Considering the current upswing in the stock market, now is the prime moment to explore the realm of momentum stocks—no pun intended.
These stocks represent companies experiencing accelerated growth and are expected to sustain their upward trajectory in the near future. With the AI revolution in full swing, the market offers a plethora of momentum stocks, albeit some fueled by hype alone. The proliferation of AI has, in essence, created a rising tide that lifts all boats. Thus, it becomes crucial to distinguish the true gems from the mere facades and concentrate on top-notch stocks basking in strong momentum. While investing in momentum stocks carries risks, the allure of significant gains may tantalize any investor at this juncture.
Pioneering Momentum: Amazon (AMZN)
From a modest bookstore to a tech powerhouse, Amazon (NASDAQ:AMZN) has transcended expectations. It boasts an exceptionally diverse tech portfolio and has emerged as a global force to be reckoned with. Consequently, AMZN stock has been a remarkable wealth generator, delivering approximately 100% returns over the past five years and a staggering 842% over the last decade. Moreover, it achieved a formidable 78% surge last year, propelled by AI advancements and robust operational performance. Particularly noteworthy is its cloud computing arm, Amazon Web Services (AWS), which continues to dazzle by incorporating AI capabilities.
During the previous year, Amazon’s stringent cost-saving measures played a pivotal role in its stellar quarterly results. In each of the four quarters, its earnings per share exceeded analyst projections by significant margins. By the end of the year, its net income reached $30.4 billion, a significant leap from a net loss of $2.7 billion in the prior year.
The fusion of AWS and AI proves to be a match made in heaven. AWS’s generative AI platform, Amazon Bedrock, equips developers with the necessary tools to efficiently construct, train, and scale generative AI models. Furthermore, the company’s investments in AI-driven chips, such as Tranium and Inferentia, position it favorably to meet the escalating demand for AI computing prowess.
Lingering Momentum: Microsoft (MSFT)
Embracing a monumental upsurge following its groundbreaking collaboration with OpenAI, tech titan Microsoft (NASDAQ:MSFT) continues its upward trajectory. MSFT stock has surged by 28% in the last six months, with an impressive gain exceeding 50% in 2023.
Microsoft’s alliance with OpenAI has solidified its standing as a trailblazer in the realm of AI, integrating this transformative technology across its software spectrum. AI pervades everything from its Teams teleconferencing platform to the Office software suite. Consequently, its quarterly outcomes have been stellar, consistently surpassing top-line estimates by an average of $1.35 billion over the past four quarters. Moreover, it has consistently outperformed bottom-line estimates by double-digit margins, with further growth anticipated in subsequent quarters. While it is still early days in the AI arena, analysts forecast substantial incremental sales and earnings in the coming years. Thus, despite its lofty valuation, MSFT remains a solid long-term AI investment with substantial upside potential.
Resilient Momentum: Netflix (NFLX)
Netflix (NASDAQ:NFLX) sent shockwaves a couple of years ago when it reported a loss of 200,000 subscribers in the first quarter of 2022. It marked the first decline in subscribers in over a decade, prompting concerns about its long-term outlook. However, since then, Netflix has staged an impressive comeback, with its stock surging by over 80%. The strategic overhaul of its business strategy, including the introduction of paid advertisements, stringent password-sharing policies, and investments in live sports programming, has been instrumental in this resurgence.
Netflix’s recent earnings release highlighted a significant revenue beat of $120.4 million, amounting to $8.83 billion. Furthermore, the fourth-quarter report showcased a 300-basis-point enhancement in operating margins to 21%. Of utmost importance, Netflix concluded the quarter by adding a substantial 13.1 million new subscribers, surpassing estimates that predicted a maximum of nine million additions. These impressive results underscore the enduring appeal of the streaming giant, operating in a favorable market environment for consumer cyclicals.
On the publication date, the writer, Muslim Farooque, had no direct or indirect positions in the securities discussed in this article. The views expressed herein are those of the author and are subject to the InvestorPlace.com Publishing Guidelines.
Muslim Farooque, a passionate investor and eternal optimist, brings to the table a lifelong love for gaming and technology. With a Bachelor of Science degree in applied accounting from Oxford Brookes University, Muslim possesses a keen eye for analyzing technology stocks.
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