The ‘Magnificent 7’ stocks have bounced off their lows. When Donald Trump announced a 90-day pause on tariffs earlier this week, share prices in this area of the stock market jumped. The thing is, many of these growth stocks are still well below their highs and currently ‘on sale’. With that in mind, here are two Mag 7 stocks that I believe are worth considering today.
A ‘generational’ buying opportunity?
First up is Nvidia (NASDAQ: NVDA). It’s currently trading for around $108, roughly 29% below its all-time high of $153.
This stock looks really cheap right now. At present, it sports a price-to-earnings (P/E) ratio of 25.
That’s low relative to the company’s earnings growth. This year, Nvidia’s earnings are expected to jump 52%, so the price-to-earnings-to-growth (PEG) ratio is only 0.48 (a ratio below one typically signals that there’s value on offer).
It’s worth noting that one well-known Wall Street analyst recently stated that Nvidia is offering a ‘generational’ buying opportunity at the moment. This analyst’s view was that trillions of dollars are going to be spent on artificial intelligence (AI) in the next few years, and that Nvidia – which develops AI chips – will be one of the primary beneficiaries of this spending.
I agree that a lot of money will be spent on AI. Recently, Google-owner Alphabet (NASDAQ: GOOG) said that it’s going to spend $75bn this year alone.
Of course, a global recession could change the outlook here. This would most likely result in companies spending less on technology in the medium term.
Taking a five-year view, however, I think this stock has a lot of potential. After all, AI is most likely here to stay.
The cheapest Mag 7 stock
Speaking of Alphabet, I think this Mag 7 stock is worth considering too at current levels. It’s trading for around $155 – about 26% below its all-time high of $209.
This is another stock that looks cheap. In fact, it’s the cheapest among the Mag 7.
Currently, the forward-looking P/E ratio is just 18. This falls to 15.8 using next year’s earnings forecast.
These multiples strike me as a great value. This is a company that operates in many growth industries including digital advertising, AI, cloud computing, self-driving cars, and streaming (it owns YouTube), so it has a lot of long-term potential.
That said, there are a few risks to be aware of. One is disruption to its search business from ChatGPT. For 20 years, Google pretty much had a monopoly on search. However, the way we look for information is now changing rapidly due to generative AI.
Another risk is economic weakness. This would most likely result in less advertising spending globally, which would hurt Google’s and YouTube’s revenues.
Weighing up the risks with the potential rewards though, I like the set-up. I think this stock has the potential to generate solid returns in the years ahead.
