The “Magnificent Seven” stocks dominated the market in 2023. The worst performer in the group, Apple (NASDAQ: AAPL), rose 49%, and the best, Nvidia (NASDAQ: NVDA), jumped nearly 240%. But with such strong runs behind them, do any of them have room left to grow in 2024?
The answer: Yes, and some are still worth buying at their current prices.
Apple and Nvidia are both richly valued for their performance
I’m breaking the seven up into buy, sell, and hold groups. Starting with the sell set, I think Apple and Nvidia’s stock prices far outpaced their businesses.
Nvidia’s 2023 success has been spurred on by the artificial intelligence (AI) arms race, and its business has responded in kind. In its fiscal 2024 third quarter (which ended Oct. 29), revenue rose 206% year over year. Furthermore, management guided for $20 billion in fiscal Q4 revenue, up 231%. The stock’s movement was warranted given the company’s sales growth, but I’m concerned that investors are forgetting that Nvidia operates in a cyclical industry.
Nvidia goes through boom and bust cycles, and right now is certainly a boom. However, it’s unknown how many AI data centers will need to be built in the near to medium term. If demand for its high-powered chips is satisfied shortly, the stock may come crashing back down to earth. Plus, it’s trading at 65 times earnings — a quite expensive premium.
From a business standpoint, Apple is the opposite of Nvidia. Its sales declined throughout 2023. Even so, its stock skyrocketed. This makes little sense, and more headwinds are coming up: a U.S. International Trade Commission order this month forced Apple to halt the import and sale of some Apple Watches due to a patent dispute (although a court ruling temporarily allowed sales to resume). With all this in mind, 2024 could be a tough year for the company. And considering that Apple stock has a higher valuation than “Magnificent Seven” members Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) and Meta Platforms (NASDAQ: META), it doesn’t make a lot of sense to own it compared to its peers.
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Microsoft and Tesla need…
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