Three Growth Stocks Outperforming the MarketThree Growth Stocks Outperforming the Market Despite the overall strong performance of the S&P 500, certain growth stocks have significantly outpaced the index. Three companies with solid competitive positions that warrant consideration for investment include: Microsoft (MSFT) * Microsoft is at the forefront of the AI boom, leveraging its investment in OpenAI (ChatGPT). * The company has integrated AI features into various products, enhancing productivity and data analysis. * Azure cloud revenue has grown significantly due to AI adoption. Apple (AAPL) * Apple recently unveiled its Apple Intelligence initiative, which will further enhance its ecosystem. * The AI features will drive upgrades and potentially generate subscription revenue, boosting the services segment. Texas Instruments (TXN) * While less glamorous than AI chip makers, Texas Instruments produces a wide range of low-power chips used in everyday products. * The company’s stock has recently rebounded, reflecting expectations of an industry upturn. * Texas Instruments remains a critical player in the semiconductor industry with long-term growth potential. Should You Invest $1,000 in Microsoft? While Microsoft is a strong investment, investors should consider the following factors: * Motley Fool’s Stock Advisor team identified other stocks with potentially higher returns. * Nvidia delivered impressive returns since its 2005 recommendation by Stock Advisor. * Stock Advisor has outperformed the S&P 500 since 2002.
The stock market has had an overall excellent year so far – the S&P 500 is up 17%. Of course, some hot stocks have outpaced that growth, and while it may seem counterintuitive, some of the stocks with big gains behind them may still be among the best places for investors to put their investment dollars right now.
Below are three growth stocks that have outperformed the market so far this year, but also have strong competitive positions, making them worth buying today and holding into the future.
Microsoft
As artificial intelligence (AI) has become the hottest topic on Wall Street, a lot of attention is focused on high-quality semiconductor companies such as Nvidiawho have delivered stunning results quarter after quarter. However, investors should not forget that Microsoft (NASDAQ: MSFT) is at the forefront of the AI boom, largely thanks to its investment in OpenAI, the company behind ChatGPT.
Microsoft has already added AI features to several of its products, and given the reach of its product suite, many consumers have already started seeing them in action. For example, the Copilot tool it added to productivity apps like Word, Excel, and PowerPoint can help users compose documents and analyze data more easily.
AI is impacting Microsoft’s business in other ways, too. In its most recently reported fiscal quarter, revenue at its Azure cloud unit grew 31% year over year, with 7 percentage points of growth from AI alone. Total revenue grew 17% to $62 billion, while earnings per share rose 20%.
Microsoft is a leader in software and cloud infrastructure, and its investments in AI are expected to strengthen this position in the coming years.
Apple
At first it seemed like Apple (NASDAQ: AAPL) lagged behind when it came to AI. While other tech companies were making headlines for their AI-related efforts, there wasn’t much news coming from the iPhone maker. That all changed last month when it held its annual developers conference, where it unveiled Apple Intelligence, which will roll out later this year.
What’s most important about Apple’s foray into AI is how it will strengthen its ecosystem. The new AI features will only be available on newer devices, which should create some level of upgrade cycle. Furthermore, while these features will be free when they launch, one could imagine a scenario where some aspects of the AI offering become part of a subscription service. This would provide a boost to Apple’s rapidly growing services segment, which is currently the second-largest source of revenue after iPhone sales.
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Apple is already one of the largest companies in the world, with one of the most recognizable brands. If its AI efforts can continue to entice consumers to buy more of its devices and subscribe to more of its services, its stock could continue to reward shareholders.
Texas Instruments
With so much attention focused on the few companies making the kinds of advanced semiconductor chips that can power AI, it’s easy to dismiss a company like Texas Instruments (NASDAQ: TXN)which produces a wide range of low-power chips needed for everyday use and products. From your microwave to your car’s entertainment center, chips are almost everywhere, and Texas Instruments makes a lot of them.
Year to date, Texas Instruments’ stock price is up 18%. That run, however, has only brought the stock back to late 2021 levels, reflecting the struggles the company has experienced in recent years.
It’s important to remember that the semiconductor industry is cyclical, and the industry, outside of the high-powered AI chip niche, has been in a cyclical downturn for the past year or so. Texas Instruments’ revenue and net income have declined, which is typical during these types of downturns.
The bottom line is that Texas Instruments plays a critical role in the semiconductor industry and that downturns like the current one are normal. The fact that the stock has risen so far this year despite the company’s top and bottom line declines shows that Wall Street believes these market conditions will be a challenge for the company in the short term. In the long run, Texas Instruments remains a solid company worth buying now and holding for the future.
Should You Invest $1,000 in Microsoft Now?
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Jeff Santoro has positions at Apple, Microsoft, Nvidia, and Texas Instruments. The Motley Fool has positions in and recommends Apple, Microsoft, Nvidia, and Texas Instruments. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
3 Red-Hot Growth Stocks to Buy in 2024 and Beyond was originally published by The Motley Fool
