This has been an excellent year for growth stocks, with many enjoying significant rises after their sell-offs in 2022. The combination of high inflation and the Federal Reserve’s interest rate hikes in response triggered a bear market that took the tech-heavy Nasdaq Composite index down by 33% last year. In 2023, however, booming markets like artificial intelligence (AI) and improvements in inflation have made investors bullish again.
The performances of many growth stocks over the past few years serve to highlight how crucial it is to hold over the long term, even in uncertain times. Stockholders who sold last year amid macroeconomic headwinds would not have benefited from the correction in 2023. So it’s not a bad idea to dedicate a large portion of your portfolio to stocks with a history of consistent long-term gains, and to plan on holding on to them for five to 10 years, minimum.
With that idea in mind, here are four growth stocks I see as smart buys this week.
Amazon (AMZN -2.99%) is on a roll this year, with its stock up 67% year to date. That rise brought it the majority of the way back from its 50% tumble in 2022. The company is winning over investors with a recovering e-commerce business and growing potential in AI.
The second-quarter report the tech giant posted on Aug. 4 proved it was back on a growth path. Its North American e-commerce segment hit over $3 billion in operating income after reporting $627 million in losses in the year-ago period.
That growth came thanks to Amazon’s quick reactions amid poor economic conditions last year. Management implemented restructuring moves such as sunsetting unprofitable platforms, closing warehouses, and laying off workers. A solid recovery in Amazon’s retail business proves its worth as a reliable growth stock, able to successfully overcome external challenges.
Despite the rally, Amazon’s stock remains down 25% from the high it hit in July 2021. It still has plenty of room for growth as e-commerce profits continue to rise and it expands its AI offerings on Amazon Web Services.
It’s not often that Apple‘s (AAPL -0.41%) stock goes on sale, but its tumble of 10% since the start of August has made it a more attractive buy. After outperforming the Nasdaq last year, inflation hikes finally caught up with the company. In Q3 2023, Apple suffered revenue declines in three of its four business segments. As a result, total revenue fell for the third consecutive quarter, decreasing by 1% year over year.
Despite those recent declines, Apple remains a behemoth in the tech industry. It has leading market shares in multiple product categories and benefits from the immense brand loyalty of its core customers. The company has much to gain from easing inflation, making its stock an excellent long-term buy.
Alongside a booming services business and expanding AI division, Apple shares are worth considering after their recent dip.
3. Advanced Micro Devices
Advanced Micro Devices (AMD -4.82%) is another company that is looking like a buy after a tumble in its share price. The tech giant’s stock has fallen by 20% in the last three months though it is still up 57% year to date. The company posted dismal second-quarter earnings in August, with revenue down 18% year over year. The company has suffered due to weakness in PC sales and has yet to see a return on its significant investments in AI.
However, AMD could come back strong in the coming years as it works to develop AI chips that match the power of Nvidia‘s best. AMD expects to begin shipping the newest chip in its MI300 lineup, which it calls its most powerful graphics processing unit (GPU) ever. Meanwhile, last month, AMD acquired AI software firm Mipsology, which specializes in AI interface software.
AMD is a long-term buy. However, it’s ramping up to play a major role in the future of AI, making its stock too good to pass up.
Microsoft‘s (MSFT -2.50%) stock has climbed by 38% this year, yet it remains one of the best ways to invest in AI. Microsoft’s forward price-to-earnings (P/E) ratio is currently the lowest among some of the biggest names in AI despite its massive potential in the sector. With a forward P/E of 31, Microsoft isn’t exactly a bargain, but by that metric, its stock still offers more value than any of the other tech companies in the chart below.
Microsoft expanded its stake in ChatGPT developer OpenAI to 49% this year by investing $10 billion in the start-up on top of its previous investment of $1 billion. Its partnership with the smaller company has granted Microsoft exclusive licenses to several of OpenAI’s AI models, which it has used to bring AI upgrades to many of its services. Azure, Word, Excel, and Bing all offer AI tools now, and the company is likely to become the go-to choice for businesses and consumers seeking to boost productivity with the help of AI.
Microsoft has the vast resources and brand recognition to go far in AI. Its collaboration with OpenAI has given it an edge in the market and made its stock worth buying this week.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon.com, Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.