stocks

When all was said and done, last month ended up being a decent one for the broad market. The S&P 500 (^GSPC -1.44%) ended August 1.9% above where it started. For a couple of S&P 500 stocks, however, the month was far better.

Chemical company Albemarle (ALB -6.28%) was August’s biggest S&P 500 winner, up a little more than 25% after China’s Contemporary Amperex Technology Company shut down operations at one of the world’s biggest lithium mines. Since Albemarle also owns and operates lithium mines, a diminished supply of the metal used to make electric vehicle batteries creates greater demand for Albemarle’s products.

That being said, the stock had the advantage of hitting the ground running early in the month. Albemarle’s second-quarter sales of $1.3 billion and non-GAAP (adjusted) per-share income of $0.11 reported at the very end of July were both better than expected, while the bottom line was considerably better than analysts’ estimates for a loss of around $0.84 per share.

Image source: Getty Images.

Shares of S&P 500 constituent and health insurer UnitedHealth Group (UNH 0.36%) rallied a little more than 24% last month, mostly in response to news that Warren Buffett’s Berkshire Hathaway had taken on a stake in the beaten-down stock.

Just keep the move in perspective. The stock’s still down 48% from April’s peak thanks to the 60% sell-off from that high to the multiyear low hit in early August following a disappointing first-quarter report and subsequent reductions for its full-year earnings outlook. The company’s now only looking for 2025 earnings of “at least $16.00” per share, well down from guidance of between $29.50 and $30.00 per share as of the end of last year. Unexpectedly high costs (particularly for its Medicare Advantage plans) are the chief culprit.

While both gains are impressive, in and of themselves, they aren’t reason enough to step in. You’ll still want to be sure these companies are actually worth owning before buying into either of them.

Warren Buffett turned Berkshire Hathaway (BRK.A 0.66%) (BRK.B 0.63%) into a trillion-dollar company primarily by investing in stocks. “That preference won’t change,” Buffett wrote in his most recent letter to shareholders.

But Buffett has been challenged by the current market to find great value in equities. He’s sold more stocks from Berkshire’s publicly traded portfolio than he bought every quarter for nearly three straight years. As valuations continue to climb higher, there’s more reason to sell Berkshire’s biggest holdings, and fewer reasons to buy new positions with the proceeds and the company’s operating cash flow. As a result, Buffett’s seen his company’s cash position balloon to $344 billion as of the end of June.

Despite the difficult market, Buffett did find a few opportunities last quarter. Berkshire bought $3.9 billion worth of equities, including 10 publicly traded stocks disclosed in its quarterly 13F filing with the Securities and Exchange Commission (SEC). Here are all 10 of Buffett’s recent buys, including the one that looks like the best opportunity for investors right now.

Image source: The Motley Fool.

Buffett’s buy list

Berkshire Hathaway filed form 13F with the SEC on Aug. 14, revealing all of the moves Buffett and his fellow portfolio managers made during the second quarter. The filing also included an amendment to the company’s first-quarter 13F, which detailed previously undisclosed purchases.

All told, Berkshire established or added to 10 of its positions last quarter:

• UnitedHealth (UNH 2.48%)
• Nucor (NUE -0.71%)
• Lennar (LEN 0.01%) (LEN.B)
• Constellation Brands (STZ 1.79%)
• Pool Corp
• Lamar Advertising
• Allegion
• Heico
• Chevron
• Dominos Pizza

The amended filing also disclosed that Berkshire established a new position in homebuilder D.R. Horton (NYSE: DHI) in the first quarter, but trimmed back shares slightly in the second quarter.

There are a lot of great investment candidates among the new purchases in Berkshire Hathaway’s portfolio.

The new position in UnitedHealth comes at a time when the stock has been beaten down by a series of poor financial results and declining consumer sentiment. It’s facing an investigation into potential Medicare Advantage fraud, which could result in billions in revenue clawbacks and penalties. At the same time, medical costs and utilization have increased, weighing on its profitability. The stock looks like a classic “be greedy when others are fearful” purchase from Buffett.

Nucor is another interesting investment, as many see it as a stealth artificial intelligence stock. As a leading U.S. steel supplier, the company is well-positioned to capitalize on new data center construction across the country. And with President Donald Trump imposing a 50% tariff on steel imports, it could benefit Nucor’s pricing. Costs have weighed on Nucor recently, but less competition from foreign suppliers could open the door for bigger profits going forward, especially as demand increases with data center buildouts.

Homebuilders Lennar and D.R. Horton have been pressured by the current market. High home prices combined with high interest rates have led to a drop in buying activity, forcing them to offer incentives to buyers like buying down their mortgage rates. That’s weighed on both revenue and profit margins, which in turn has weighed on their stock prices. But the housing shortage isn’t going away, and that could make right now an opportunity to buy one of the homebuilders.

But another stock on Buffett’s buy list looks like an even better value than the rest, and it’s no wonder he’s been buying shares for three straight quarters.

The best of the bunch

Warren Buffett loves a company with a wide moat. And one of the companies with extremely strong competitive advantages on Buffett’s buy list is Constellation Brands.

The company owns the exclusive distribution rights to many of the most popular Mexican beer brands, including Modelo and Corona. It’s worked to expand its portfolio and build strong distribution relations that have led it to gain market share over the last decade. It’s now the second biggest beer vendor in the United States, dominating the premium import category.

Despite headwinds for the beer industry, Constellation continued to gain market share last quarter. Management said the beer business captured 0.6 points of dollar sales share. That growth was supported by expanding distribution and continuing to spend on strategic marketing to expand its customer base to more non-Hispanic drinkers. That positions it well to capitalize when consumer spending turns around.

Constellation’s wine and spirits business has been a drag on its results, though. To that end, management divested its low-end brands in the segment in June, and it now operates a leaner portfolio of premium brands. Still, management expects the segment to weigh on profits for some time as it resizes the operations.

Importantly, Constellation generates significant free cash flow, with expectations for $1.5 billion to $1.6 billion this year. It should be able to consistently generate that level of cash flow every year with steady sales growth and minimal capital expenditure needs. That supports its share repurchase program and quarterly dividend. Management bought back $306 million worth of shares last quarter while returning an additional $182 million through its dividend.

The stock price has dropped since Buffett’s initial purchase at the end of last year. With the pressure on the beer industry, the stock price has remained low, and shares now trade for less than 13 times forward earnings estimates. Despite the slow growth of the business, it’s well-positioned to continue making steady gains and outperforming its peers. Combined with share repurchases, it should be able to generate respectable earnings-per-share growth. That makes its current valuation very attractive, especially for investors who like to follow Buffett’s value investing style.

Artificial intelligence (AI) has taken the world by storm in what seems like the blink of an eye. It’s also played a huge role in pushing the stock market to new record highs.

While there has recently been some data that’s raised questions about the level of profitability that businesses are getting from AI integration, the technology is still just starting to change the world — and long-term investors who back the right players could score huge wins.

With that in mind, read on for a look at two stocks identified by Fool.com contributing analysts as standout buys even among other top artificial intelligence investment opportunities.

Image source: Getty Images.

The largest cloud provider, the most to gain

Jennifer Saibil (Amazon): Amazon (AMZN -1.16%) disappointed investors with its second-quarter report released two weeks ago, but if you can focus on the future, you can take Amazon stock’s dip as a buying opportunity. There are many reasons to imagine it can keep growing over the next few years and become one of the top players in AI.

It’s already the biggest cloud services provider in the world, with 30% of the market, according to Statista. One of the updates that alarmed the market after the report was growth in Amazon Web Services (AWS), Amazon’s cloud segment. Sales increased 17% in the quarter, only half the growth of its closest competitor, Microsoft‘s Azure. It may be somewhat of an overreaction, since AWS sales are much higher than Azure’s, at nearly $120 billion over the trailing 12 months, while Azure’s were $75 billion, and Amazon’s dollar share gain was still higher.

There were other things that bothered the market, such as tariff uncertainty and an outlook that didn’t quite match expectations. But these are short-term bumps along the road, and investors should be able to look past them and see the long-term opportunity, especially in AI.

As the largest cloud company, Amazon has incredible potential in building its generative AI business, which is primarily on the cloud. It’s investing more money than competitors, which CEO Andy Jassy upped to more than $100 billion this year in the second-quarter release. It offers a slew of services to meet demand at every level, from the small player who needs plug-in solutions to some of the biggest companies in the world, which employ a full staff of developers to create custom large language models (LLM).

Amazon’s trademark service is called Bedrock, and it offers a large array of LLMs and tools for developers to create AI apps that fit their needs. These include the gamut of LLMs, from high-cost to free, as well as Amazon’s own Nova LLMs. Amazon acquired a stake in AI company Anthropic last year, which has some of the best LLMs available. It’s even creating its own hardware, with budget chips for smaller needs, but it also has a robust partnership with chip powerhouse Nvidia.

CEO Andy Jassy keeps reminding investors that 85% to 90% of information technology (IT) spend is still on the premises, but that’s going to flip to the cloud over the next 10 to 15 years. As the largest cloud provider, with the most competitive set of options in place, Amazon is well-positioned to benefit from a windfall when that happens.

Up more than 140% over the last year, this stock is still flying under the radar

Keith Noonan (Unity Software): When most people think of hot AI stocks, Unity Software (U -1.95%) is probably a name that doesn’t come up much. The company specializes in video game development tools and digital marketing services, and it’s generally had a rough go of things since going public nearly five years ago. The company’s share price is down 41% from market close on the day of its initial public offering (IPO) and 80% from its all-time high.

Some poorly conceptualized and executed growth bets and monetization strategies caused the company to lose ground in its key markets, but the company has switched up its leadership team and is moving forward with renewed focus on profitability and strategic innovation. The turnaround initiative has helped the company’s share price surge more than 140% over the last year, and the comeback rally could still be in its early innings.

Sales increased 1.4% on a sequential quarterly basis in Q2, and management is guiding for mid-single-digit sequential growth in the current quarter. Compared to other companies with substantial exposure to AI trends, that may not look like much — but the relatively modest top-line expansion is obscuring the bigger comeback picture. Along those lines, the company’s new AI-driven ad network powered 15% sequential sales growth in Q2 and is likely still in the very early stages of making an impact.

Unity’s AI digital marketing platform looks poised to reenergize the business, and that’s far from the company’s only AI-related opportunity. Software and data that’s used to help nonplayable game characters navigate virtual worlds could wind up proving very useful when it comes to training robots to navigate real-life space.

Unity also provides the leading development platform for creating augmented reality (AR) and virtual reality (VR) applications, and its data and software tools could prove very valuable as tech giants look for the next big hardware platform after mobile.

I’m on a mission to reach financial freedom through passive income. My goal is to build multiple income streams that combine to eventually cover my basic living expenses, thereby eliminating the stress of having to earn money to meet my financial needs.

Every week, I aim to make progress toward this financial goal. This time, I plan to invest $250 into three leading dividend stocks: Coca-Cola (KO 0.94%), Camden Property Trust (CPT 1.12%), and W.P. Carey (WPC 0.90%). I believe these companies offer great potential to help me achieve my passive income ambitions.

Image source: Getty Images.

Satisfying income-seeking investors for decades

Coca-Cola has a terrific record of paying dividends. The global beverage giant has paid dividends for over a century, while increasing its payout for 63 consecutive years. That qualifies it for the elite group of Dividend Kings, companies that have had 50 or more consecutive years of annual dividend increases. Coca-Cola has been growing its payout at a low- to mid-single-digit rate in recent years.

The iconic beverage company’s dividend currently yields about 3%. That’s more than double the S&P 500‘s dividend yield, which is around 1.2%.

Coca-Cola generates significant cash flow, enabling it to reinvest in growing its business while paying its lucrative dividend. The company expects its capital investments to drive 4%-6% annual organic revenue growth over the long term, which should support mid- to high-single-digit annual earnings-per-share growth. Coca-Cola also has an A-rated balance sheet, giving it the financial flexibility to make acquisitions as attractive growth opportunities arise. Since 2016, a quarter of the company’s earnings growth has come from acquisitions. Those drivers should enable Coca-Cola to continue growing its cash flows and dividends.

Cashing in on demand for rental housing

Camden Property Trust is a real estate investment trust (REIT) focused on owning multifamily properties. The landlord owns nearly 60,000 apartment units across 15 major markets in the southern half of the country. It invests in metro areas benefiting from strong employment and population growth trends. That drives demand for rental housing.

The REIT has paid a stable and steadily rising dividend over the past decade and a half. While Camden hasn’t increased its dividend every single year, it has been on a steady upward trajectory since the REIT reset its dividend during the financial crisis. The company’s payout currently yields around 3.8%.

Camden expects to deliver consistent earnings and dividend growth in the future. Its apartment portfolio should benefit from strong demand for rental housing, which should keep occupancy levels high while driving steady rent growth. Camden also has a strong financial profile, enabling it to invest in expanding its portfolio by acquiring stabilized apartment communities and starting new development projects. These growth drivers should enable Camden to continue increasing its dividend.

Building back better

W.P. Carey is a diversified REIT. It owns operationally critical commercial real estate (retail, industrial, warehouse, and other properties) across North America and Europe, secured by long-term net leases with built-in rental escalation clauses. These properties produce very stable rental income that rises each year.

The REIT has increased its dividend every single quarter since resetting the payment at the end of 2023. W.P. Carey realigned its dividend with its expected cash flows after exiting the office sector by selling and spinning off those properties. That strategy shift enabled the company to focus on properties with better long-term growth potential.

W.P. Carey has been steadily rebuilding its dividend (which currently yields 5.4%) and its portfolio. It spent $1.6 billion on new property investments last year and is on track to invest at a similar rate this year. That should enable it to grow its cash flow per share at a mid-single-digit annual rate, supporting a similar dividend growth rate.

Ideal passive income stocks

Coca-Cola, Camden Property Trust, and W.P. Carey are excellent fits for my passive income investment strategy. They pay dividends with above-average yields that steadily grow. As a result, they enable me to generate an attractive and growing stream of dividend income. Investing an additional $250 in these stocks this week will add nearly $10 to my annual passive income total, bringing me a little closer to achieving financial independence.

The U.S. gross domestic product grew 3.3% year over year in the second quarter. That number shows the resilience of the U.S. economy despite higher interest rates and global macroeconomic uncertainty.

In such an environment, investors can particularly benefit from putting their money into companies with scale, durable cash flows, and the ability to ride secular tailwinds.

Image source: Getty Images

Here’s why these two stocks fit the criteria, making them wise buy-and-hold choices for the long term.

1. Nvidia

Nvidia (NVDA -3.38%) has firmly established itself as the leading player in artificial intelligence (AI) infrastructure, as it accounts for nearly 92% of the data center GPU market. That dominance has been the foundation of its robust financial performances of recent years. In its fiscal 2026 second quarter (which ended July 27), Nvidia reported revenues of $46.7 billion, up 56% year over year and exceeding guidance, while its GAAP (generally accepted accounting principles) gross margin was 72.4%. Management now expects fiscal third-quarter revenue to reach $54 billion, plus or minus 2%, driven by increasing demand for its Blackwell-architecture GPUs.

Nvidia estimates that between $3 trillion and $4 trillion will be invested in AI infrastructure by the end of 2030. En route to that total, it expects hyperscalers and enterprises to invest nearly $600 billion in data center infrastructure and computational technologies in calendar 2025, nearly double the amount that was invested in 2023. Nvidia’s Blackwell-based AI systems, such as the GB200 NVL System and GB300 platform, are increasingly being used by cloud service providers and consumer internet companies to train and power large AI models.

Nvidia’s proprietary Compute Unified Device Architecture (CUDA) software stack can be used to optimize its hardware for specific AI workloads. CUDA has become the industry standard, used by over 5 million developers. Nvidia has also strengthened its position in networking solutions, where its record quarterly revenue of $7.3 billion was driven by demand for Spectrum-X Ethernet, InfiniBand, and NVLink from customers building massive AI clusters. The company also highlighted that networking is now a $10 billion-plus annualized revenue business for it, underlining its importance as data centers evolve into AI factories.

Although U.S. restrictions on exporting the highest-end GPUs to China have been a headwind for the company, Nvidia is responding by adapting versions of its Blackwell chips (B30A ) that adhere to the new regulations and seeking regulatory approvals for broader deployments. It has already done this with its previous Hopper architecture, creating the H20 for Chinese customers. The company estimates the Chinese market opportunity to be nearly $50 billion in 2025.

Nvidia has also continued to reward its investors. In its fiscal second quarter, it returned $10 billion to shareholders through buybacks and dividends, and the board authorized an additional $60 billion stock repurchase program.

Trading at about 39.5 times expected forward earnings, Nvidia’s stock is quite expensive. However, that valuation seems justified considering its robust financials and unmatched AI ecosystem.

2. Alphabet

Alphabet (GOOG 0.56%) (GOOGL 0.63%) has firmly established itself as a dominant technology powerhouse, with a leadership position in digital advertising and rapidly expanding presences in cloud computing and artificial intelligence. In the second quarter, it reported revenues of $96.4 billion, up 14% year over year, and operating income of $31.2 billion. Those results underscore the scalability and profitability of its business model. The company also had $95 billion in cash and securities on its books at the end of the quarter, giving it the flexibility to keep investing in growth while returning capital to shareholders.

Alphabet’s core advertising businesses have demonstrated remarkable resilience. Google Search continues to provide more than half of total revenues, with AI-enhanced search features such as AI Overviews, AI Mode, and Lens offering new ways for users to access information. This has helped deepen user engagement and improve monetization. YouTube generated nearly $9.8 billion in advertising revenues in the second quarter, while subscriptions added another layer of recurring revenue streams.

Google Cloud accounted for a 13% share of the global spending on cloud infrastructure services in the second quarter, up 1 percentage point year over year. Google Cloud is benefiting from a growing demand for AI infrastructure and generative AI services worldwide. Google Cloud revenues were up 32% to $13.6 billion.

Alphabet has also successfully integrated advanced AI technologies across its entire ecosystem to improve productivity and efficiency, and create better user experiences. Its Gemini models are powering Search, Gmail, Workspace, and Maps. This is helping it hold onto its user base and improve avenues for monetization. Alphabet is also investing in other opportunities such as autonomous driving through its Waymo, healthcare, and quantum computing units — giving investors exposure to next-generation technologies.

It has been returning significant capital to shareholders, including nearly $16.1 billion returned through share buybacks and dividends in the second quarter.

Despite a resilient advertising business, a fast-growing cloud division, and deep AI integration, Alphabet trades at 18.3 times forward earnings, lower than its five-year average of 23.9.

Risks such as increased regulatory scrutiny, a looming court ruling in a major anticompetition case, rising competition in digital advertising, and concerns about the long-term impact of AI on search monetization may be among the reasons why the stock trades at a discounted valuation. Yet this very discount provides investors with the opportunity to buy shares of a dominant, cash-rich business with an AI-enabled platform at a reasonable price.

Considering these factors, Alphabet stock looks like an attractive stock to buy now and hold for the foreseeable future.

It didn’t turn out to be a “Cruel Summer” for singer Taylor Swift: she and Kansas City Chiefs tight end Travis Kelce, in a continuation of their ongoing “Love Story,” have officially told each other, “You Belong With Me.”

The pop icon, self-made billionaire, and self-described “Anti-Hero” announced her engagement to Kelce in an Instagram post on Tuesday. Sure enough, where there used to be a “Blank Space” on Swift’s ring finger, she was now “Bejeweled” with a large engagement ring (and we hope she doesn’t accidentally “Shake It Off”).

Swift surely knew “All Too Well” that the announcement would make “Sparks Fly” among her legion of fans (to them I say, “You Need to Calm Down”), but even in her “Wildest Dreams,” she probably never expected the news to affect the stock market.

But it did. Here’s how.

Image source: Getty Images.

Look what you made me do…to the market

In the immediate wake of the announcement, as fans were still trying to identify the exact cut of the diamond in Swift’s ring (it was a “cushion cut,” for those who are interested), there was a brief, otherwise-unexplained 1% pop in the stock price of Signet Jewelers Limited (SIG -2.54%), one of the few publicly traded jewelry companies.

As the afternoon wore on, Signet’s shares climbed higher in a rally continued through Wednesday and into Thursday’s premarket trading, when Signet’s stock briefly hit $95/share, up nearly 10% over the pre-“pop star pop” price. The Swift Effect was even more pronounced for Brilliant Earth Group (BRLT 8.55%), which soared from $2.17/share at 12:50 PM on Tuesday to close at $2.82/share, a 30% gain.

Even luxury brands only partially exposed to the jewelry market rose in the wake of the announcement: Movado Group (MOV 2.47%), which is primarily a watchmaker but does sell other jewelry items, and LVMH (LVMHF -1.43%), which owns Tiffany & Co., were both up more than 4% over their pre-engagement price at Thursday’s close.

Today was a fairytale

It’s not the first time that Taylor Swift’s legions of fans — known as “Swifties” — have collectively influenced the financial world. In July 2023, the Federal Reserve’s Beige Book credited Swift’s “Eras” tour as being responsible for the strongest month of hotel revenue in Philadelphia since the pandemic. This mirrored reports from Cincinnati and Chicago, among many other cities, that credited the “Eras” tour for record hotel revenues.

So how did this happen? There was likely a noticeable spike in internet searches for various types of wedding rings in the wake of Swift’s announcement as eager fans tried to identify the exact ring in question (and possibly score one for themselves). That activity may have triggered certain traders’ algorithms to buy jewelry stocks…or perhaps there are just plenty of Swifties among the ranks of hedge fund managers.

The money question is, could this one-time pop in interest translate into a meaningful increase in jewelry sales, or lasting gains for these jewelry stocks?

Is it over now?

Unfortunately, it looks like the rally may already be fizzling. Although Signet Jewelers closed on Thursday at $89.86/share, which is 3.6% above its pre-engagement price, it had fallen significantly from its post-engagement high of $95. Brilliant Earth Group also closed lower on Thursday at $2.69/share, though that was also well above its pre-engagement price.

Getting engaged is a much bigger commitment than buying an album or attending a concert (although the cost of some resold “Eras” tour tickets could have funded an entire wedding and then some). Sure, it might be fun to dream about getting a ring like Taylor Swift, or to shop for one online, but even if you idolize Swift, will her engagement really prompt legions of uncommitted Swifties to propose? (Don’t get me wrong: I know the intensity of Swift’s fandom is strong…but that strong?)

Meanwhile, all of the aforementioned jewelry and jewelry-adjacent companies have significantly lagged the S&P 500 over the past five years: some by a little (Signet is trailing on a total return basis by about 35 percentage points) to a lot (Brilliant Earth is “Down Bad,” by a jaw-dropping 130 percentage points).

I’d classify those returns as not just in the “Red,” but redder than “Bad Blood,” and it’ll take more than a one-time surge of interest from Swifties to make me say anything besides “I Knew You Were Trouble” and “We Are Never Ever Getting Together.”

That said, whichever jeweler can be the first to mass-produce a Taylor Swift-inspired cushion-cut engagement ring will almost certainly have a hit on their hands.

The 10 largest growth-focused U.S. companies now make up 38% of the S&P 500. Known as the “Ten Titans,” the list includes Nvidia (NVDA -3.38%), Microsoft, Apple, Amazon, Alphabet, Meta Platforms, Broadcom, Tesla, Oracle (ORCL -5.97%), and Netflix (NFLX -1.87%).

Oracle, Netflix, and Nvidia have been the best performers of the Titans year to date. Let’s determine if these growth stocks have what it takes to continue outperforming next year.

Image source: Getty Images.

Oracle has innovative ideas, but they come at a price

Oracle has been the standout among the Titans. With a year-to-date total return of more than 40%, it vaulted its market cap above $660 billion.

ORCL Total Return Level data by YCharts.

Oracle was close to dead money in the five years between 2015 and the end of 2019 — gaining just 17.8% compared to 56.9% for the S&P 500. But since the start of 2020, Oracle is up 345% compared to a 100.6% gain in the S&P 500. A big driver of the outperformance is the build-out and adoption of Oracle Cloud Infrastructure (OCI).

Oracle transformed from a database-first company to a fully fledged ecosystem. Not long ago, companies were using Oracle’s database software on third-party clouds. Oracle decided to capture that revenue by building out its own cloud services.

Oracle Integration Cloud hosts software-as-a-service offerings for financial reporting, automated workflows, human resources operations, marketing, personalization, and more. Oracle also offers artificial intelligence (AI)-powered database services. And OCI has been shown to be much more cost-effective for data-intensive operations than Amazon Web Services, Microsoft Azure, or Google Cloud. It’s an especially ideal offering for industries like financial services and healthcare that have complex regulatory frameworks and sensitive information. On its earnings calls, Oracle often discusses how industries are choosing OCI for its security and compliance capabilities.

Oracle was already a leader in enterprise software solutions. And now, it is a major player in the cloud business. The main downside of Oracle is that its valuation is expensive, and it is spending extremely aggressively. Oracle is arguably among the higher-risk, higher-potential-reward Titans. If its investments translate to bottom-line earnings growth, it could continue to be one of the best performers in the group. If not, it wouldn’t be surprising if the stock underwent a sizable sell-off.

Netflix is an entertainment giant that is raking in the cash flow

Netflix’s outsized returns in recent years are partly due to how beaten down the stock was going into 2023. Netflix fell over 50% in 2022, outpacing the broader sell-off in the Nasdaq Composite (NASDAQINDEX: ^IXIC) that year. At the time, other streaming platforms were gaining traction, and Netflix was still inconsistently profitable.

The business model has remained largely unchanged over the past decade. So it’s not a transformational story like Oracle. Rather, Netflix has perfected its craft.

The biggest change has been its content slate — what it spends on, how it markets that content (like the global success of “KPop Demon Hunters,”) and basically just boosting its overall content success rate. The second major change was cracking down on password sharing. This was a resounding success because a lot of new accounts opened up — showing that customers were willing to pay for Netflix because they value the service (again, despite a lot of competition). And finally, Netflix’s ad-supported tier is driving new signups, which accelerates revenue growth.

Netflix is an industry-leading cash cow with high margins. It has become a near-perfect business. The only issue is that the valuation reflects that, as Netflix trades at 52 times trailing 12-month earnings. Netflix could still be a winning long-term stock, but it may need a year or two to grow into its valuation. Therefore, it may not be a standout performer in 2026.

Nvidia just delivered another blowout quarter

Nvidia reported exceptional second-quarter fiscal 2026 results on Aug. 27 despite the company’s China business being hindered by export restrictions to China.

Even with difficult comps from the second-quarter fiscal 2025, Nvidia grew revenue by 56% and adjusted earnings per share by 54%. Arguably, the most impressive aspect of Nvidia’s results is that it continues to sustain ultra-high gross margins over 70%. Nvidia’s high margins allow it to convert a substantial amount of sales into profit, which is a testament to its edge over the competition and technological leadership on the global stage.

Nvidia gets a lot of attention for its data center business — and rightfully so, as it made up 88% of revenue in the recent quarter. But it’s worth noting that the rest of the business is doing well too. Nvidia’s non-data center revenue, which includes gaming and AI PC professional visualization, automotive, and robotics, was collectively $5.49 billion — up 48% compared to $3.7 billion a year ago.

Nvidia is in its third year of what has been an uninterrupted masterclass of exponential growth on a scale unlike any business the world has ever seen. And somehow, the company still has its foot on the gas with no signs of slowing down.

Nvidia’s outlook for the third-quarter fiscal 2026 calls for $54 billion in revenue even if it ships zero H20 chips to China — all while maintaining a 73% gross margin. That would mark a 54% increase in revenue and just slightly lower gross margins than third-quarter fiscal 2025 and a near three-fold increase in revenue in just two years.

Despite the impeccable results, Nvidia’s valuation isn’t cheap, as investors are pricing in a sustained breakneck growth rate. But Nvidia just keeps delivering, so its 58.4 price-to-earnings ratio is reasonable.

If Nvidia’s stock price remained unchanged for a year but the company grew earnings by 50%, the P/E would drop to 38.9. So even now, with the stock on track to crush the S&P 500 for the third consecutive year, Nvidia remains a top AI stock to buy now.

I expect Nvidia to continue leading the Ten Titans higher in 2026, especially if trade policy with China eases. However, if for whatever reason there’s a slowdown in AI spending from key Nvidia customers, Nvidia could drag down the Ten Titans and the broader market with it.

The stock market makes it easy to build wealth. All you have to do is invest in strong businesses that are growing and profitable. Choosing top stocks from among brands or services you use regularly is a great place to start.

To give you some ideas, three Fool.com contributors are here to offer three timely stocks to buy in September. Here’s why they chose Apple (AAPL -0.19%), Airbnb (ABNB -0.01%), and RH (RH -1.55%).

Image source: Getty Images.

1. Apple still has an ace up its sleeve

John Ballard (Apple): Shares of Apple are up 40% over the past three years but are currently trading below their 52-week high of $260. Apple has a tremendous competitive moat around its ecosystem of products and services that locks in customers and generates enormous profits. While flat iPhone sales and the lack of a compelling artificial intelligence (AI) strategy has created uncertainty for investors, the recent dip is a good buying opportunity.

Apple is one of the strongest consumer brands. Its installed base of active devices, including iPhones, continues to hit all-time highs. Apple reported more than 2.35 billion active devices at the beginning of the year. This continues to fuel steady growth in services, including subscriptions and app purchases, which now make up more than a quarter of Apple’s revenue.

While Apple Intelligence has had a positive impact on iPhone 16 sales, it hasn’t been the game-changer investors were expecting. For a company that generates $96 billion in free cash flow and has massive cash resources on its balance sheet, Apple has surprisingly missed the boat on building its own proprietary AI models. But the good news is that Apple’s enormous cash resources will allow it to catch up quickly through acquisitions, which is a catalyst to watch.

Apple’s sticky ecosystem of products and services, growing installed base of devices, and profitability make the stock a solid investment. These advantages buy some time for Apple to figure out its AI strategy, providing investors a good opportunity to buy shares before better news sends the shares higher.

2. This travel powerhouse is thriving, but its stock isn’t keeping up

Jennifer Saibil (Airbnb): Airbnb stock has not kept up with its growth, but as it continues to expand and increase sales, it looks poised to soar.

Airbnb has become the premier platform for vacation rentals, changing the landscape of the travel industry. While short-term rentals are its bread and butter, it offers a large assortment of services today, including longer-term stays and even living in Airbnbs.

It had already launched an entire segment devoted to experiences, which dovetails with its travel categories, and recently launched a new segment with all kinds of services, like salons and photography. Each of these new features increases its addressable market and its brand presence, making it the go-to name for travel-related services.

That’s important to maintain its growth levels. Revenue growth has slowed, but it remains in the double digits, and revenue increased 13% year over year in the second quarter. Aside from the expansion, Airbnb is constantly adding new features and updates to improve the user experience and generate higher engagement and sales. Some of its updates include more flexible payments and a more fine-tuned search system, which makes it easier for customers to press the button.

It’s also been building its brand in countries where it has plenty of rentals but lower name recognition. Just as many travelers use it domestically in the U.S., it’s trying to make that happen in other regions.

It’s done a spectacular job of generating free cash flow, which reached $1 billion in the second quarter at a 31% margin, and it’s also highly profitable, with a 21% profit margin in the quarter.

The market has been disappointed in Airbnb’s decelerating growth, and it has been concerned about regulatory hurdles. But Airbnb continues to thrive as a business, and its stock should eventually follow suit.

3. Housing stocks are coming back

Jeremy Bowman (RH): It’s been a rough few years for RH, the home furnishing company formerly known as Restoration Hardware, but a number of tailwinds appear to be forming for the company.

First, after a long wait, the Federal Reserve appears to be ready to lower interest rates following Jerome Powell’s comments at the Jackson Hole conference, and RH is likely to be one of the beneficiaries.

The company’s business is correlated with the housing market, as home sales tend to trigger purchases of home furnishings. Even in a challenging housing market, RH has delivered solid results, returning to growth after an earlier lull as revenue rose by 12% in the first quarter.

Additionally, the company is expanding both geographically and into new businesses. It’s opening up several galleries across Europe, and has launched new verticals, including a handful of guesthouses and restaurants, and leasing charter jets and yachts. That’s all part of a strategy to extend the luxury brand beyond home furnishings, and it could significantly expand RH’s addressable market.

The stock is still down significantly from its all-time high, and looks cheap based on forward estimates, trading at just around 15 times next year’s expected earnings.

The company is set to report second-quarter earnings on Sept. 11, and better-than-expected results could spark a surge in the stock, and a rate cut from the Federal Reserve later in the month could do the same.

Over the longer term, RH has a lot of upside, especially if the housing market recovers.

For much of the last 30 years, investors have had a next-big-thing innovation to captivate their attention. But in rare instances, two or more hyped trends can coexist. Though the rise of artificial intelligence (AI) is the primary headline-grabber at the moment, investor euphoria surrounding stock splits in high-profile companies comes in a close second.

A stock split is an event that allows a publicly traded company to cosmetically adjust its share price and outstanding share count by the same factor. The “cosmetic” aspect of these changes has to do with stock splits having no effect on a company’s market cap or its underlying operations.

But although these changes are superficial, they’re often viewed very differently by investors on Wall Street. Reverse splits, which are designed to increase a company’s share price, are typically viewed as a situation to avoid by investors. Businesses that need to increase their share price are often doing so to avoid delisting from a major stock exchange and may be operating from a position of weakness.

Image source: Getty Images.

In comparison, investors almost always gravitate to companies announcing and completing forward splits. This type of split reduces the share price (and correspondingly increases the share count) to make it more nominally affordable for retail investors who can’t purchase fractional shares with their broker. Generally, if a business needs to reduce its share price to make it more “affordable” for everyday investors, it must be doing something right from an operating standpoint.

To date, three prominent companies have announced and completed a forward stock split in 2025. One of these high-flying stocks — which has gained just shy of 300% over the trailing-three-year period — is becoming the newest member of the benchmark S&P 500 (^GSPC 0.24%), effective as of the start of trading today, Aug. 28.

The newest member of the benchmark S&P 500 completed its first-ever stock split this year

The phenomenal business that’s forever changing the broad-based S&P 500 is automated electronic brokerage firm Interactive Brokers Group (IBKR -2.37%).

Unlike auto parts chain O’Reilly Automotive, which completed a 15-for-1 split in June, and Fastenal, which effected its ninth forward split in May since going public in 1987, Interactive Brokers had never completed a split. That changed when its 4-for-1 split was completed in mid-June.

The S&P 500, which consists of 500 of the largest (and generally profitable) public companies, tends to change a bit each year. Because of mergers and acquisitions, as well as poor stock performance, not all of the 500 components in the benchmark index stick around.

For instance, pharmacy chain Walgreens Boots Alliance (WBA 0.55%) is being acquired by private equity firm Sycamore Partners in an all-cash deal, with a potential divested asset proceed right to come for remaining shareholders. While there’s no set closing date for the Walgreens deal, it’s expected to wrap up before the end of the year. This means it’s only a matter of time before the S&P 500 needs a new member.

Interactive Brokers Group checked all the right boxes to become the S&P 500’s newest entrant and replace Walgreens Boots Alliance. It handily surpasses the minimum market cap requirement of $22.7 billion, as of July 1, 2025, more than meets than minimum monthly trading volume requirements, and has been profitable over the trailing four quarters.

Entering the S&P 500 means index funds that attempt to mirror the performance of this broad-based index will be buying up shares of Interactive Brokers Group stock.

Image source: Getty Images.

Investing aggressively in automation has given Interactive Brokers an edge

However, entering the S&P 500 today represents just a short-term milestone for a company that’s been firing on all cylinders.

Without question, Interactive Brokers is a business that thrives off of the nonlinearity of stock market cycles. Though stock market corrections and bear markets are normal, healthy, and inevitable events on Wall Street, they’re historically short-lived.

Based on an analysis from Bespoke Investment Group that was published on X (formerly Twitter) in June 2023, the average S&P 500 bear market since the start of the Great Depression in September 1929 lasted only 286 calendar days, or less than 10 months.

On the other end of the spectrum, the typical S&P 500 bull market has endured 1,011 calendar days, or roughly 3.5 times longer. Bull markets tend to encourage investors to trade and put more money to work in the stock market, which is good news for online brokers.

But what’s really helped Interactive Brokers Group stand out is its investments in technology and automation, which have been targeted at retail investors.

Aggressively investing in its platform and emphasizing automation has lowered its operating expenses and allowed the company to be more competitive in other areas where it can lure/retain retail investors. For example, Interactive Brokers offers a higher interest rate on cash held in customer accounts than its competitors provide, and its margin loan rates are notably lower than its peers. It’s able to maintain these dangling carrots thanks to its prudent investments in automation.

Every key performance indicator (KPI) for Interactive Brokers is currently growing by a double-digit percentage from the prior-year period. As of the end of June, total customer accounts jumped 32% to 3.87 million from the comparable period last year, with customer equity rising 34% to nearly $665 billion. Perhaps most importantly, daily average revenue trades rose 49% to 3.55 million, which signals that its clients are trading more than ever before.

While a nearly 300% move higher for Interactive Brokers Group stock may merit a short breather at some point, the company’s KPIs point to additional long-term upside.

Arguably, nothing has commanded the attention of professional and everyday investors quite like artificial intelligence (AI). In Sizing the Prize, the analysts at PwC forecast AI would provide a $15.7 trillion boost to the global economy by 2030, with $6.6 trillion tied to productivity improvements, and the remainder coming from consumption-side effects.

Excitement surrounding this technology has sent some of the market’s largest and widely held AI stocks soaring, including AI-data mining specialist Palantir Technologies (PLTR 2.37%) and electric-vehicle (EV) manufacturer Tesla (TSLA 1.42%).

But just because these stocks have been (thus far) unstoppable, it doesn’t mean optimism is universal among analysts. Two Wall Street analysts who are respective longtime bears of Palantir and Tesla stock believe both companies will lose most of their value.

Image source: Getty Images.

1. Palantir Technologies: Implied downside of 72%

There’s a solid argument to be made that Palantir has been the hottest AI stock on the planet since 2023 began. Shares have rallied approximately 2,370%, with Palantir adding more than $360 billion in market value, as of the closing bell on Aug. 22.

Both of the company’s core operating segments, Gotham and Foundry, lean on AI and machine learning. Gotham is Palantir’s breadwinner. It’s used by federal governments to plan and execute military missions, as well as to collect/analyze data. Meanwhile, Foundry is an enterprise subscription service that helps businesses better understand their data and streamline their operations. Neither operating segment has a clear replacement at scale, which means Palantir offers a sustainable moat.

But in spite of Palantir’s competitive edge, RBC Capital Markets’ Rishi Jaluria sees plenty of downsides to come. Even though Jaluria raised his price target on Palantir shares for a second time since 2025 began, his $45 target implies downside of up to 72% over the next year.

If there’s one headwind Jaluria consistently presents when assigning or reiterating a price target on Palantir, it’s the company’s aggressive valuation. Shares closed out the previous week at a price-to-sales (P/S) multiple of roughly 117!

Historically, companies that are leaders of next-big-thing technology trends have peaked at P/S ratios of approximately 30 to 40. No megacap company has ever been able to maintain such an aggressive P/S premium. While Palantir’s sustainable moat has demonstrated it’s worthy of a pricing premium, there’s a limit as to how far this valuation can be stretched.

Jaluria has also previously cautioned that Foundry’s growth isn’t all it’s cracked up to be. Specifically, Jaluria has opined that Foundry’s tailored approach to meeting its customers’ needs will make scaling the platform a challenge. Nevertheless, Palantir’s commercial customer count surged 48% to 692 clients in the June-ended quarter from the prior-year period, which appears to be proving RBC Capital’s analyst wrong.

There’s also the possibility of Palantir stock being weighed down if the AI bubble were to burst. History tells us that every next-big-thing trend dating back three decades has undergone a bubble-bursting event early in its expansion. While Palantir’s multiyear government contracts and subscription revenue would protect it from an immediate sales decline, investor sentiment would probably clobber its stock.

Image source: Tesla.

2. Tesla: Implied downside of 94%

Over the trailing-six-year period, shares of Tesla have skyrocketed by more than 2,200%. Though Tesla hasn’t moved in lockstep with other leading AI stocks, its EVs are increasingly reliant on AI to improve safety and/or promote partial self-driving functionality.

Tesla was the first automaker in more than a half-decade to successfully build itself from the ground up to mass production. It’s produced a generally accepted accounting principles (GAAP) profit in each of the last five years, and it delivered in the neighborhood of 1.8 million EVs in each of the previous two years.

In spite of Tesla’s success and it becoming one of only 11 public companies globally to have ever reached the $1 trillion valuation mark, Gordon Johnson of GLJ Research sees this stock eventually losing most of its value. Earlier this year, Johnson reduced his price target on Tesla to just $19.05 per share, which implies an up to 94% collapse.

Among the many concerns cited by Johnson is Tesla’s operating structure. Whereas other members of the “Magnificent Seven” are powered by high-margin software sales, Tesla is predominantly selling hardware that affords it less in the way of pricing power. Tesla has slashed the price of its EV fleet on more than a half-dozen occasions over the last three years as competition has ramped up.

Johnson has also been critical of Tesla’s numerous side projects, which are providing minimal value to the brand. Although energy generation and storage products have been a solid addition, the company’s Optimus humanoid robots and extremely limited robotaxi service launch have been grossly overhyped.

This builds on a larger point that Tesla CEO Elon Musk has a terrible habit of overpromising and underdelivering when it comes to game-changing innovations at his company. For instance, promises of Level 5 full self-driving have gone nowhere for 11 years, while the launch of the Cybertruck is looking more like a flop than a success.

Furthermore, Tesla’s earnings quality is highly suspect. Though the company has been decisively profitable for five straight years, more than half of its pre-tax income in recent quarters has been traced back to automotive regulatory credits and net interest income earned on its cash. In other words, a majority of Tesla’s pre-tax income derives from unsustainable and non-innovative sources that have nothing to do with its actual operations. Worse yet, President Trump’s flagship tax and spending bill, the “Big, Beautiful Bill” Act, will soon put an end to automotive regulatory credits in the U.S.

What investors are left with is an auto stock valued at north of 200 times trailing-12-month earnings per share (EPS) whose EPS has been declining with consistency for years. While Johnson’s price target appears excessively low, paying over 200 times EPS for a company that consistency underdelivers is a recipe for downside.

There are over 2,900 people in the world with a net worth of over $1 billion, according to the World’s Billionaires List from Forbes. Some build wealth by running a business, and others just allow trust fund managers to build wealth for them. But many of the world’s billionaires continue to grow their wealth through investing in stocks.

Among them are Warren Buffett, Bill Ackman, and David Tepper. Let’s look at one stock each of these investors has bought recently.

Image source: Getty Images.

1. Warren Buffett

Warren Buffett became CEO of Berkshire Hathaway through investing. And after taking over the company, he continued to invest in stocks with the company’s cash. That’s continued for decades now, allowing Buffett’s net worth to climb to over $150 billion today. And in recent months, Buffett’s Berkshire has been buying shares of Domino’s Pizza (DPZ -1.96%).

Buffett’s top rule for investing is: “Never lose money.” And I believe Domino’s Pizza stock will adhere to this rule over the long term. Here’s why.

Domino’s is the world’s largest pizza chain. But it mostly franchises its restaurants. The company operates a huge supply chain on behalf of its franchisees, which is a big reason they can run their restaurants profitably. And for its part, Domino’s makes high-margin revenue from franchise fees.

In my view, Domino’s size and supply chain are competitive advantages. The business likely won’t struggle with profitability, and management uses the profits to reward shareholders with stock buybacks and a dividend that routinely goes up.

Domino’s has underperformed the S&P 500 in recent years and could struggle to outperform in coming years. But it will likely increase in value over the long term, which is why it follows Buffett’s top rule.

Berkshire didn’t purchase many shares of Domino’s in the most recent quarter. But its stake did increase, and it now holds over 2.6 million shares of the pizza chain.

2. Bill Ackman

Before he was famous, Bill Ackman was studying Buffett’s investing philosophy to learn what he could. Considering Ackman’s net worth is over $9 billion today, I’d say it worked out pretty well. And in the second quarter, he made an investment in Amazon (AMZN 0.29%) that he believes can carry his net worth higher still.

It’s hard to argue against an investment in Amazon stock. Its relevance to consumers as the largest e-commerce company in the world is impossible to understate.

But it’s also majorly important to businesses as well. Third-party sellers reach customers with Amazon’s marketplace, advertisers can find new customers with its advertising slots, and corporations can get a tech upgrade by using the tools and products on Amazon Web Services (AWS).

Specifically with AWS, Amazon has a cash cow that can reward shareholders for years to come. Over the last 12 months, this cloud-computing division has generated over $110 billion in net sales and has earned the company almost $43 billion in operating income. It’s a huge profit stream for the company that should only continue for the long term, especially with drivers such as artificial intelligence (AI) still ramping up.

Ackman’s hedge fund, Pershing Square, bought 5.8 million shares of Amazon in the second quarter of 2025. It makes the company worth 9% of the portfolio’s value, demonstrating Ackman’s conviction in this stock.

3. David Tepper

Lastly, David Tepper has a net worth of over $21 billion. And his hedge fund, Appaloosa Management, has been busy buying shares of Vistra (VST 2.86%). This used to be a more-sleepy stock. But it’s been a top performer in recent years due to surging demand for electricity.

Energy stocks such as Vistra didn’t see much action for a while because of the low growth in electricity consumption in the U.S. But there are trends that are now catalyzing growth better than anything in the last 20 years. For just a couple of examples of what’s driving growth, management on a recent conference call said, “Hyperscalers continue to invest in AI and data center infrastructure,” and these things are energy intensive.

The conversation regarding nuclear energy is heating up as investors wonder what will meet growing energy demand. But while many investors are focusing on nuclear start-ups, Vistra already produces nuclear power as well as generating electricity from a variety of other sources.

To be clear, Tepper’s Appaloosa hasn’t purchased any shares of Vistra since the fourth quarter of 2024. In fact, it was a seller in the two most recent quarters. That said, it was among the top 100 stocks that were being bought by hedge funds in the second quarter of 2025, according to the website HedgeFollow. And Tepper’s position is still substantial considering it’s valued at roughly $350 million.

Play your own game

Buffett, Ackman, and Tepper have made a lot of money by investing in stocks, and right now each could make even more money if shares of Domino’s Pizza, Amazon, and Vistra go up.

However, readers should remember that all investors have different financial needs, goals, and time horizons. Therefore, nobody should blindly copy another investor’s decisions, expecting things to work out fine. To the contrary, all investors should understand the companies they’re invested in and should make their own decisions.

Looking at what billionaires are buying is a good way to generate investment ideas — and Domino’s, Amazon, and Vistra are good ideas, in my view. But coming up with an idea is just the first step in a longer process of creating an investment thesis before buying shares.

Warren Buffett has led Berkshire Hathaway for six decades. During that time, the one-time textile manufacturer that became a huge conglomerate never paid a dividend. Not even a penny.

However, Buffett loves dividend stocks. He bought 12 stocks in the second quarter of 2025. All of them pay dividends. Which is the best of the bunch for income investors?

Image source: The Motley Fool.

Buffett’s dozen dividend stocks

The following table lists Buffett’s dozen dividend stocks purchased in Q2 (listed alphabetically):

Data sources: Berkshire Hathaway 13F filings, Google Finance.

Half of these stocks were new additions to Berkshire’s portfolio. Buffett bought more than 5 million shares of UnitedHealth Group in Q2, the biggest purchase of the group. The legendary investor probably viewed the health insurance stock as a rare bargain in today’s market after UnitedHealth’s share price plunged roughly 50%.

You might have noticed two similarly named stocks on the list. Homebuilder Lennar has two share classes. Buffett initiated a new position in Lennar Class A and added to the existing stake in Lennar Class B. Other new stocks bought in Q2 were security-products maker Allegion, homebuilder D.R. Horton, outdoor advertising company Lamar Advertising, and steelmaker Nucor.

Buffett also added more shares of several existing holdings. He has owned a sizable position in Chevron since 2020. The “Oracle of Omaha” (or one of Berkshire’s two other investment managers) has built stakes in Constellation Brands, Domino’s Pizza, Heico, Pool, and Pool Corp. more recently.

How these stocks compare

Most income investors would probably rank dividend yield near the top of the list of factors they consider when selecting stocks to buy. We can eliminate a few of Buffett’s Q2 purchases from contention because of low dividend yields: Allegion, D.R. Horton, and Heico. Lamar Advertising offers the juiciest yield, followed by Chevron.

However, yield isn’t everything. Income investors also want sustainable dividends. One of the most popular ways to determine the sustainability of a dividend is the payout ratio. Lamar Advertising’s payout ratio of 137.5% raises questions about how long the company will be able to fund the dividend at current levels. Constellation Brands’ payout ratio of 104.5% is also somewhat concerning. All of the other dividend stocks bought by Buffett in Q2, though, have payout ratios below 100%.

Many income investors like stocks with long track records of dividend increases. Although there aren’t any Dividend Kings on Buffett’s Q2 list, there is one Dividend Champion (stocks with 25 or more years of dividend hikes). Chevron has increased its dividend for 38 consecutive years.

Valuation is a factor for some income investors. They don’t want to buy a stock that’s so overpriced it could fall and offset any dividends received. Heico’s forward price-to-earnings ratio of 59.5 could cause some income investors to cross it off the list. So could Pool Corp. and Lamar’s forward earnings multiples of 29.9 and 29.5, respectively.

The best of the bunch for income investors

I think two stocks stand out as especially good picks for income investors right now among the 12 stocks bought by Buffett in Q2.

The runner-up is UnitedHealth Group. The health insurer’s dividend yield is attractive. Its payout ratio is a low 36.8%. UnitedHealth should be able to return to growth next year as it implements premium increases.

But Chevron is the best of the bunch, in my opinion. The oil and gas giant offers a juicy dividend yield. It has an impressive track record of dividend increases. The stock isn’t cheap, but neither is it absurdly expensive, with shares trading at 20 times forward earnings. Income investors should be able to count on steady and growing dividends from Chevron for a long time to come.

Dividend investing can be tricky, since income-focused investors want to find high yields while also avoiding stocks that end up cutting their quarterly payouts. There’s a balance that has to be found, and company quality is highly important to consider. That’s why you should be interested in dividend-paying healthcare stocks like Johnson & Johnson (JNJ 0.08%), Medtronic (MDT 1.66%), and Omega Healthcare Investors (OHI -0.38%).

If you have $500 in available cash (or $5,000) that isn’t needed for an emergency fund, to pay monthly bills, or to lower short-term debt, you might want to consider using it to buy and hold one of these dividend stocks (or maybe all three). 

1. Johnson & Johnson is a Dividend King

Johnson & Johnson’s big draw right now is two-fold. First, it has increased its dividend annually for more than 50 consecutive years, making it a Dividend King. Second, its 2.9% dividend yield is well above the 1.2% of the broader market and the 1.8% of the average healthcare stock. But the big story for buy-and-hold investors is really its business.

Johnson & Johnson is an industry leader in both the pharmaceutical and medical device niches. It has a global reach and industry-leading research and development (R&D) chops, making it a valuable partner to medical professionals around the world. The business will wax and wane over time, since R&D success can be lumpy. But it has a proven record of, eventually, either finding its own new blockbuster product or buying smaller peers that have novel product candidates.

There are some concerns right now about litigation around talcum powder to worry about, but if you don’t mind some near-term uncertainty, this high-yield and diversified medical giant is worth a deep dive. A $500 investment would buy you roughly two shares, with $5,000 allowing you to buy 27 shares.

Image source: Getty Images.

2. Medtronic is closing in on Dividend King status

Medtronic has a similar story to Johnson & Johnson, except that Medtronic is focused on just medical devices. That said, Medtronic is diversified across the cardiovascular, neuroscience, medical surgical, and diabetes niches. It has 48 years’ worth of dividend increases under its belt, and its 3% dividend yield is high relative to the market, the healthcare sector, and its own yield history. That last comparison suggests that Medtronic’s shares are on sale today.

There are some reasons for that, with the company only now coming out of a period in which it didn’t introduce many new products. Investors are in a wait-and-see mood, noting that rising costs have also put pressure on the company’s profitability. But new products are starting to gain traction, with demand for its new cardiac ablation products pushing that business segment’s revenue up nearly 50% year over year in the second quarter of fiscal 2026.

Management is working to improve margins by focusing on the company’s most profitable businesses. On that score, the company is spinning off its diabetes business in 2026, a move that is expected to immediately boost earnings.

A $500 investment will get you around five shares of Medtronic, and $5,000 will allow you to buy 55 shares. Either way, you’re still getting in early on the business upturn that’s starting to take shape right now.

3. Omega Healthcare is still standing tall

Johnson & Johnson and Medtronic are both appropriate for risk-averse investors. Omega Healthcare involves a little more risk. This real estate investment trust (REIT) is focused on owning senior housing, a property niche that took it on the chin during the early stages of the coronavirus pandemic. But, while some other senior housing REITs were cutting dividends, Omega stood behind its payment. It didn’t increase the dividend, mind you, but it didn’t cut the dividend either, showing that it understood just how important that dividend is to shareholders. The yield is currently an ultra-high 6.4%.

The good news here is that the world has moved past the worst of COVID-19, and the age wave that is cresting into retirement is already pushing a strong recovery in Omega’s core business. Funds from operations (FFO), which are like earnings for a REIT, rose nearly 8% year over year in the second quarter of 2025. The company is again starting to invest for the future, making over $500 million in new investments in the quarter.

With Omega’s business on the mend, the massive size of the baby boomer generation suggests that the future is going to be bright. You can buy roughly 11 shares with $500, or 119 with $5,000.

A high yield needs a strong business

The big story here is that Johnson & Johnson, Medtronic, and Omega have all proven resilient to adversity over time. The long history of dividend hikes backs that up at the first two companies, and Omega’s ability to hold the dividend line through the pandemic proves its dividend bona fides. If you have $500 (or $5,000) to invest in dividend stocks today, any one of these healthcare stocks could easily find a home in your portfolio.

As a buy-and-hold investor, I closely follow my long-term investments through exchange-traded funds and retirement accounts. I’ve always followed a Warren Buffett-style of investing, in which I look for strong, profitable companies to hold over the long term.

However, I also recognize that tech stocks are way too important — and profitable — to miss out on. Tech stocks represent companies that are at the forefront of innovation and development, leading the world’s charge into the future. Without tech companies, we wouldn’t have a host of massively significant advances that we take for granted today — things like personal computers, online banking, 5G wireless service, the internet, smartphones, and GPS technology. Nor would we have the incredible types of tech that companies are still making rapid progress on today — such as cloud computing, the Internet of Things, generative AI, and autonomous vehicles.

Including strong, profitable tech stocks in your portfolio is one of the best ways to give yourself an opportunity to outperform the market. Consider that the tech-heavy Nasdaq Composite is up nearly 18% in the last 12 months, handily outperforming the Dow Jones Industrial Average and the S&P 500.

Three tech stocks that I think would be great choices for any retail investor’s portfolio are Nvidia (NVDA 1.65%), Taiwan Semiconductor Manufacturing (TSM 2.58%), and Meta Platforms (META 2.04%).

Image source: Getty Images.

1. Nvidia

Semiconductor maker Nvidia is the biggest company in the world by market capitalization, so it naturally gets the top position on this list, too. While a recent pullback has driven the market cap from $4.4 trillion down to $4.2 trillion, the tailwinds that have propelled Nvidia’s upward over the last few years are still present — and they won’t be going away any time soon.

Nvidia designs graphics processing units (GPUs) that are used by data centers to provide the computing power required by a host of advanced computing tasks, such as training and running large language models (LLMs) and artificial intelligence (AI) systems. Nvidia’s GPUs are designed to be deployed in clusters of hundreds or thousands, boosting the parallel processing power they can apply to workloads. In addition, Nvidia’s CUDA platform provides libraries and tools for developers who are working on software that will be powered by its GPUs. It’s a popular platform with developers, and it’s only compatible with Nvidia’s chips. That added competitive advantage is one reason why I’m confident that it will continue to control the lion’s share of the GPU market for years to come.

Nvidia will release its results for its fiscal 2026 second quarter on Aug. 27, and I think it’s going to be another sterling report. I’ll also be looking carefully at management’s guidance, as the company is expected to resume selling its H20 AI chips to customers in China after being blocked from exporting them to that country earlier this year.

2. Taiwan Semiconductor

As the company that fabricates the advanced chips designed by Nvidia (as well as an array of other chip companies), Taiwan Semiconductor benefits from many of the same tailwinds as the GPU leader. But there are some differences between their businesses that make TSMC stock even more appealing.

As the world’s leading third-party chip foundry, Taiwan Semi manufactured nearly 12,000 products for 522 customers in 2024, employing 288 separate process technologies. It’s involved in about 85% of all semiconductor start-up product prototypes. In short, this is an ideal stock to own if you believe that the semiconductor business broadly will continue to grow, but you want to hedge some of your exposure away from Nvidia.

Taiwan Semi is also moving to limit its exposure to the trade war between Washington and Beijing, and to expand its manufacturing footprint further beyond the island of Taiwan, which China has designs on. The company is in the midst of spending $165 billion to expand its new manufacturing and R&D facility in Arizona and bring some of its most advanced fabrication processes to the U.S.

3. Meta Platforms

Meta Platforms, which operates Facebook, Instagram, WhatsApp, and Messenger, is the unquestioned king of the social media companies. On average, 3.48 billion people use its platforms every day — and that number is increasing. Its daily active user count was up by 6% in June from a year earlier.

The company leverages that massive audience — and the mountain of information it collects about them — into an impressive revenue stream. Ad impressions were up 11% in the second quarter from the previous year. Overall, Meta reported $47.5 billion in revenue in the second quarter, up 22% year over year.

Meta’s own artificial intelligence platform, Meta AI, has been driving a lot of its recent success. Meta AI’s chatbot can generate content, answer questions, and create images. The company also provides AI-powered tools to advertisers to help them reach the customers they want, making their ads on its social media platforms more effective.

Tech stocks to buy and hold

Companies in the tech sector must constantly innovate in their efforts to stay relevant, and their stocks can sometimes be volatile. But Nvidia, Taiwan Semiconductor, and Meta Platforms aren’t merely chasing trends — they’re shaping them. I expect that these companies will remain at the forefront of their industries as we move into the second half of the decade, and I view them as good bets to continue outperforming the market. That’s why I like them for any buy-and-hold portfolio.

The largest growth-focused U.S. companies by market cap are Nvidia (NVDA 1.65%), Microsoft (MSFT 0.56%), Apple (AAPL 1.21%), Amazon (AMZN 3.12%), Alphabet (GOOG 2.98%) (GOOGL 3.10%), Meta Platforms (META 2.04%), Broadcom (AVGO 1.48%), Tesla (TSLA 6.18%), Oracle (ORCL 1.30%), and Netflix (NFLX -0.20%).

Known as the “Ten Titans,” this elite group of companies has been instrumental in driving broader market gains in recent years, now making up around 38% of the S&P 500 (^GSPC 1.52%).

Investment management firm Vanguard has the largest (by net assets) and lowest cost exchange-traded fund (ETF) for mirroring the performance of the index — the Vanguard S&P 500 ETF (VOO 1.46%). Here’s why the fund is one of the simplest ways to get significant exposure to the Ten Titans.

Image source: Getty Images.

Ten Titan dominance

Over the long term, the S&P 500 has historically delivered annualized results of 9% to 10%. It has been a simple way to compound wealth over time, especially as fees have come down for S&P 500 products. The Vanguard S&P 500 ETF sports an expense ratio of just 0.03% — or $3 for every $10,000 invested — making it an ultra-inexpensive way to get exposure to 500 of the top U.S. companies.

The Vanguard S&P 500 ETF could be a great choice for folks who aren’t looking to research companies or closely follow the market. But it’s a mistake to assume that the S&P 500 is well diversified just because it holds hundreds of names. Right now, the S&P 500 is arguably the least diversified it has been since the turn of the millennium.

Megacap growth companies have gotten even bigger while the rest of the market hasn’t done nearly as well. Today, the combined market cap of the Ten Titans is $20.2 trillion. Ten years ago, it was just $2.5 trillion. Nvidia alone went from a blip on the S&P 500’s radar at $12.4 billion to over $4 trillion in market cap. And not a single Titan was worth over $1 trillion a decade ago. Today, eight of them are.

S&P 500 Market Cap data by YCharts.

To put that monster gain into perspective, the S&P 500’s market cap was $18.2 trillion a decade ago. Meaning the Ten Titans have contributed a staggering 51.6% of the $34.3 trillion market cap the S&P 500 has added over the last decade. Without the Ten Titans, the S&P 500’s gains over the last decade would have looked mediocre at best. With the Ten Titans, the last decade has been exceptional for S&P 500 investors.

The Ten Titans have cemented their footprint on the S&P 500

Since the S&P 500 is so concentrated in the Ten Titans, it has transformed into a growth-focused index, making it an excellent way to double up on the Ten Titans. But the S&P 500 may not be as good a fit for certain investors.

Arguably, the best reason not to buy the S&P 500 is if you’re looking to avoid the Ten Titans, either because you already have comfortable positions in these names or you don’t want to take on the potential risk and volatility inherent in a top-heavy index.

That being said, the S&P 500 has been concentrated before, and its leadership can change, as it did over the last decade. The underperformance by former market leaders, like Intel, has been more than made up for by the rise of Nvidia and Broadcom.

So it’s not that the Ten Titans have to do well for the S&P 500 to thrive. But if the Titans begin underperforming, their sheer influence on the S&P 500 would require significantly outsized gains from the rest of the index.

Let the S&P 500 work for you

With the S&P 500 yielding just 1.2%, sporting a premium valuation and being heavily dependent on growth stocks, the index isn’t the best fit for folks looking to limit their exposure to megacap growth stocks or center their portfolio around dividend-paying value stocks.

The beauty of being an individual investor is that you can shape your portfolio in a way that suits your risk tolerance and investment objectives. For example, you use the Vanguard S&P 500 ETF as a way to get exposure to top growth stocks like the Ten Titans and then complement that position with holdings in dividend stocks or higher-yield ETFs.

In sum, the dominance of the Ten Titans means it’s time to start calling the Vanguard S&P 500 ETF what it has become, which is really more of a growth fund than a balanced way to invest in growth, value, and dividend stocks.

Investors with a high risk tolerance and long-term time horizon may cheer the concentrated nature of the index. In contrast, risk-averse investors may want to reorient their portfolios so they aren’t accidentally overexposing themselves to more growth than intended.

Who wouldn’t be interested in some Warren Buffett stocks to consider for their portfolio? After all, Buffett’s investing chops have not been exaggerated. He increased the value of his company Berkshire Hathaway (BRK.A -0.13%) (BRK.B -0.06%) by 5,500,000% (nearly 20% annually) over 60 years. In contrast, the S&P 500 index of 500 of America’s biggest companies gained about 39,000% (10.4% annually, on average) over the same period.

Here, then, are some stocks in the Berkshire Hathaway portfolio that you might want in your own. Do note, though, that the days of Buffett himself making all the investment decisions (often in consultation with his late business partner Charlie Munger) are over. He now has two investing lieutenants, Ted Weschler and Todd Combs, so some stocks in the portfolio may be their picks.

Image source: The Motley Fool.

1. Amazon

You might know that Berkshire Hathaway owns multiple insurance and energy operations, along with companies such as Dairy Queen International, See’s Candies, Fruit of the Loom, and the entire BNSF railroad. Buffett has long avoided many high-tech companies, but yes, his company now owns shares of Amazon.com (AMZN 3.12%) — some 10 million shares, in fact, per the latest disclosure.

You might want to consider buying Amazon stock, too, because it still has enormous growth potential. It features a hugely dominant online marketplace, but it’s also home to a major cloud computing platform, Amazon Web Services (AWS). Its shares are appealingly valued at recent levels, too, with a recent forward-looking price-to-earnings (P/E) ratio of 34, well below the five-year average of 46.

2. Lennar

You may not be very familiar with Lennar (LEN 5.19%), but it’s a major homebuilder in America, and its future is promising because America needs many more homes — especially affordable ones for young first-time home buyers. If interest rates drop in the near future, that could spur home buying, though a recession could thwart that trend.

Near term, it’s hard to know what will happen, but Lennar’s long-term outlook is promising. Patient investors can collect a dividend that recently yielded 1.5% — and that has grown by an annual average rate of 33% over the past five years.

Lennar shares are reasonably priced at recent levels, too, with a price-to-sales ratio of 1, on par with its five-year average, and a forward P/E of 13 above the average of 9. It’s a new holding for Berkshire, and Berkshire already owns 3% of the company.

3. Chevron

Chevron (CVX 1.50%) is Berkshire’s fifth-largest stock holding, and Berkshire now owns close to 7% of the energy giant. It’s another dividend-paying stock, with a recent fat 4.5% yield. It’s also been a big stock repurchaser, with its reduced share count leaving each remaining share more valuable.

Why might you buy Chevron stock? Well, thanks to various investments (such as its purchase of Hess), it stands to collect a lot of free cash flow in the years ahead — which can be used to pay dividends and increase dividends. Chevron is also well positioned to profit from both traditional energy sources as well as alternative energies.

Chevron’s forward P/E was recently 20, a bit above its five-year average of 14, suggesting it’s somewhat overvalued. You might wait for a lower price, or buy into it incrementally, or just buy anyway — as long as you plan to remain invested for many years.

4. UnitedHealth Group

Berkshire was in the news recently, for buying into the beleaguered health insurer UnitedHealth Group (UNH 1.24%). It’s a new holding for Berkshire, and was recently the 18th-largest position in the portfolio

Shares of the insurer were recently down 39% year-to-date, in part due to the fact that it’s being investigated by the Department of Justice for possible Medicare fraud. Also, its CEO has just stepped down. For those who see such issues as temporary and surmountable, this is a good buying opportunity.

You can be sure the company’s management is working to turn things around, and simple demographics paint a promising future, too, as our growing and aging population will continue to need healthcare — and medications. (UnitedHealth includes the pharmaceutical specialist Optum.)

5. Berkshire Hathaway

A last Berkshire Hathaway stock to consider is Berkshire Hathaway itself. It’s built to last, after all, and is likely to keep growing over time, though not at the breakneck speeds of yore, perhaps. Buffett is stepping down at the end of the year, but he’ll still be around, and his successor, Greg Abel, is a promising choice.

Berkshire Hathaway doesn’t pay a dividend, but when it’s under new management, that might change. It has all depended on whether there were more productive ways to deploy the company’s cash. So far there have been, but Abel might decide differently. Investing in Berkshire means you’ll always be a part-owner of any stock in Berkshire’s portfolio.

Give any or all of these companies some consideration for your own portfolio. And know that you can always take the easier (and also effective) path, recommended by Buffett himself, of opting for a simple, low-fee index fund.

For all the attention artificial intelligence (AI) has received over the last three years, it’s possible we’re still very early in the spread of the technology. Just 9.2% of the 1.2 million U.S. businesses surveyed by the U.S. Census Bureau in June said that they have adopted AI in parts of their operations. That number continues to climb every quarter, though.

There’s a long runway ahead for AI, but that doesn’t make every stock in the space a long-term winner. It’s likely AI stocks will face some major headwinds at some point in the not-too-distant future. Sam Altman, CEO of OpenAI, says we’re currently in a bubble, but that doesn’t diminish the long-term importance of AI innovations.

The best AI stocks are well-positioned to capitalize on the current environment of growing adoption and tremendous innovation, but also maintain long-term competitive advantages that will ensure they remain great investments well into the future. On top of that, they have to offer good value that growth investors expect to receive. Many AI stocks are arguably overpriced, but here are three worth buying right now.

Image source: Getty Images.

1. Microsoft

Microsoft (MSFT 0.56%) increased its investment in OpenAI in early 2023, which gave it both a major customer for its cloud computing segment, Azure, and the ability to quickly build new AI services for both Azure and its enterprise software segment. The company has produced tremendous results on both fronts.

Azure is now a $75 billion business, with revenue increasing 34% year over year in fiscal 2025. Not only is Microsoft growing a $75 billion business that quickly, but it’s also accelerating revenue. Azure sales grew 39% year over year in its most recent quarter. Revenue could continue to speed up as management reiterated that the cloud business remains capacity-constrained on its most recent earnings call.

Microsoft is spending heavily to support that growth. Management expects capital expenditures (capex) for the current quarter to climb to $30 billion, jumping from $24 billion last quarter.

But the top-line growth for Azure appears to be worth the up-front spending. Remaining performance obligations climbed 35% last quarter, so there’s still a lot of unearned revenue for Microsoft to realize. Management expects another strong quarter for Azure with 37% revenue growth.

Microsoft’s enterprise software business has also benefited from developing new AI services. The company has created its own suite of AI assistants for use across its software, dubbed Copilot, which provides a way to increase revenue per seat while further locking in customers.

But the real potential may be in its Copilot Studio software, which allows businesses to use foundation models like OpenAI’s GPT-5 to create their own AI agents using proprietary data. Microsoft’s Productivity and Business segment grew 16% last quarter, and management expects to maintain similar growth this quarter.

Both the near-term and long-term look good for Microsoft, with strong growth for Azure and Microsoft 365 driving tremendous free cash flow despite huge capex. The stock currently trades for almost 33 times forward earnings estimates, which is certainly a premium to the market.

But with expectations for double-digit revenue growth, steady operating margins, and plenty of cash to buy back shares, the stock price looks more than fair.

2. Alphabet

Many expect AI to negatively affect Alphabet (GOOG 2.98%) (GOOGL 3.10%) as chatbots displace its core Google Search, but that’s yet to happen. Google Search revenue increased 12% year over year in its most recent quarter, accelerating from 10% growth in the first quarter.

That strength is driven by Google’s efforts to integrate generative AI into its search product. Its AI Overviews have driven higher engagement and user satisfaction, according to management. And AI-powered features like Circle to Search and Google Lens have increased search traffic for high-value products. Google’s new AI Mode pushes users into a more robust AI-powered search, similar to Perplexity.

The real growth driver for Alphabet is its cloud computing platform, Google Cloud. The business grew 32% last quarter and demonstrated strong operating leverage. Operating margin expanded to 21% from 11% last year and 18% last quarter. Based on earnings results from competitors, there’s still a lot of room to increase those margins as well.

Alphabet is also spending heavily to keep up with demand for its cloud AI services. Management increased its capex guidance for the full year to $85 billion from $75 billion.

That spending may be weighing on the stock, but the biggest things burdening Alphabet are regulatory concerns. Last year, the courts determined Google operates an illegal monopoly, and it faces remedies that could involve divesting key assets. Some have speculated it may have to sell Chrome, its web browser, for which Perplexity made an offer of $34.5 billion.

Despite the overhang, Alphabet shares look very attractive. The stock price is just 20 times forward earnings estimates. That’s below the S&P 500 average and the lowest among the “Magnificent Seven” stocks. That price more than factors in the uncertainty around Google and offers a significant discount on the fast-growing cloud computing business.

3. Taiwan Semiconductor Manufacturing

Taiwan Semiconductor Manufacturing (TSM 2.49%) has seen demand for its industry-leading chipmaking capabilities surge as companies like Microsoft and Alphabet look to stock their data center servers with high-end GPUs, networking chips, and other silicon. That has pushed the already high market share of TSMC (as it’s also known) to new levels, with the company commanding over two-thirds of all spending on contract semiconductor manufacturing.

TSMC’s massive technology lead benefits from a virtuous cycle. Its technology attracts big contracts from chip designers like Nvidia and Apple. In turn, it can invest more in building out capacity and developing the next-generation technology. That ensures that it’s well-positioned to win the next contract from those big customers while attracting new customers as well.

Just like Microsoft and Alphabet, TSMC is also spending heavily to meet demand for its services. Management expects to spend around $40 billion this year to build out capacity, including ramping up its next-generation 2nm node, which promises better performance while using less power. That capex budget is a 34% increase from last year.

After strong second-quarter results, management raised its full-year revenue growth guidance to 30% from the mid-20% range. The long-term outlook remains strong as well, with expectations for 20% average annual increases from 2025 to 2029. That number may be revised higher since it’s shown strength in the AI market, which is driving a good amount of that rise.

And TSMC’s gross margin has climbed close to 60%. While the company typically sees a drop in gross margin as it ramps up a new node, it’s already seeing strong demand for its 2nm chips and charging a hefty step-up in price. As a result, the company should be able to maintain very high gross margins in 2026 and beyond.

Investors can buy shares for just 23 times forward earnings, an exceptionally low price for a company growing this fast with a long runway ahead of it. Investors may be keeping the price low due to the threat of tariffs on the company’s finances. TSMC received an exemption from tariffs on semiconductors thanks to its huge investment in its Arizona manufacturing center.

Even if it is subject to tariffs in the future, TSMC remains the best-in-class chip manufacturer and an essential company in the future of AI. As such, it can blunt the financial impact, and it looks like a great buy at today’s price.

Artificial intelligence (AI) is a massive opportunity for investors. Just as the internet spawned several new industries, such as e-commerce and smartphones, AI will also create new industries in the next 20 years that don’t exist today.

Sticking with industry-leading tech companies that are enabling the AI revolution is all you need to do well. If you have a few thousand dollars you’re committing to a long-term investment plan, here are two AI stocks you can buy and hold for the long term.

Image source: Getty Images.

1. Taiwan Semiconductor Manufacturing (TSMC)

Shares of Taiwan Semiconductor Manufacturing (TSM 2.58%) have delivered outstanding returns for investors over many years. It’s the largest chip manufacturer in the world. Top AI companies like OpenAI and Alphabet‘s Google (GOOGL 3.10%) (GOOG 2.98%) are using TSMC to build their chips. This puts TSMC in a lucrative position to capitalize on the AI boom.

Importantly, TSMC’s long-term track record of delivering profitable growth is why you can sleep well at night investing in this stock. Over the last 10 years, revenue grew 14% on an annualized basis, and that includes a few soft demand cycles along the way, yet AI chip demand is causing revenue to accelerate. The company’s revenue grew 44% year over year in the most recent quarter.

The momentum continues to build for TSMC. For example, Google just announced its Tensor G5 AI chip will be made by TSMC and deliver improved performance for AI features on Google’s Pixel phones.

Meanwhile, ChatGPT maker OpenAI is tapping TSMC for its first custom AI chip. Given the lead times for making new chips, TSMC should be mass-producing OpenAI’s new chip in 2026. This is a positive indicator for TSMC’s future growth.

While some on Wall Street might be concerned about spending on AI infrastructure, including chips, running out of gas in the near future, the key signal for investors is that the largest tech companies continue to guide for more capital spending in data centers and AI infrastructure, which benefits TSMC. The company expects growth for advanced AI chips to increase more than 40% annually over the next five years.

Despite these demand trends, the stock is still reasonably priced. At a forward price-to-earnings ratio of 23, investors should continue to outperform the broader market with TSMC stock.

2. Alphabet (Google)

Alphabet is benefiting from multiple growth opportunities. The company hauled in $371 billion in trailing revenue over the last year from advertising, cloud computing, and AI. The stock also trades at a reasonable valuation that suggests it’s likely undervalued, especially as its cloud computing business continues to report strong growth.

Alphabet has more than 2 billion users across seven products, making Google one of the most valuable brands. Its investments in AI features are making its products more useful and driving solid gains for its core advertising businesses like Search and YouTube. Google Search reported another solid quarter of growth with ad revenue increasing by 12% year-over-year in Q2.

The company’s advantage in AI can be seen in the growth happening at Google Cloud. Cloud revenue grew 32% year-over-year last quarter, and this lifted the segment’s operating profit to $2.8 billion for the quarter, up from $1.2 billion in the same quarter last year. This shows businesses are increasingly choosing Google Cloud at a time when there is stronger competition than ever in the cloud market due to AI.

Alphabet said it will spend $85 billion in capital expenditures this year to meet cloud demand. Despite spending this huge amount on technology infrastructure, management expects the demand-supply situation for cloud services to remain “tight” entering 2026. This indicates incredibly strong demand that should see Alphabet’s cloud business continue to report high double-digit growth for the foreseeable future.

This echoes the strong demand for AI chips that TSMC is seeing in its business, and suggests that the AI opportunity is still in the early innings. Despite Alphabet’s strong competitive advantage with billions of people using its services every day, in addition to a booming enterprise cloud business, the stock trades at a reasonable forward P/E of 20. This makes Alphabet stock a solid long-term buy.

Investors have been very fortunate over the past couple of years. A tremendous run for technology stocks on artificial intelligence enthusiasm, investments, and rising long-term expectations has carried the broader stock market to impressive heights.

But it seems the market has begun to cool off over the past week or so, with some of the top-performing technology stocks dipping off their highs. As fun as soaring stock prices are, it’s crucial to remember that volatility is a regular part of long-term investing, and that it’s healthy when things take a bit of a breather after an extended run.

It can also be a good opportunity to buy your favorite stocks at lower prices. Three Fools got together to identify three winning tech stocks that still offer that right mix of long-term growth and present-day value. When it was all said and done, Nvidia (NVDA 1.65%), SoundHound AI (SOUN 2.70%), and Netflix (NFLX -0.20%) stood out from the crowd.

Here is what you need to know about each stock right now.

Image source: Getty Images.

This AI accelerator leader is not done rising

Will Healy (Nvidia): It seems nothing can hold back Nvidia’s stock price growth for long. The chip stock is up around 1,400% from its 2022 low as its research spearheaded the rapidly growing AI accelerator industry.

NVDA data by YCharts

That product has so fundamentally changed the company that its data center segment made up 89% of the company’s revenue in the first quarter of fiscal 2026. This is a dramatic turnabout from three years ago, when the data center segment was not significantly larger than Nvidia’s long-established gaming business.

Also, Nvidia’s profits have risen so dramatically that even with its massive gains, its P/E ratio is only about 56. In comparison, Advanced Micro Devices (AMD), whose stock has experienced much lower returns, trades at 94 times earnings.

Moreover, there are no meaningful signs of a slowdown. Grand View Research forecasts a compound annual growth rate (CAGR) of 29% for the AI chip market through 2030, and Nvidia has far exceeded that estimate.

In the first quarter of fiscal 2026, its revenue of $44 billion rose 69% from year-ago levels. Even though a company with a $4.2 trillion market cap is unlikely to sustain that growth rate, the aforementioned CAGR makes it likely to continue reporting robust revenue growth.

Additionally, competitive threats have not held it back. DeepSeek’s breakthrough on low-cost AI training earlier this year contributed to a temporary pullback of over 40% in the stock price, but Nvidia recovered quickly. Also, while AMD’s upcoming MI400 release next year could bring competition to Nvidia’s Vera Rubin platform, the company still has time to respond to that threat.

Indeed, Nvidia’s massive stock gains and huge market cap might deter some investors from buying. Nonetheless, with its domination of the AI accelerator market and the company’s relatively low P/E ratio, Nvidia stock remains on track for further growth.

A recent pullback in SoundHound AI stock could present an opportunity for long-term investors

Jake Lerch (SoundHound AI): My choice is SoundHound AI. Here’s why.

First, let’s put the recent downturn in context. It’s no surprise that the artificial intelligence (AI) sector is getting hit hard by the recent volatility in the stock market. Many of the stocks in this sector are young companies that are developing cutting-edge technology. Therefore, when the growth trajectory of the industry is questioned, sell-offs can be steep and sudden. Yet, these big sell-offs present an opportunity for long-term investors.

Turning to SoundHound AI specifically, let’s recall that the company is a leader within the voice AI sector. They have solid penetration within the automotive and restaurant sectors.

In addition, one of their primary competitive advantages is their ability to deploy custom voice AI solutions. What this means is that SoundHound works with companies to tailor their specific AI solutions, which are then deployed under the customer’s brand name. This gives SoundHound a leg up on some of its big tech competitors by allowing clients to maintain brand management and data privacy.

Last, let’s recall that only a few weeks ago, SoundHound posted a fantastic quarterly report. The company generated an all-time high of $43 million in revenue, which was up an eye-popping 217% from a year earlier. Management highlighted new or expanded business partnerships across the restaurant, automotive, healthcare, finance, and retail sectors. What’s more, the company raised full-year guidance.

According to Yahoo Finance, sell-side analysts now expect SoundHound to generate $166 million in revenue in 2025 and $215 million in 2026, representing growth of 96% and 29%, respectively.

In short, SoundHound remains a promising long-term investment within the AI sector, thanks to its solid growth trajectory. Growth-oriented investors might therefore want to consider it on this most recent pullback.

Netflix isn’t done delivering for shareholders

Justin Pope (Netflix): The streaming king has delivered in a big way for shareholders. Shares have risen over 70% over the past year, even after a recent 10% dip. While that’s not a very big drop, it’s still a dip long-term investors should consider buying.

One of the prettiest charts you’ll see is that of Netflix’s profit margins over time. As more people sign up for Netflix, the company becomes increasingly profitable because it can spread its content costs across more customers. Netflix stopped reporting subscriber numbers at the end of 2024, but paid subscriptions increased by 15.9% year over year in Q4 to 301.63 million, so new customer acquisition still had plenty of momentum at the end of last year.

NFLX Profit Margin data by YCharts

Additionally, Netflix is beginning to pull multiple growth levers. For instance, Netflix has raised its subscription prices over time and launched an ad-supported membership option a few years ago. It surpassed 70 million subscribers last November, and management expects ad revenue to double this year as some subscribers trade a little convenience for cost savings.

Meanwhile, the future looks bright. Netflix has waded increasingly deeper into live sports, a significant media category that could continue to help drive and sustain subscriptions. Analysts estimate Netflix will grow earnings by an average of almost 23% annually over the next three to five years. I wouldn’t say Netflix’s stock is a once-in-a-lifetime deal at 46 times 2025 earnings estimates, but the stock seems fairly valued for a business with such a strong growth outlook and increasingly fatter profit margins.

Investors who buy and hold Netflix will likely be very happy with their decision a few years from now.

The growth of artificial intelligence (AI) is the biggest opportunity in technology since the internet and PC adoption in the 1990s. Top tech companies continue to report surging demand across cloud services, software, and semiconductors.

Investors who choose wisely among the top companies benefiting from AI adoption could make a fortune over the next decade. Here are two top AI stocks to help you profit from this opportunity.

Image source: Getty Images.

1. Applied Digital

There is massive spending pouring into data center infrastructure for AI. But as AI advances, it creates potential bottlenecks in power requirements and data center capacity. This is a huge opportunity for Applied Digital (APLD 1.78%) — a small but fast-growing data center builder with a market cap of $3.7 billion.

The Dallas-based data center operator has delivered tremendous growth over the past few years. While quarterly revenue can be lumpy due to the timing of revenue recognition from new projects, revenue has grown from $55 million in fiscal 2023 to $215 million in fiscal 2025 (which ended in June), and it grew 41% year over year in the most recent quarter.

The stock is volatile, which is evident in the company’s large operating losses. This results from high upfront costs to build new data centers. In the most recent quarter, Applied Digital reported a loss of $26 million. But this is not concerning because demand is robust for more data center power, and Applied Digital stands ready to supply it.

Goldman Sachs has found that data centers currently have about 55 gigawatts of power capacity, with 14% being used for AI. By 2027, the global power used by data centers will increase to 84 gigawatts, with AI’s percentage increasing to 27%.

Applied Digital recently signed a 15-year lease agreement with AI hyperscaler CoreWeave to deliver 250 megawatts of power for CoreWeave’s Ellendale, North Dakota, data center campus. CoreWeave just recently extended this agreement to 400 megawatts. For Applied Digital, this will help generate approximately $7 billion in contracted revenue over the lease term, which is a big deal for the company’s value.

AI chip leader Nvidia held a $77 million stake in Applied Digital stock in the second quarter. This is a huge vote of confidence by Nvidia CEO Jensen Huang in Applied Digital’s strategy to capitalize on this opportunity. It’s still early in this market. Investors will have to endure volatility in the share price, but patiently holding over the next 10 years could have a big payoff.

2. Microsoft

Microsoft (MSFT 0.56%) is a highly profitable business that makes it a great complement to a volatile stock like Applied Digital. The software giant is on pace to eventually take the No. 1 market-share position in the cloud-computing market. It has a large offering of software products to capitalize on the growing demand for AI.

A big advantage of Microsoft is that many businesses and individuals are familiar with its software. Windows, Office, and Teams are software products widely used by millions, if not hundreds of millions of people. This puts Microsoft in a lucrative position to benefit from growing adoption of AI, as it rolls out advanced features in the form of subscriptions through Copilot.

On the enterprise side, Microsoft Azure is experiencing strong demand. Azure and other cloud services revenue grew 39% year over year in the June-ending quarter. This is double the growth that competitor Amazon Web Services is reporting, positioning Microsoft Azure to take the lead in the not-too-distant future.

Azure’s recent growth is an acceleration from the 33% growth rate reported in the previous quarter, signaling that demand for AI remains red hot. But this growth shouldn’t come as a surprise, since most of the world’s data is still stuck in on-premise servers. The arrival of AI is clearly incentivizing more businesses to migrate to the cloud to take advantage of cutting-edge tools that can improve their efficiency, and this will continue to benefit Microsoft.

But Microsoft isn’t stopping there. Quantum computing is the next growth opportunity for cloud computing. Microsoft is partnering with Atom Computing on a quantum computer built on Azure Elements, which will be shipping to customers by the end of 2025. Earlier this year, Microsoft unveiled its Majorana 1 quantum chip to solve the most complex computing problems, positioning it to be a top player in this burgeoning market.

The ability for Microsoft to benefit from AI demand while generating growing free cash flow makes it a solid investment. It generated $71 billion in free cash flow on $281 billion of revenue over the last year, which is driving the stock higher.