AI Drives Growth Among Leading Tech Stocks

The Magnificent Seven tech stocks, Alphabet (NASDAQ:GOOGL), Amazon (NASDAQ:AMZN), Apple (NASDAQ:AAPL), Microsoft (NASDAQ:MSFT), Meta Platforms (NASDAQ:FB), Nvidia (NASDAQ:NVDA), and Tesla (NASDAQ:TSLA), continued to lead the tech industry in 2024, largely due to their investments in artificial intelligence.

But the companies have had varying degrees of success with their AI efforts in 2024. Nvidia, Meta, Microsoft and Amazon have done particularly well, using AI to enhance their products and services and drive big stock price gains.

Apple and Tesla have had some challenges but are still investing in AI that aligns with their core businesses. Alphabet with its vast data resources and market dominance is well positioned to benefit from AI.

Nvidia, Microsoft and Amazon are investing heavily in data centers and AI specific hardware to support the growing demand for AI compute. Meta is also pouring resources into its AI efforts including its own AI chips.

Nvidia: The AI Chip Leader

Nvidia has established itself as the clear leader in AI chips, with its stock price soaring nearly 160% in 2024. The company’s H100 chip series played a crucial role in the early stages of the AI revolution, and its next-generation Blackwell architecture is set to elevate AI to new levels.

For the fiscal year (FY) 2024, which ended on January 28, Nvidia’s revenue was $60.9 billion, a 126% increase over the previous year. By the end of its fiscal year, Nvidia’s revenue is anticipated to reach $125 billion, with a 40% increase anticipated the following year, potentially reaching $175 billion. This expansion is mostly driven by the growing need for AI infrastructure.

However, it comes at a price: Nvidia invested $1.07 billion in capital expenditures (CapEx) in FY2024, and this amount is anticipated to rise in FY2025 as it makes investments in AI technology and infrastructure to support its growth.

Meta: AI-Centric Social Media Giant

Meta, formerly known as Facebook, is now one of the top stocks focused on AI. In 2024, its stock price increased by nearly 75%. Under Mark Zuckerberg’s leadership, Meta has incorporated AI into its digital ads and social media apps using its large language model, LLama.

The company’s emphasis on AI has enhanced its current offerings and created new revenue streams. Analysts predict long-term earnings growth of 19% each year on average.

In 2023, Meta invested $27.3 billion in capital expenditures; this year, it anticipates spending $30 to $37 billion on data centres, infrastructure initiatives, and AI technology.

Microsoft: Cloud and AI Synergy

Microsoft’s stock has gone up 20% this year as the company adds AI features to its cloud platform, Azure. Its partnership with OpenAI helps Microsoft include advanced AI tools in many products, like Office applications and developer tools.

In the fiscal year that ended on June 30, Microsoft spent $44.5 billion on capital expenses and plans to increase this amount to $50 billion in the next fiscal year to support the growth of its cloud and AI systems.

Amazon: AI in E-commerce and Cloud

Amazon’s stock price increased by more than 50% in 2024, reflecting its successful integration of AI into both its e-commerce platform and Amazon Web Services (AWS).

On the e-commerce side, AI is being used to enhance product recommendations and summarize customer reviews.  Amazon’s biggest AI opportunities are in AWS, its cloud platform. By adding AI features to AWS, the company aims to meet the rising demand for AI-based cloud solutions.

In 2023, Amazon invested $52.7 billion in CapEx and plans to increase this to $75 billion in 2024 to support the demand for generative AI and its expanding cloud business.

Alphabet (Google): AI-Enhanced Search and Services

Alphabet has added AI technology to its main products like Google Search and YouTube. Its stock price has risen by over 40% this year, and the company expects its long-term earnings to grow by an average of 17% each year.

Alphabet has a large amount of its own data and leads the market in internet search, which supports its AI development.  In 2023, Alphabet spent $32.3 billion on capital expenses and plans to spend $38.3 billion in 2024. The investments will focus on AI technology and data centers.

Apple: AI Integration Challenges

Apple has faced some challenges with its AI projects. Its stock price fell by 15.5% in the first four months but then rebounded, rising by 31% in 2024. The company is working to add AI features to its devices and services, but it’s making slower progress compared to some of its peers. Despite this, Apple is still investing in AI research and development, focusing on on-device AI to protect user privacy.

In the year that ended on September 30, Apple spent $9.4 billion in CapEx and plans to spend about $10.8 billion in the following year. However, most of this spending goes to building manufacturing facilities, data centers, and corporate infrastructure. This includes costs for new production lines, equipment upgrades, and expanding its global supply chain to support products like iPhones and iPads.

Tesla: AI in Automotive Innovation

Tesla’s stock experienced a significant decline in the first half of the year, down over 42%, partly due to increased competition in the electric vehicle market and challenges in scaling its AI-driven autonomous driving technology. The stock rebounded in the second half of the year after surging following Donald Trump’s election win in November and is now up over 90% year-to-date.

Tesla remains committed to advancing its AI capabilities, particularly in the realm of self-driving vehicles and robotics. The company’s Full Self-Driving (FSD) beta program continues to evolve, leveraging AI to improve vehicle autonomy.

Tesla spent $8.9 billion on CapEx in 2023, with plans to spend at least $10 billion in 2024. This rise reflects Tesla’s continuous expenditures in a number of critical areas, including AI and autonomy, battery technology, factory enhancements, and the supercharger network.

The Next Group of AI Stocks

The success of the Magnificent Seven in AI has had a ripple effect on the broader tech ecosystem. Data center stocks like Vertiv and Digital Realty have seen substantial growth as demand for AI infrastructure has surged.

As the AI landscape evolves, Goldman Sachs predicts that the next wave of AI stocks will be companies that are actively using AI to boost their revenues. This shift from infrastructure to application could present new investment opportunities beyond the Magnificent Seven.

Final Thoughts

The Magnificent 7 are heavily investing in AI research, development, and implementation. This focus is not just changing their industries; it is also helping more people and businesses around the world to use AI.

In the coming years, we can expect to see huge investments in AI infrastructure. More new and creative AI applications and services will emerge from these leaders, which will strengthen their roles in the AI revolution.

FIGURE 1: The “Magnificent 7” Tech Stocks – Comparative Year-to-Date Stock Chart and Market Data