The stock market continues to perform well, with the NASDAQ leading the way in total returns over the past few years. That comes as no surprise to many long-term growth investors who have benefited from this long-term bull market.

Now, a rotation has begun to emerge, with some divergence between big tech stocks in the NASDAQ and other smaller companies in the Russell 2000 and other indices outperforming. We’ll have to wait and see if this trend continues – it will be interesting if it does. But if history, or at least recent history, teaches us anything, it’s that straying too far from the growth investing thesis has been painful for many investors. It has led to underperformance, and given that most money managers want to keep their jobs as their number one priority, it means that there will likely continue to be an outsized focus on the mega-cap NASDAQ stocks that most investors are well aware of.

For investors who believe this thesis and want to consider investing some capital in the NASDAQ’s biggest winners that have the potential to continue to extend their outperformance, we dive into three key options.

Key points about this article:

• The rotation from mega-cap tech stocks to smaller growth stocks has been going on for a while, but it appears that many investors are primarily looking to invest in mega-cap tech stocks.
• For those expecting to see capital flowing back into these big tech stocks, here are three you should really be focusing on right now.
• If you are looking for stocks with great potential, make sure to grab a free copy of our brand new report “The Next NVIDIA”It includes a software stock that we are confident has 10x potential.

Meta-platforms (META)

Meta Platforms CEO Mark Zuckerberg stands in front of a chart with a sign that reads: “META Stock to $1,000 a Share?”

Meta platforms (NASDAQ:META) continues to be a top Magnificent 7 outperformer, with META shares up over 52% year-over-year at the time of writing. Moves like these from a company of this size are certainly notable, and have many investors considering diversifying away from the social media and AI giant.

Meta’s core businesses are of course Facebook, WhatsApp, Instagram, Threads, and other online social media businesses. These businesses provide the company with a cash cow to reinvest significant amounts of capital into growing its non-core segments. For years, that capital has been flowing into the metaverse (hence the name change), and the company continues to spend heavily there. But over the past year, Meta has diverted a significant amount of capital into investing in its AI tools to gain even more dominance in its core businesses.

Of extensive first-party data of its 3.27 billion usersWith nearly 600,000 Nvidia H100 GPUs and its own custom AI chip, Meta is shaping up to be a formidable foe in this AI race. The company has also notably developed Llama, its own AI model, integrated it into its apps and offered it to developers. Meta is thus creating a fully controlled AI ecosystem and hopes to be one of the few winners in this space at the end of the day.

i think Meta stands out in the AI ​​space with its comprehensive approach, unlike others like Nvidia, Apple or Alphabet. While Nvidia supplies chips and Apple uses OpenAI’s models, Meta leverages its strengths digital advertising base, AI tools and $150 billion in annual revenue to improve ad effectiveness. With ad impressions and prices up 10% year over year and double-digit growth expected, META stock, trading at 25x estimated 2024 earnings with a PEG ratio of 1.3, presents a buying opportunity on any big dip. At least that’s my opinion.

Amazon (AMZN)

A little girl speaks into an Amazon Alexa Echo Dot

from Amazon (NASDAQ:AMZN) stock price has historically followed operating earnings, rising with earnings increases and falling with declines. In the first half of 2024, operating income increased 141% year-over-year, largely driven by AWS, which represents 84% ​​of the Operating profit Q2Given AWS’s expected annual growth rate of 15% to 21% through 2028, the strong fundamentals of this key earnings engine suggest a positive outlook for long-term investors.

For the quarter ended June 30, Amazon reported $53 billion in free cash flow and has $86 billion in cash and equivalents, positioning the company to continue aggressively investing. Key growth drivers include a $4 billion stake in AI startup Anthropic and an $11 billion data center project in Indiana. These moves bolster Amazon’s competitive edge in AI and semiconductors, signaling that its current growth is just the beginning.

Amazon’s current price-to-free cash flow ratio of 37.1 is well below its 10-year average, despite the company’s growth and sophistication. Investors appear to be undervaluing Amazon’s AI investments, unlike its peers in the Magnificent Seven. With significant cash reserves and continued AI-driven growth, Amazon appears to be a top buying opportunity among mega-cap tech stocks right now.

Nvidia (NVDA)

Nvidia logo on the side of a building

This list of the best NASDAQ stocks to consider wouldn’t really be complete without discussing the following points: Nvidia (NASDAQ:NVDA). The semiconductor giant is set to report earnings next week (on August 28). This quarterly earnings report is expected to be a hot one, with revenue expectations skyrocketing to $28.5 billion in revenue (at least according to the rumored numbers), above the $28 billion forecast. In addition, earnings are expected to more than double to $0.64 per share. With strong demand for its AI GPUs, Nvidia has seen a 427% year-over-year increase in data center revenue and an overall revenue increase of 262% in Q1Despite potential delays in its Blackwell chips, robust demand for its H100 and H200 processors is likely to drive continued sky-high year-over-year growth rates.

Colette Kress, CFO of Nvidia, noted that the company continued to see strong demand for its H100 processor despite the launch of the H200. Continued strong demand and a lack of availability for the company’s more powerful chip should continue to deliver the kind of earnings wins investors have come to expect.

Of course, there are significant risks associated with this upcoming earnings report. Any kind of top or bottom line (or guidance) miss could lead to a sharp decline in NVDA stock. Therefore, I wouldn’t be surprised to see some hedging taking place prior to earnings, especially given how high this stock has gone lately.

Nvidia’s stock price outlook largely depends on the duration of the Blackwell chip delay. A short delay might have minimal impact, but a three-month setback could hurt performance. Despite the risks of an accelerated development cycle, Nvidia’s stock remains attractive with a forward price-earnings multiple of around 30 times, reflecting strong growth prospects. We’ll have to wait and see if the company delivers, but I’m staying in the bullish camp on this one for now.

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