2 ‘Magnificent Seven’ stocks to buy before they rise as much as 71%, according to select Wall Street analysts

The rise to prominence of artificial intelligence (AI) since the beginning of last year has been absolutely phenomenal. The potential applications for generative AI continue to grow by leaps and bounds, and it has become clear that companies at the forefront of this technology will benefit from early adoption.

Leading the pack is the so-called “Magnificent Seven” group of stocks that have outperformed the broader market by a wide margin since the advent of AI early last year (in order of returns, as of this writing):

• Nvidia (NVDA 3.37%): up to 700%
• Meta platforms (META 1.74%): up 379%
• adze: up to 120%
• Amazon: up 109%
• Alphabet: up 89%
• Microsoft: up 75%
• Apple: up 74%

To put these gains in the context of the overall market, S&P 500 it’s up 49% over that time, so the difference is big.

It should come as no surprise that each of these companies is a leader in the adoption and development of AI. What’s surprising is that a growing chorus on Wall Street — which rarely agrees on anything — is almost universally in support of several of these stocks. And despite triple-digit gains, two of them still have quite a positive grade ahead, according to select Wall Street analysts.

Image source: Getty Images.

Meta Platforms: Implicit Growth 41%

The first stock with a lot of growth potential is Meta Platforms. The social media specialist has recently turned its sights on the vast potential of generative AI, but the company has a long history of developing and implementing cutting-edge algorithms.

Meta has a treasure trove of user data from its multiple social media sites, which provides the information needed to develop its own large language models — which form the foundation of generative AI. While the company doesn’t have its own cloud infrastructure service to monetize its LLaMA AI, Meta offers its AI models on its rivals’ cloud platforms — for a fee.

The company derives most of its revenue from advertising that appears on its social media platforms. To that end, Meta has also developed a suite of tools to help these advertisers succeed by helping them secure their share of those ad dollars.

Despite a 379% increase in its share price since the beginning of last year (as of this writing), Wall Street remains firmly behind Meta. Just last week, Rosenblatt Securities analyst Barton Crockett assigned an $811 price target and a buy rating on the stock. This represents a potential upside of 41% from Tuesday’s closing price.

Crockett sees Meta’s unmatched spending on virtual reality, augmented reality and the Metaverse as a strength rather than a weakness. It gives the company “an ability to make effective price/performance choices.” He notes that Meta “uniquely offers category products that could be described as leading in consumer adoption.” He’s also impressed with Meta’s latest advances in AI.

The analyst is not the only bullish on Meta. Of the 64 analysts who covered the stock in June, 56 rated it a buy or strong buy and none recommended sale. Additionally, the Meta is selling for just 29 times earnings, a discount to the S&P 500 multiple of 30.

Meta boasts over 3.2 billion users who visit its social media platforms every day, providing the company with a constant stream of relevant data. It’s the world’s second-largest digital advertiser, giving the company plenty of cash flow to pursue its AI ambitions.

Add in the opportunity presented by AI and it’s no wonder Wall Street is in love with Meta.

Nvidia: an implicit 71% advantage

The second Magnificent Seven stock with a ton of potential is Nvidia. The chip specialist has been one of the biggest early beneficiaries of the AI ​​revolution, as its graphics processing units (GPUs) make the technology possible. Nvidia processors have long been the gold standard for video games, cloud computing, data centers and other forms of AI. The emergence of generative AI in early 2023 led to triple-digit gains in revenue, earnings, and share price.

It’s easy to see why. Nvidia is the undisputed leader in the discrete desktop GPU space, controlling 88 percent of the market, according to data compiled by Jon Peddie Research. The company also continues to dominate the data center GPU market, with a staggering 98 percent of the market last year, according to semiconductor analyst TechInsights. If that weren’t enough, Nvidia dominates the market for machine learning — an earlier branch of AI — with 95 percent of that market, according to business analytics firm CB Insights. This helps illustrate that when it comes to the data center and AI market, Nvidia is the undisputed leader.

Despite the roughly 700% increase in the stock price since the beginning of last year (as of this writing), Wall Street continues to be bullish on Nvidia. Rosenblatt analyst Hans Mosesmann maintains a buy rating and a $200 price target on the stock. This represents a potential upside of 71% from Tuesday’s closing price.

Mosesmann believes the chipmaker’s software — which complements and accelerates its industry-leading processors — doesn’t get enough credit. “We anticipate that this software aspect will grow significantly over the next decade in terms of the overall sales mix, with an upward trend in valuation due to sustainability,” Mosesmann wrote.

The analyst is not the only bullish on Nvidia. Of the 60 analysts who provided an opinion on the stock in September, 55 rated the stock a buy or strong buy, and none recommended sale.

While some investors may be suspicious of Nvidia’s valuation, that view is short-sighted. For Nvidia’s 2026 fiscal year, which starts in February, analysts’ consensus estimates call for earnings per share of $4.02. With a current share price of $117, that works out to about 29 times forward earnings, cheaper than the S&P 500’s current multiple of 30.

Given the company’s industry dominance and cutting-edge technology, I think it’s clearly a bargain.