Redefining the “Magnificent Seven”
The term “Magnificent Seven” typically conjures images of a classic 1960s Western, but today, it refers to a group of forward-thinking companies that have significantly propelled stock market growth recently. You might recognize these names—think Nvidia, Meta Platforms, and others—all thriving in the rapidly expanding artificial intelligence (AI) sector. Analysts predict the S&P 500 could rise by double-digit percentages this year, perhaps even reaching new heights.
Yet, the Magnificent Seven isn’t the only focus; two additional stocks could see substantial benefits over the next five years as spending on AI infrastructure surges and the demand for AI computing power grows. These two stocks are currently outperforming the Magnificent Seven this year, and there might be more to come. Let’s explore these two contenders that could potentially outshine the established players in the near future.
CoreWeave (NASDAQ:CRWV) has seen its shares rise over 250% since its market launch. While the company may still be young, its services are undeniably in demand now and in the future, particularly in the realm of AI infrastructure.
CoreWeave offers impressive computing capabilities, backed by a fleet of 250,000 graphics processing units (GPUs), which customers can rent as needed—yes, even by the hour. This setup eliminates the need for significant upfront investment in costly GPUs, allowing easy access to necessary power for tasks like model training.
Another point of interest is Nvidia’s involvement in CoreWeave. The semiconductor giant holds a 7% stake in the company and has plans to purchase any unused capacity by 2032, somewhat alleviating the risks associated with investing in CoreWeave.
Revenue at CoreWeave has skyrocketed, boasting a more than 400% increase year-over-year in the first quarter, along with a tripling of revenue in the most recent quarter. Given the soaring demand for AI capabilities, especially in training and real-world applications, the company seems well-positioned for future growth—possibly exceeding the Magnificent Seven.
Broadcom (NASDAQ:AVGO) has also seen its stock climb nearly 50% this year. As cloud service providers ramp up their AI infrastructure, Broadcom could continue to rise. The company is a networking powerhouse, providing a wide array of products employed across various sectors, from smartphones to data centers.
Interestingly, as the AI movement grows, Broadcom’s data center business has become essential, responding effectively to customer needs for networking solutions that connect the multitude of compute nodes facilitating AI workloads. Their products, such as Tomahawk switches and Jericho routers, are in demand.
Add to that their development of custom AI accelerators—known as XPUs—Broadcom is poised to become a notable player in computing. These XPUs serve specific purposes, distinguishing them from Nvidia’s general-purpose high-performance chips, making it easier for Broadcom to capture market share and meet tailored customer demands. Recently, Broadcom even announced a significant $10 billion order for XPUs, likely from leading AI lab OpenAI.
The recent AI business surge has translated into remarkable revenue growth for Broadcom, too. For instance, they reported a 63% increase in AI revenue to $5.2 billion just last quarter. If Nvidia’s CEO is correct, with rising costs for AI infrastructure projected to soar, Broadcom is also likely to profit immensely from this trend, further solidifying its position in the market and potentially outpacing the Magnificent Seven.
Before making any decisions about investing in CoreWeave, it’s essential to consider various factors, weighing both potential risks and opportunities in the evolving tech landscape.
