For individual investors aiming to build wealth for future generations, choosing stocks with strong, enduring potential is essential. While market fluctuations are inevitable, investing in solid companies that can navigate challenges and leverage growth opportunities can set the foundation for generational wealth. Here are two stocks that hold the potential to build such wealth: TMX Group (TSX:X) and Advanced Micro Devices (NASDAQ:AMD).
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TMX Group: A growing home for Canadian growth stocks
TMX Group, which owns and operates Canada’s leading stock exchanges, offers a stable revenue stream through its various platforms, including the Toronto Stock Exchange, TSX Venture Exchange, and the Montreal Exchange. This company’s core business—facilitating stock trading and market operations—generates consistent revenue from trading volumes, data sales, and annual subscriptions from listed companies. With growing demand for advanced trading tools and data, TMX Group continues to benefit from the sustained interest in the Canadian financial markets.
Growth drivers
One of TMX Group’s major strengths is its steady increase in new listings. In the first nine months of 2024 alone, the TSX and TSX Venture Exchange welcomed 175 new listings, which raised approximately $16 billion from the public. This influx of new customers bolsters TMX’s annual revenue-generating capacity.
Additionally, TMX Group is investing in cutting-edge technologies like blockchain solutions and artificial intelligence (AI) to improve market efficiency and maintain and expand its services, potentially tapping into new revenue streams that could support long-term growth. Although Canada currently lags in offering single-stock exchange-traded funds (ETFs) — a popular new investment vehicle — TMX Group may soon adapt, creating additional growth opportunities.
Strong total returns potential
TMX Group has a history of consistent dividend growth, adding an appealing income potential for investors looking for steady returns. Over the past decade, X stock has delivered a robust 462% in total returns and increased its dividend by 137.5%. Shares appear fairly valued with a price-to-earnings multiple of 30 that compares well to an industry average price-to-earnings (P/E) ratio of 36.8. TMX Group stock is a fairly priced, stable investment and a compounding growth machine that could generate wealth for years to come.
An AI growth stock to buy: Advanced Micro Devices
Advanced Micro Devices (AMD) is one of the most dynamic players in the semiconductor industry, with a growing foothold in AI hardware. AMD has consistently challenged larger rivals like Nvidia and Intel, especially with its recent developments in AI-capable hardware and strategic acquisitions to enhance its offerings.
The company reported a decent 18% year-over-year revenue growth in its most recent quarter, alongside a significant 24% expansion in gross margins and a 161% surge in diluted earnings per share. However, the market demands more than the company’s guidance for a 22% growth in fourth-quarter sales to a new record US$7.5 billion. AMD stock declined by more than 9% in early trading on Wednesday, offering long-term focused investors another opportunity to buy the AI stock cheaper.
A stronghold in the AI market
As AI and machine learning technologies continue to expand, AMD is building a unique market position by focusing on high-performance yet affordable solutions. This approach makes AMD a formidable competitor in the AI hardware space, where demand for powerful processors is surging. AMD’s partnerships with computer manufacturers worldwide further strengthen its brand as its AI-capable processors find a home in more devices across consumer and enterprise markets. This broad adoption sets AMD up to defend its market share against new competition from ARM-based processors as well.
AMD’s acquisition of ZT Systems, a leader in general-purpose computing infrastructure, enhances its appeal to hyperscale providers like cloud giants and data centers. The company is building competitive moats that support its revenue and earnings growth in the future. Its potential to capture a growing share of the futuristic and lucrative AI market positions AMD as a stock that can generate sustainable long-term value.
AMD stock fairly valued
AMD stock has generated 5,310% in returns during the past decade. Despite the tech stock’s volatility, AMD’s valuation appears fair, with a forward P/E multiple of 27.7 and a forward P/E-to-growth ratio of 1.3, which suggests AMD stock’s valuation aligns well with its future earnings growth potential. The latest drop provides investors with a better entry point into a growth stock with significant long-term upside.
