Seven mega-cap tech stocks making up the so-called Magnificent 7 continue to generate most of the buzz in the market right now. These companies are the largest and most successful U.S. tech stocks, with strangleholds on their respective industries.
The AI boom has led to outsized interest in a number of these names, with Nvidia (NASDAQ:NVDA) continuing to be among the best-performing stocks in the market. That said, I think three companies out there could provide even greater gains for the remainder of the year.
Here are the three Magnificent 7 stocks with overlooked potential that I think investors are sleeping on the most right now.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) continues to garner strong Wall Street support, with a consensus rating of Strong Buy from 43 analysts. Its previous revenues and earnings displayed excellent results, with 3.98 billion active monthly users. Revenue grew 25%, and net income surged 201% year-over-year.
Those sorts of results on their own provide an easy-to-understand investment thesis for this giant. A focus on profitability is clearly translating into better bottom-line results — what investors want to see.
However, Meta is also intensifying its AI efforts, which are crucial for its metaverse expansion plans. Notably, the company is investing heavily in Nvidia’s H100 GPUs, advancing its open-source Llama language model. CEO Mark Zuckerberg eyes AGI as the next stage of the company’s growth plan.
Now, the success of Meta’s emerging technologies is yet to be determined. Management acknowledges metaverse investments may take a decade to realize fully. That is the headwind the company has been fighting for some time, as certain investors aren’t buying into Zuckerberg’s vision.
Despite this, rising advertising income and investments in AI position META stock as a long-term buy. The company’s prospects are promising, mainly if ventures like Meta Glasses evolve into substantial revenue streams, further diversifying the company’s cash flows beyond advertising.
Alphabet (GOOG, GOOGL)
Among the Magnificent Seven stocks, Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) receives the slightest acknowledgment currently. Challenges with its AI model have hampered the stock greatly. However, I think these issues are likely temporary.
As Google’s parent company, Alphabet heavily relies on advertising, contributing 76% of its revenue. Successful AI implementation is crucial for targeted advertising. While Alphabet’s AI-related setbacks haven’t affected ad revenue, the company’s future progress in this realm will be closely watched.
Alphabet’s generative AI product, Gemini, faced public setbacks from image generation flaws to incorrect responses. Apple’s (NASDAQ:AAPL) potential Gemini integration could enhance Alphabet’s data and ad value. Despite challenges, Alphabet’s AI potential remains underestimated.
Alphabet’s stock trades at reasonable multiples compared to its peers, such as Microsoft (NASDAQ:MSFT) and Apple. Analysts project 11% growth over the next two years, augmented by stock buybacks. With disciplined spending, Alphabet’s earnings per share could outpace revenue growth, potentially outperforming the market.
Amazon (AMZN)
This year looks to be a bright one for e-commerce giant Amazon (NASDAQ:AMZN), given the stock’s recent performance over the past few weeks. However, to sustain this momentum, Amazon must continue to enhance profitability in online retail and combat rivals in cloud computing.
With a market cap exceeding $1.8 trillion, Amazon faces heightened competition from Walmart (NYSE:WMT) and Target (NYSE:TGT) in digital sales. As a leader in e-commerce and cloud computing via Amazon Web Services, the company is working on leveraging generative AI and a thriving advertising sector for continued growth.
Additionally, Amazon and Anthropic’s recent collaboration on cutting-edge generative AI is one catalyst to pay attention to. Anthropic chose Amazon Web Services (AWS) as its primary cloud provider for critical tasks, leveraging AWS Trainium and Inferentia chips for model development. Anthropic’s long-term commitment ensures future generations of its models will be accessible to AWS customers worldwide through Amazon Bedrock, providing a robust platform for advanced generative AI applications.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.