Key Points
Nvidia expects revenue to increased 70% next year, on top of higher growth this year,
Google Cloud sales increased 82% in the second quarter.
American Express raised full-year guidance after a 10% sales increase in the second quarter.
- 10 stocks we like better than Nvidia ›
The Dow Jones Industrial Average is a group of 30 stocks in various categories that represent some of the largest and most important companies in the U.S. It doesn’t change frequently, but it replaced Verizon with Google-parent Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) in June.
That reflects shifting economic trends. Nvidia (NASDAQ: NVDA), Apple, Amazon, and Microsoft are already Dow components, and the index’s heavyweights are mostly mature industry powerhouses. However, not all of them are performing well today, and not all of them are growth machines. Nike, for example, has been struggling lately, and Procter & Gamble generally reports single-digit sales increases.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue »
Image source: Google.
Nvidia, Alphabet, and American Express (NYSE: AXP) have been unstoppable lately, and they’re worth buying today.
1. Nvidia
Nvidia is the largest company in the world, and it’s far from done. It sits at the epicenter of artificial intelligence (AI) development, and its products are critical for hyperscalers to run their large-language models (LLM). Although there are now many chip designers that can take care of some of the processes, none are as powerful or as in demand as Nvidia’s.
On the company’s fiscal 2027 second quarter (ended July 26)earnings call CFO Colette Kress updated investors that management expects revenue to increased 70% in fiscal 2028, and that’s “a supply constrained outlook.” The implication is that the demand is much higher, so high that Nvidia cannot address it.
The company continues to lead in its industry, launching new lines that can handle more compute capacity, such as the recently rolled out Vera Rubin platform, which combines central processing units (CPU) and graphics processing units (GPU) in a supercomputer that’s 10 times more efficient at handling complex agentic AI tasks than the previous platform.
Despite its phenomenal performance, including more than doubling revenue year over year in the 2027 fiscal second quarter, Nvidia stock is trading at an attractive valuation of only 14 times forward, 1-year earnings.
2. Alphabet (Google)
Alphabet stock has plunged recently, since the market was disappointed in guidance for high capital expenditures over the next two years, but the company has been unstoppable. Revenue increased 24% year over year in the second quarter, with an 82% increase in Google Cloud, and it also can’t meet demand.
The market sees free cash flow turning negative, but management assured investors that it’s going to monetize the spend. “Our AI investments are redefining what’s possible across every part of our business,” CEO Sundar Pichai said.
There was outstanding growth across the AI platforms. Nine million developers are creating with Google’s tools, and its models are processing 22 billion tokens per minute, up from 16 billion last quarter. It launched a creative tool called Omni in May, and by July, there was already a 40% increase in daily active users. Google must invest to be able to handle the increasing workloads.
And Alphabet is so much more than Google. It owns several leading businesses, including Android and YouTube.
Alphabet is also trading at a cheap price, just 22 times forward, 1-year earnings, and it’s a great buy right now.
3. American Express
American Express is one of the oldest Dow stocks, having been added in 1982. The credit card network has a unique model targeting high-income consumers, making it more resilient under pressure. It charges an annual fee for most of its cards, and members participate in a highly regarded rewards program that makes it worthwhile for them.
American Express also stands out for its closed-loop system, which means that its own bank provides the credit for its cards, in contrast with Visa and Mastercard, which partner with issuing financial institutions. Its bank brings in lots of cash and net interest income, and the unified model creates a tight, efficient system with strong credit metrics and profitability.
American Express has been reporting healthy growth despite inflation, including a 10% year-over-year increase in revenue and a 14% increase in earnings per share (EPS). Cardmember spending increased 9%, the highest in three years, and management raised full-year revenue guidance. However, the company kept EPS guidance steady, and plans to use the extra money to invest for the future.
Like Alphabet, the market didn’t like that too much, but it’s a great signal for long-term growth, especially because the company has done this before successfully. However, it gives investors a chance to buy in at a lower price. American Express stock trades at only 15 times forward, 1-year earnings, and it’s an excellent long-term value play.
Should you buy stock in Nvidia right now?
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American Express is an advertising partner of Motley Fool Money. Jennifer Saibil has positions in American Express and Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, American Express, Apple, Mastercard, Microsoft, Nike, Nvidia, and Visa. The Motley Fool recommends Verizon Communications. The Motley Fool has a disclosure policy.
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