Investing in AI Stocks: Why Dell and Amazon are Top Picks in a Lasting Bull Market
- The bull market on Wall Street continues, driven by strong stocks like Nvidia and Microsoft, which benefit from the AI boom.
- Investing when the market is near all-time highs is challenging.
- The number of large data centers has surpassed 1,000, with at least 120 openings expected each year.
The bull market on Wall Street continues, driven by strong stocks like Nvidia and Microsoft, which benefit from the AI boom. Many believe the market will keep rising due to a favorable business environment and significant investments in AI, estimated at $250 billion next year. Revenue from AI is projected to exceed $820 billion by 2030.
Investing when the market is near all-time highs is challenging. Though risky, stocks might still rise. Below, we explore two companies with potential for long-term growth.
Dell’s Data Center Opportunity
The number of large data centers has surpassed 1,000, with at least 120 openings expected each year. These centers require infrastructure, and Dell is a leading provider. Last quarter, Dell’s Infrastructure Solutions Group recorded $11.6 billion in revenue, a 38% increase. Total sales rose 9% to $25 billion.
Dell anticipates a $124 billion market in AI and a $265 billion market for infrastructure by 2027. Recent troubles for competitor Super Micro Computer may allow Dell to capture more market share. Analysts are also raising price targets for Dell, with Wells Fargo raising its target from $140 to $160 per share and Morgan Stanley from $136 to $154. Dell also offers dividends and plans annual increases of 10% through fiscal 2028. Overall, Dell shows significant promise as an investment.
Amazon’s Data Processing Opportunity
Amazon is not just a product company; it is heavily invested in building data centers as well. Construction has begun on an $11 billion site in Indiana, vital for expanding Amazon Web Services (AWS). AWS generated 60% of Amazon’s $60.5 billion operating income over the past year, boasting a 38% operating margin last quarter.
Amazon’s stock trades below its five-year sales averages, making it an attractive option in today’s market.
Investment Strategies in a Bull Market
Investing at a market’s peak carries risks, but it is crucial not to time the market. Major indexes near record highs might rise further. Here are two strategies to manage risk:
- Dollar-Cost Averaging: Buy shares over several months to capitalize on price declines, reducing the risk of buying at peak prices.
- Buy-the-Dip: Look for market corrections to buy during price drops.
For those interested in the AI sector, consider investing in Dell and Amazon for potential growth.