Better tech stock buy: MercadoLibre vs AMD

Today, the long-term investing case for two tech stocks is put forward by a couple of our Foolish contributors.

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Thanks to both artificial intelligence (AI) and the ever-increasing shift away from shopping in ‘bricks and mortar’ to online shopping — among much, much more! — there’s no doubting that tech stocks remain at the forefront of many investors’ minds.

So we asked two Fools to name their favourite shares in the sector right now, and why. As ever, note that returns are not guaranteed and past performance is not a reliable indicator of future results.

Building a digital empire in Latin America

By Ben McPoland. MercadoLibre (NASDAQ:MELI) is often referred to as ‘the Amazon‘ or ‘the PayPal of Latin America’. Not only does that reveal its business model, it also hints at its huge scale.

Today, MercadoLibre operates its online marketplace across 18 countries and receives 668m visits per month. That’s four times the amount of traffic that Amazon gets in Latin America. And when PayPal was looking to expand in the region, it decided to partner with MercadoLibre rather than compete against it.

The company’s growth has been breathtaking, with sales rising from $1.2bn in 2017 to $10.5bn in 2022. Last year, its revenue was 49% higher than 2021. Given the global economic challenges, that performance seems remarkable to me. 

More importantly, the firm reported a full-year operating profit of $1bn, which translates into an operating margin of 9.8% (far higher than Amazon’s 2.4%). Its free cash flow generation also beats its competition.   

Mercado Pago, its payments platform, is the region’s third most popular digital wallet today.

Now, the company’s ambition to become the digital bank of Latin America pits it (once again) against some mighty competition. Banco Santander, for example, isn’t going to just roll over and let MercadoLibre dominate in areas such as loans, insurance and other financial services.

However, this is a region where approximately 450m people are still unbanked (no account) or underbanked (accounts lacking access to credit and loans). So the market is large enough to accommodate multiple winners.

The stock currently trades at 6 times sales, a significant discount to its five-year average of 12.5. I think that presents investors with a timely opportunity to buy a small piece of this exceptional enterprise.

Ben McPoland owns shares of MercadoLibre.

Up 45% in 2023, AMD is on the rise 

By Matt Cook: Advanced Micro Devices (NASDAQ:AMD) is one of the biggest stock winners of 2023. As ChatGPT and interest in AI have boomed, so have stocks related to the technologies.

Year to date, AMD is up 45%, Nvidia 85%, and Intel 22%. Currently, Nvidia has the lead in graphics cards that can power AI technology. ChatGPT was trained on Nvidia hardware, and other companies are rushing to buy up Nvidia’s enterprise A100 and H100 cards.

However, I’m not buying shares in Nvidia. Since last year, I have been buying shares in AMD whenever I can. That’s because, although Nvidia has a headstart, I believe AMD is the only company that can give Nvidia a run for its money. 

AMD was slow to add the hardware that is required to run AI to its graphics cards. In 2020, Nvidia and AMD released the RTX 3000 and RX 6000 series of graphics cards, respectively. 

Due to Nvidia’s early adoption of AI hardware, its high-end offering was up to 77% faster in AI tasks than the best from AMD. Fast forward two years, and both companies released their latest graphics cards at the end of 2022. 

In one generation, AMD has made massive gains, closing the gap considerably to Nvidia with its latest card matching Nvidia’s best offering from early 2022. 

Nvidia may still have the lead, but with how quickly AMD is catching up, I think it’s the best buy in AI right now.  

Matt Cook owns shares in AMD and Intel.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended and Nvidia. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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