If the last few years have taught investors anything, it’s the importance of keeping a long-term mindset when investing in the stock market. Macroeconomic headwinds in the post-COVID world sent the Nasdaq Composite plunging by 33% in 2022. Tech stocks were hit particularly hard as a spike in inflation curbed consumer and commercial spending.
Yet since the start of 2023, that same index has climbed by 60% thanks to economic improvements and excitement over emerging markets like artificial intelligence (AI). As a result, over that entire period — from the end of 2021 until today — it’s up by about 7% again. And those who sold in 2022 will not have benefited from the surge many stocks have enjoyed since then.
For instance, tech giants Advanced Micro Devices (NASDAQ: AMD) and Amazon (NASDAQ: AMZN) suffered stock declines of 55% and 50% in 2022. However, their share prices have since soared by 158% and 110%, respectively, as tech stocks have come back into favor.
Both companies have reputations for delivering consistent and significant gains over the long term. Meanwhile, coming developments indicate they will continue to profit from the tailwinds of tech for years. Here’s why I see them as screaming buys in June.
The case for Advanced Micro Devices
Shares of AMD have risen by more than 4,000% since 2014, with the last decade likely the most crucial period in its 55-year history. CEO Lisa Su took the helm 10 years ago, pulled the company back from the brink of bankruptcy, and led it to an impressive recovery.
During that period, AMD’s annual revenue rose by 312% while operating income climbed by 169%. Much of its growth is owed to the launch of its line of Ryzen central processing units (CPUs) in 2017. Those powerful chips allowed AMD to consistently take market share from Intel and given it the funds to expand into other sectors.
Indeed, AMD’s CPU market share rose from 18% in the first quarter of 2017 to about 33% today. Meanwhile, Intel’s fell from 82% to 64%.
AMD’s success has led it to delve into other areas of tech, such as AI. Over the last year, the company has released new AI graphics processing units (GPUs) to compete with the offerings of market leader Nvidia as it seeks to profit from soaring demand. Additionally, AMD is gradually expanding into the AI-capable PC market. According to a forecast from Canalys, AI-capable PCs will represent about 18% of all PC shipments this year, and that share is projected to more than double to 40% in 2025.
With solid positions in multiple areas of tech, AMD is on a promising growth trajectory. The company’s stock is trading at a premium, with a forward price-to-earnings ratio of 47. However, the vast potential of AI and other industries will likely keep its stock rising for years, making AMD an attractive long-term investment to buy right now.
The case for Amazon
Amazon was hit particularly hard during 2022 as reductions in consumer discretionary spending caused steep declines in its e-commerce business. However, impressive growth over the last year illustrated the company’s ability to navigate tricky market conditions successfully.
Amazon posted its first-quarter results on April 30. Revenue rose 13% year over year to $143 billion, outperforming Wall Street’s consensus estimate by $750 million. Its retail business grew significantly throughout 2023, and the trend continued into this year. Revenue from Amazon’s two e-commerce segments delivered combined growth of 12% as their operating income hit nearly $6 billion — a considerable improvement on the $349 million in losses they posted in the prior-year period.
In addition to solid gains in retail, sales in Amazon’s advertising services division increased by 24% after it began showing ads on the Prime Video streaming platform. It’s still early days for the company’s ad business, but it’s a promising growth driver.
All eyes were on Amazon’s cloud growth this earnings season, as it represents the tech giant’s expanding role in AI with Amazon Web Services (AWS). The platform reported 17% revenue growth in Q1 as operating income spiked 84% year over year. Amazon is investing heavily in AWS’ AI capabilities by building new data centers worldwide, launching new AI tools, and venturing into chip production.
Thanks to its thoroughly diverse business model and vast financial resources, Amazon is easily one of the best growth stocks available. Its price-to-sales ratio sits at an attractive 3, which could be a bargain valuation that makes Amazon a screaming buy this June.
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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. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2025 $45 calls on Intel and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
2 Growth Stocks That Are Screaming Buys in June was originally published by The Motley Fool
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