treasuries, adding more bidders to the auction.

But it's important for investors to keep in mind that these are short-term factors. The equity risk premium is unlikely to stay this low for very long, especially if the above factors and the Fed's plans to eventually lower the Fed Funds Rate push yields lower over time. Despite the fact that Buffett has more money in Treasuries than marketable equities right now, he'd still prefer Berkshire's money to go into stocks. "Berkshire shareholders can rest assured that we will forever deploy a substantial majority of their money in equities," Buffett wrote in his 2024 letter to shareholders.

The challenge for investors is finding good value in the current market. That's an even bigger challenge for Buffett, who's not very interested in opportunities where he can only invest a few billion dollars. The good news for smaller investors is that small- and mid-cap stocks trade at much more attractive valuations than large-cap stocks. So, while the large-cap S&P 500 index doesn't look that attractive right now, there are plenty of opportunities among smaller companies.

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Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $966,931!*

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*Stock Advisor returns as of June 23, 2025

Bank of America is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. Adam Levy has positions in Apple. The Motley Fool has positions in and recommends Apple, Bank of America, and Berkshire Hathaway. The Motley Fool has a disclosure policy.

Warren Buffett, chairman and CEO of Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B) has been managing investments for his company for roughly 60 years. For much of that time, he largely avoided trading in technology stocks, once stating:

Technology is based on change; and change is really the enemy of the investor. Change is more rapid and unpredictable in technology relative to the broader economy. To me, all technology sectors look like 7-foot hurdles.

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But there are always exceptions to the rule, and Berkshire Hathaway started buying Apple (NASDAQ: AAPL) stock in 2016 and invested in Amazon (NASDAQ: AMZN) beginning in 2019. These are two of the world's largest tech companies. Let's take a look at Buffett's seeming contradiction and maybe also determine whether these two blue chip stocks might fit into your portfolio.

Amazon invests in innovation to prolong its strong growth

Berkshire's stake in Amazon is a relatively small position in its nearly $285 billion stock portfolio (about 0.8%), valued at approximately $2.2 billion. It's likely that it was initially purchased in 2019 by one of Buffett's lieutenants. Nonetheless, Buffett has previously joked that he was "an idiot for not buying" the stock sooner.

Amazon's stock price has struggled of late, down about 1% so far in 2025 as it ramps up its capital expenditures to keep up in the artificial intelligence (AI) arms race. Amazon CFO Brian Olsavsky said capital expenditures could exceed $100 billion in 2025, driven by investments in data centers, chips, and AI infrastructure. That expense is up significantly from $48.1 billion in 2023 and $77.7 billion in 2024, reflecting the importance management puts on AI.

While the return on investment for AI may take a few years to materialize, Amazon continues to deliver results now. In Q1 2025, Amazon generated $155.7 billion in revenue, a 9% year-over-year increase. As for profitability, one metric Buffett prefers is operating earnings, a measure of a company's direct profits from its core operations that exclude volatile unrealized capital gains and losses resulting from its investments. Amazon delivered $18.4 billion in operating earnings for the quarter, representing year-over-year growth of 20.3%.

One area where Amazon's AI return on investment is already showing up is in its Amazon Web Services (AWS) division. Specifically, management projected a $117 billion annual revenue run rate for AWS in 2025, with its Q1 increasing 17% year over year to $29.3 billion. CEO Andy Jassy underscored the growth on the company's most recent earnings call, saying: "Before this generation of AI, we thought AWS had the chance to ultimately be a multi $100 billion revenue run rate business. We now think it could be even larger."

Data by YCharts.

Beyond its earnings growth, the balance sheet is in tremendous shape, with $41.2 billion in net cash. And as for Amazon's valuation, its stock looks undervalued compared to its historical averages. Specifically, Amazon stock trades at 34 times trailing earnings, close to a five-year low and well below its five-year median of 65 times trailing earnings.

Put it all together, and Amazon is the rare company that isn't afraid to invest in innovation to prolong its growth phase. It can afford to do so with a strong cash position and consistent earnings growth, making it a perfect buy-and-hold candidate for your portfolio.

2. Apple

Berkshire Hathaway first bought Apple stock in 2016, and despite trimming the position beginning in 2024, it remains the company's largest holding by far (21.2% of the portfolio). At the end of Q1 2025, Berkshire still owned over 300 million shares, worth north of $60 billion. Buffett has previously noted Apple is a "better business than any other we own [outright]."

In many ways, Apple checks every box for Buffett: iconic brand, loyal customers, and enormous cash generation. In its most recent quarter, its fiscal second quarter ended March 29, 2025, Apple generated $90.8 billion in revenue and $29.6 billion in operating income, year-over-year increases of 5% and 6%, respectively. Notably, revenue for the company's flagship product, the iPhone, only grew 2% year over year to $46.8 billion after the company faced a decline in the segment during its fiscal Q1 2025.

While Apple isn't spending as much proportionately as its peers on AI, it isn't ignoring it either. The company developed Apple Intelligence, a free, built-in AI system for its products, which CEO Tim Cook said in a 2024 earnings call "will transform how users interact with technology."

It could also boost its iPhone sales, considering the technology is only available on Apple's relatively newer hardware models, which may prompt more consumers to upgrade from their current devices. Apple hasn't broken out exact figures, but Cook recently noted that markets where the company rolled out Apple Intelligence saw "stronger" performance than those that hadn't.

Data by YCharts.

As investors wait to see demand for Apple Intelligence develop, Apple rewards shareholders through continued share repurchases and dividends. In just the past five years, Apple has reduced its share count by nearly 13%, and more recently announced a $100 billion addition to its share repurchasing program. Buffett has called buybacks a way to benefit all owners, provided they're done at attractive valuations. "The math isn't complicated: When the share count goes down, your interest in our many businesses goes up," he said in a 2022 letter to shareholders. "Every small bit helps if repurchases are made at value-accretive prices."

Additionally, management has consistently paid and raised its dividend for 14 consecutive years. Today, the company pays a quarterly dividend of $0.26 per share, equating to an annual yield of 0.5%. Moreover, considering its payout ratio -- the percentage of earnings paid out as dividends -- is a lowly 16%, investors can reasonably expect annual dividend hikes for the foreseeable future.

Data by YCharts.

Finally, despite the stock's recent decline of roughly 18% in 2025, it trades at 31 times its trailing earnings, slightly above its five-year median of 29 times. While that may give some investors pause, Apple's track record of innovation, shareholder returns, and support from Warren Buffett make a compelling case. For long-term investors concerned about valuation, dollar-cost averaging offers a disciplined way to build a position in one of the most iconic public companies ever.

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 $713,547!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $966,931!*

Now, it’s worth noting Stock Advisor’s total average return is 1,062% — a market-crushing outperformance compared to 177% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of June 23, 2025

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Collin Brantmeyer has positions in Amazon, Apple, and Berkshire Hathaway. The Motley Fool has positions in and recommends Amazon, Apple, and Berkshire Hathaway. The Motley Fool has a disclosure policy.

The Dow Jones Industrial Average tracks the performance of 30 blue chip stocks. These are some of the world's strongest companies. The index has climbed about 17,000% since 1930.

This is also why some investors like to bottom fish for undervalued stocks among the Dow Jones' worst performers each year. So far in 2025, Apple (NASDAQ: AAPL) and Nike (NYSE: NKE) are swimming at the bottom. Both stocks are down over 20% year to date.

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 see if either is worth buying right now.

1. Apple

Apple stock has slid 21% year to date. Weak iPhone sales, especially in China, have weighed on the stock's performance. The weak growth from its largest product category raises concerns about Apple's strategy to tackle the burgeoning opportunity in artificial intelligence (AI).

Apple launched its AI platform, Apple Intelligence, last year. This brought several new AI features to its Mac and iOS operating system. But Apple Intelligence hasn't translated to the strong sales cycle investors were expecting.

In the first half of fiscal 2025, total net sales were $219 billion, up just 4% year over year. This was mostly driven by double-digit growth in services (e.g. apps and subscriptions). Product sales posted just a 2% year-over-year increase in the most recent quarter.

Apple has tremendous brand power, and it's loaded with cash. The company hauled in $98 billion of free cash flow over the last year. It certainly has the money to make some moves in AI. But it is concerning that Apple's former chief design officer, Jony Ive -- who was instrumental in designing the iPhone and other products until leaving Apple in 2019 -- recently merged his design company with OpenAI and will consult the AI leader on new hardware products.

The fact that Ive is not coming back to Apple, but instead is joining the company that brought us ChatGPT speaks loud and clear that Apple is at risk of being disrupted in the next decade. Apple still has its "walled garden" advantage of hardware and services that many people attribute to a quality user experience. But it needs to make a bigger splash in AI than it has so far.

Given these developments, the stock doesn't look that attractive from a valuation standpoint. Its forward P/E of 27 looks expensive against analysts' estimates for 10% annualized earnings growth over the long term. Investors looking for better return prospects might want to wait until Apple settles on a more promising AI strategy to grow sales before buying shares.

2. Nike

Nike stock is down 21% this year and off by a stunning 66% since its previous peak four years ago. Declining sales and earnings caused Nike to bring in a new CEO last year. Company veteran Elliott Hill is aiming to return Nike to profitable growth, and if successful, could make the stock a bargain at current share prices.

The company is on pace to report earnings per share of $1.93 for fiscal 2025 based on consensus analyst estimates. The stock's price-to-earnings multiple looks fair based on this year's estimate, but Nike is capable of much higher earnings. The stock is currently trading at 16 times its $3.75 peak earnings in fiscal 2022, which seems too low for a brand of this caliber.

I believe Nike is a solid investment at these share prices. This is one of the world's iconic brands, generating $47 billion in trailing-12-month sales. Roughly two-thirds of that comes from footwear. Nike is still the leader in an industry that has a long history of growth and is expected to reach $677 billion by 2030, according to Grand View Research.

Nike has a straightforward path to growth. It involves investing in new products and shifting the current sales mix to those categories that are seeing the strongest demand. On that score, the company is seeing healthy demand in running shoes, such as the Peg 41 and Vomero 18. Despite posting a 9% year-over-year decline in total sales, Nike noted growth in running and training products last quarter.

To improve margins and grow earnings, Nike is tightening its inventory to better match supply and demand. Certain products like Air Jordan 1 and Dunk remain above demand levels, which could weigh on margins in the near term. However, as inventory tightens up over the next year, it should lead to more full-price sales and less discounting.

Wall Street analysts are expecting Nike to report earnings of $2.68 in fiscal 2026, representing a 38% increase over fiscal 2025 estimates. By 2030, Nike's earnings could be back to its previous peak, if not at new highs, and that could spell market-beating returns for investors.

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

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

When companies deploy artificial intelligence (AI) to streamline operations, the results can be staggering. Microsoft (NASDAQ: MSFT) is using AI-powered code-completion tools to help developers write code 55% faster. Johnson & Johnson (NYSE: JNJ) is leveraging AI to accelerate drug-discovery timelines. IBM (NYSE: IBM) reported over $1 billion in generative AI revenue in a single quarter. These efficiency gains translate directly to the bottom line, creating sustainable cost savings that can flow to shareholders through dividends and buybacks.

Consider what happens when a company with $100 billion in revenue uses AI to improve efficiency by just 5%. That's $5 billion in cost savings flowing straight to the bottom line -- money that can fund dividend increases, share buybacks, and further AI investments. This virtuous cycle of AI deployment leading to margin expansion leading to shareholder rewards is already playing out across multiple industries. The five companies below have figured out how to turn AI from a buzzword into a profit-generating machine that benefits patient dividend investors.

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 »

Microsoft leads from the front

Microsoft offers a modest 0.68% yield today, but don't let that fool you. With a rock-solid 24.4% payout ratio, the company has massive room to grow its dividend as AI supercharges its business. Microsoft isn't just selling AI through Azure and its OpenAI partnership -- it's using AI internally to optimize everything from coding to customer service. When a company generating $245 billion in annual revenue finds ways to boost efficiency by even 10%, that's $24.5 billion in potential savings flowing straight to the bottom line.

IBM's transformation pays off

IBM yields 2.38% and has raised its dividend for 30 consecutive years, though its 114.2% payout ratio demands attention. The company's aggressive pivot to AI and hybrid cloud is already bearing fruit, with generative AI revenue jumping over $1 billion in the third quarter of 2024 alone. While the high payout ratio suggests IBM is stretching to maintain its long dividend growth streak, the AI-driven revenue growth could quickly bring that ratio back to sustainable levels. Watson's evolution from a game show novelty to an enterprise AI powerhouse shows IBM still has innovation in its DNA.

Powering the AI revolution

ExxonMobil (NYSE: XOM) might seem like an odd AI play, but here's what everyone's missing: Every ChatGPT query, every AI model training session, every autonomous vehicle mile requires massive amounts of energy. Data centers are projected to consume 9% of U.S. electricity by 2030, and natural gas will power much of that demand. With a healthy 3.2% yield and a sustainable 51.4% payout ratio, Exxon is perfectly positioned to profit from AI's insatiable energy appetite while paying shareholders along the way.

A prescription for AI

Johnson & Johnson combines a juicy 3.47% yield with 63 years of consecutive dividend increases -- the definition of reliability. But this dividend titan isn't resting on its laurels. The company is deploying AI across drug discovery, clinical trials, and manufacturing, potentially shaving years off development timelines and billions off costs. With a 55.2% payout ratio, J&J has plenty of room to keep those dividend increases coming as AI-driven efficiencies boost profitability.

A hidden dividend story

Apple (NASDAQ: AAPL) sports the group's lowest yield at 0.52% but also the lowest payout ratio at just 15.6% -- meaning massive dividend growth potential. While everyone focuses on iPhone sales, Apple is quietly embedding AI into every corner of its ecosystem.

From on-device AI processing that protects privacy to machine learning that powers health features, Apple is building an AI moat that will drive customer loyalty and pricing power for years. That translates to growing cash flows and bigger dividend checks.

The efficiency dividend

These five stocks prove you don't need to gamble on speculative AI plays to profit from the AI revolution. By focusing on established companies using AI to drive efficiency and growth, you get the best of both worlds: steady dividend income today and accelerating earnings growth tomorrow. Microsoft and Apple offer lower yields but massive growth potential. IBM provides higher current income as its transformation gains steam. Exxon captures the infrastructure angle. And J&J brings healthcare innovation to the mix.

These five dividend payers are quietly compounding wealth through a combination of yield, dividend growth, and share-price appreciation. The combination of current income, margin-expansion potential, and reasonable valuations makes these stocks compelling holdings for any dividend-focused portfolio in the era of AI-powered efficiency gains.

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

Before you buy stock in Microsoft, consider this:

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

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $664,089!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $881,731!*

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See the 10 stocks »

*Stock Advisor returns as of June 23, 2025

George Budwell has positions in Apple and Microsoft. The Motley Fool has positions in and recommends Apple, International Business Machines, and Microsoft. The Motley Fool recommends Johnson & Johnson and recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.