2 Stocks Worth Buying That Should Be in Your Portfolio

Recent market volatility highlights the importance of investing in stable growth stocks. Companies in sectors that are constantly growing can offer great potential over the long term. Technology is one such sector that is growing and innovating. Danny Cook of Motley Fool Recommends two stocks that deserve a permanent place in an investment portfolio.

The Nasdaq has risen about 110% over the past five years and 280% over the past 10. The growth has been driven by consumer technology, digital advertising, cloud computing, and artificial intelligence, and these sectors are likely to continue for decades. However, the index recently fell 10% due to a massive sell-off in technology stocks on concerns about disappointing economic reports.

However, past trends suggest that these headwinds are only temporary. Technology remains a fast-growing sector with a lot to offer long-term investors. These are two stocks that investors can take advantage of this trend.

1. Advanced Micro Devices – Good Runner Up

Advanced Micro Devices is the number two in graphics processing units (GPUs). It has to contend with market leader Nvidia. GPUs are needed to train artificial intelligence (AI) models and are essential to the development of the industry. GPU sales from AMD and Nvidia have surged in recent months due to the AI ​​hype. That hasn’t left the stock market untouched, as they have soared to record highs.

Nvidia’s market cap has reached over $2 trillion, while AMD’s is valued at $215 billion. This huge difference in market cap shows the huge potential that AMD has as it continues to grow in the AI ​​space. This could be an excellent opportunity to invest in a company that could be worth $1 trillion by the end of the decade. That would require a 374% price increase. The stock has risen 500% over the past five years, so such growth is not out of reach.

Meanwhile, AMD is making progress in AI. Revenue was up 9% year over year and beat expectations by $120 million. The growth was driven primarily by increased sales in its data center segment, where revenue rose a record 115% year over year to nearly $3 billion. The stock isn’t exactly cheap, with a forward price-to-earnings ratio of 38. However, that’s well below average and given the huge potential in AI chips, AMD is an attractive stock to buy now and hold indefinitely.

2. With Microsoft on Cloud 9

Microsoft’s stock price has also suffered from the sell-off in technology stocks. But the company’s long-term potential remains strong. As the owner of powerful brands like Windows, Office, Xbox, Azure, and LinkedIn, Microsoft has grown into a tech giant with profitable positions in multiple markets. Operating profit and free cash flow have grown 288% and 212%, respectively, over the past 10 years.

The company’s $74 billion in free cash flow gives it room to expand its operations, and its large cash reserves have given Microsoft the opportunity to invest early in the AI ​​market. In 2019, the tech company invested $1 billion in OpenAI. Its stake in OpenAI has since grown to $13 billion. This gives Microsoft access to ChatGPT and can successfully integrate AI into its software and cloud services.

The latest results show a 16% year-over-year increase in revenue in fiscal 2024 and a 24% increase in operating profit. The growth of the Azure cloud platform continues to be impressive, with revenue up 20%, while operating profit increased by 31%.

In addition to artificial intelligence, Microsoft has strong positions in PCs, gaming, and digital advertising. Its broadly diversified business model makes it less vulnerable to macroeconomic headwinds. Growth has been steady over the past decade, with annual revenue increasing 162% since 2014. Microsoft’s price-to-earnings ratio of 30, combined with its growing cash position and strong position in technology, makes the stock attractive for investors to hold for the long term.