Microsoft: Dominating the Desktop Operating System Arena
Microsoft’s Windows remains the go-to choice for desktop operating systems, providing Microsoft a stronghold in the market, while its Azure platform has become a global leader.
Alphabet’s Google: Search Engine Monopoly
With almost 92% of the global internet search market share in November, Alphabet’s Google holds an almost monopolistic position in the search engine industry.
Amazon: Dominating the Online Retail Space
Amazon’s online marketplace accounted for approximately 40% of all online retail sales in the United States in 2022, leaving competitors far behind.
Nvidia: Graphics Processing Unit Dominance
Nvidia’s graphics processing units (GPUs) are responsible for 80% to 90% of GPUs deployed in high-compute data centers, cementing Nvidia’s position as a key player in the market.
Meta Platforms: Owning Social Media Real Estate
Meta Platforms, headed by Facebook, holds the top spot in social media and boasts nearly 4 billion monthly active users during Q3.
Tesla: Leading the Electric Vehicle Revolution
Tesla, as North America’s foremost electric vehicle manufacturer, is the only profitable pure electric vehicle player in the market.
Impressive Upside for the Magnificent Seven
Based on analysts’ ambitious price targets, three of the Magnificent Seven have a potential upside ranging from 50% to 122% in 2024 and beyond.
Nvidia, a semiconductor stock, has already seen its shares surge by nearly 240% this year. However, Wall Street analyst Hans Mosesmann of Rosenblatt Securities believes there is still potential for triple-digit growth ahead. Mosesmann has set a target of $1,100 per share, which equates to a 122% increase and would add $1.5 trillion to Nvidia’s market capitalization.
A significant factor contributing to Nvidia’s success is its involvement in the rise of artificial intelligence (AI). The company’s A100 and H100 AI-driven GPUs are projected to capture a majority share in AI-accelerated data centers by 2024. With increased production capacity, Nvidia is expected to boost output in the coming year.
However, an ironic challenge may arise for Nvidia. The majority of its data center sales growth thus far has been driven by limited product availability, resulting in exceptional pricing power. As supply catches up and competition intensifies, particularly from Advanced Micro Devices, Nvidia may lose its pricing advantage, potentially impacting its gross margin. Additionally, looking to history, it’s unlikely that Mosesmann’s $1,100 price target will be reached in 2024, as the initial hype around AI often takes time to stabilize.
Another Magnificent Seven stock with attractive potential is Microsoft, according to Truist Securities analyst Joel Fishbein. Fishbein forecasts a $600 price target for the tech giant over the next three years, representing a 61% increase in share price and a potential $1.7 trillion addition to market capitalization.
Microsoft’s investments in AI play a crucial role in Fishbein’s optimistic projection. The company has poured billions into OpenAI, which introduced ChatGPT and contributed to AI implementation in Microsoft’s search engine, Bing. Microsoft has also integrated generative AI solutions into its Azure cloud infrastructure, offering businesses tailored marketing options, virtual agents/chatbots, and supply chain enhancement.
While AI investments drive Microsoft’s future, the company’s legacy segments, including Windows, continue to provide a solid foundation. Although Windows no longer fuels growth as it did two decades ago, it remains the dominant operating system globally, generating ample cash flow to support risk-taking and further investments in emerging trends like AI. With a current stock valuation already factoring in anticipated success (29 times forward earnings), reaching Fishbein’s $600 price target may prove challenging.
Analyst Alex Haissl of Redburn Atlantic sees significant potential for e-commerce giant Amazon, projecting a $230 price target for the company’s shares. This target represents a 50% increase, equivalent to a nearly $790 billion boost in market capitalization.
Key to Haissl’s optimistic forecast is Amazon’s fast-growing cloud-infrastructure services, particularly Amazon Web Services (AWS). Despite competition from Azure, AWS maintains its status as the leading provider of cloud infrastructure services, capturing 31% of the market. With enterprise cloud spending still in its early stages, AWS is poised to contribute substantial operating cash-flow growth to Amazon’s future.
Additional growth drivers include Amazon’s various ancillary segments. With over 2 billion unique monthly visitors, Amazon attracts advertising spend from a vast audience, positioning the platform as an attractive choice for advertisers. Despite Amazon’s currently high trailing-12-month price-to-earnings ratio (81), its forward-year multiple-to-cash flow (14) is the lowest since becoming a publicly traded company. Among the Magnificent Seven, Amazon appears the most likely to achieve its high-water price target.