Earnings season has arrived once again, providing insights into the recent performance and future outlook of major companies. Investors are particularly interested in the opinions of chief executive officers, given the challenges U.S. companies are currently facing, such as President Trump’s import tariff plan. The announcement of these tariffs earlier this month caused a decline in indexes as investors expressed concerns over potential increases in import prices affecting corporate profits.
The tech industry is especially concerned, as many companies import materials and finished goods from abroad. Although Trump has temporarily exempted electronics, this exemption may not be permanent. As companies report their earnings, investors are keen to see how they plan to handle potential future tariffs.
Despite these concerns, this does not necessarily mean investors should avoid buying tech stocks. Although tech companies might face short-term challenges, the long-term prospects for well-established players remain strong. Companies positioned in the high-growth artificial intelligence (AI) market are considered valuable additions to any tech portfolio, especially at current attractive prices. Below are three AI stocks deemed promising ahead of the earnings season.
1. Nvidia
Nvidia is currently facing challenges, including a recent halt on chip exports to China and the potential impact of future import tariffs. The company manufactures its leading AI chips in Taiwan through Taiwan Semiconductor Manufacturing. Despite these challenges, Nvidia is a global leader in AI, offering high-performance chips and a comprehensive range of supporting products and services. This comprehensive offering encourages customers to work with Nvidia for all AI needs, given the advanced technology available. AI’s potential to improve business efficiency means that even an economic slowdown may drive companies to accelerate their AI adoption. Nvidia’s strong track record of earnings growth, coupled with a current valuation trading at only 22 times forward earnings estimates, makes it an attractive investment right now.
2. Amazon
Amazon is expected to secure significant benefits from AI advancements. The company already uses AI to enhance the efficiency of its fulfillment network, which may be beneficial during economic slowdowns. Amazon’s cloud computing division, Amazon Web Services (AWS), is a major seller of AI services. AWS, as the leading global cloud provider, has a vast customer base, and as businesses seek to build AI capabilities, they are likely to choose AWS. The growth trajectory of AWS has recently been attributed to AI, with the division showcasing a $115 billion annual revenue run rate last year. Amazon’s consistent earnings growth over time reinforces its status as a solid operation, trading at 27 times forward earnings estimates.
3. Meta Platforms
Meta Platforms is primarily known for its social media applications, including Facebook, Messenger, WhatsApp, and Instagram, with most revenue generated through advertising on these platforms. However, AI is increasingly integrated into Meta’s strategy. The introduction of Meta AI, already the world’s most-used AI assistant, aims to increase user time spent on its applications, thereby encouraging advertisers to invest more. Meta is also focused on leading in the broader AI market, with efforts such as developing the Llama LLM and significant AI investments, potentially reaching $65 billion this year. Meta’s ongoing earnings growth, dominance in social media, and ambitious AI goals, along with the stock trading at 20 times forward earnings estimates, make it a compelling investment during the current earnings season and beyond.
Disclosure
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is also a board member. Adria Cimino holds positions in Amazon. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Nvidia, and Taiwan Semiconductor Manufacturing, and adheres to a disclosure policy.
