Every country has its own set of publicly traded giants that may or may not be confined to a single sector, like Canada’s Big Six from the banking sector.
But the American Magnificent Seven — i.e., the seven stocks that have outstripped the S&P 500 by a massive margin and have emerged as trillion-dollar giants — are not even confined to a country’s stock market. They are giants around the globe and among the most sought-after investments in the world.
Another thing common in the Magnificent Seven, or at least three of the Magnificent Seven, is that they are essentially internet companies. And now that another technology (artificial intelligence — AI) that is just as disruptive and may become just as big over time has emerged, at least two of the magnificent seven may experience another strong bull market.
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A software company
Microsoft (NASDAQ: MSFT) was a tech giant even before the dawn of the internet. It rode on the popularity of one of the most widely used operating systems for personal computers. Despite several powerful alternatives joining the market, it still dominated the personal computing arena, at least until smartphones became the personal computing device of choice.
However, Microsoft is emerging as a leader in the field of AI, mostly through its stake in OpenAI, which is an early bird in AI and the company behind the most widely recognized AI tool in the world — ChatGPT.
It has been one of the primary catalysts behind Microsoft’s rapid growth in the past few years, bringing its five-year total to an impressive 250% (almost). Considering how rapidly the demand for AI is growing, just one more product, like ChatGPT from OpenAI, may propel Microsoft ahead at an even more rapid pace.
A hardware company
Even though its origins are in gaming hardware, Nvidia (NASDAQ: NVDA) is also currently riding the AI hype train thanks to its Graphics Processing Units (GPUs).
These GPUs tend to be much faster and far more efficient in parallel processing thanks to their numerous cores compared to CPUs, which makes them ideal for specific use cases. Up until a few years ago, the most prominent use case was crypto mining. Now, it’s training AI and Machine Learning (ML) models.
From individual developers to businesses, a wide variety of entities are investing heavily in Nvidia chips for the computing power they need to train and run their own AI models. It has also triggered a secondary business, where a company may invest in a fleet of Nvidia cards and then offer slices of this computing power to the market.
This has allowed Nvidia’s stock to grow at a rapid pace. It rose over 270% in just the last 12 months, which is more growth than Microsoft achieved in the last five years.
Foolish takeaway
It wouldn’t be fair to pin the desirability of these two tech stocks primarily on AI. They have several fundamental strengths of their own, and both were leaders in their respective spheres even before the current AI wave.
However, it’s certainly the most significant catalyst for the future growth of these stocks, making them the best of the Magnificent Seven to consider in March.
