Investing Opportunities in the Nasdaq-100’s Magnificent Seven Stocks

The Nasdaq-100 index features 100 of the largest non-financial companies on the Nasdaq Stock exchange. This group includes the renowned “Magnificent Seven” stocks, boasting a combined market value of $14.7 trillion:

1. Apple: $3 trillion.
2. Microsoft: $2.9 trillion.
3. Nvidia (NASDAQ: NVDA): $2.7 trillion.
4. Amazon: $2 trillion.
5. Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL): $1.9 trillion.
6. Meta Platforms: $1.4 trillion.
7. Tesla: $811 billion.

The significant size and market dominance of these companies contributed to Wall Street’s designation of these stocks as the Magnificent Seven in 2023. Each stock shows a consistent tendency to outperform the broader market over time, as these companies are well-established leaders in their sectors.

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On April 2, President Trump announced tariffs on all physical products imported into the U.S., which caused a flight to safe-haven assets like cash due to fears of a global economic slowdown. Consequently, the Nasdaq-100 has entered a bear market, experiencing a drop of up to 23% from its peak in February.

This market downturn may present an opportunity for investors. Shares of Nvidia and Alphabet have both fallen more than 20% from their record highs, yet many of their products are either exempt from the tariffs or were never at risk. Here are some reasons why purchasing shares of Nvidia and Alphabet now could be advantageous for long-term investors.

Image source: Nvidia.

Reasons to Invest in Nvidia

Nvidia specializes in advanced graphics processing units (GPUs) for data centers, setting the standard for artificial intelligence (AI) development. The H100 GPU has been pivotal in establishing Nvidia’s 98% market share in 2023, thanks to its effectiveness in training large language models (LLMs) and performing AI inference. Although these models produced accurate responses, they often struggled with errors.

Developers are now focusing on creating “reasoning” models that utilize existing data more effectively, reducing inaccuracies before delivering responses to users. Top reasoning models include OpenAI’s GPT-4o series, Anthropic’s Claude 3.7 Sonnet, DeepSeek’s R1, and Alphabet’s Gemini 2.5.

According to Nvidia CEO Jensen Huang, these reasoning models require 100 times more computing power than traditional LLMs, meaning each generated response utilizes ten times more tokens. Additionally, the slower processing times necessitate GPUs that are ten times faster to ensure user satisfaction.

Consequently, Nvidia’s Hopper architecture is now inadequate, as developers transition to the more advanced Blackwell-based GPUs like the GB200, which perform AI inference at 30 times the speed of the H100. Furthermore, Nvidia announced a new architecture called Blackwell Ultra during the GTC 2025 conference in March, which promises performance improvements up to 50 times greater than Hopper.

In the last fiscal year, Nvidia’s data center business achieved a record $115.2 billion in revenue, reflecting a massive 114% increase from the previous year. Huang projects that spending on AI data center infrastructure could exceed $1 trillion annually by 2028, indicating substantial growth potential for Nvidia.

Currently, Nvidia’s stock is trading at a price-to-earnings (P/E) ratio of 37.7, a 36% discount compared to its 10-year average of 59.6:

NVDA PE Ratio data by YCharts

Importantly, semiconductors are exempt from President Trump’s tariffs on Taiwan, where many of Nvidia’s chips are produced. Nevertheless, Nvidia’s reliance on substantial AI data center spending from a small number of customers introduces uncertainty. If trade tensions negatively impact the global economy, these customers may adjust their capital expenditure plans.

However, this situation is likely a temporary challenge, as countries are negotiating new trade agreements with the Trump administration. Thus, investors who purchase Nvidia stock at present could see significant gains over the next three to five years.

Image source: Alphabet.

Reasons to Consider Alphabet

Alphabet, the parent company of Google, YouTube, and self-driving car developer Waymo, has established itself as a leading technology conglomerate. Google has dominated internet search for over twenty years, enabling Alphabet to accumulate a wealth of data to develop effective AI models.

This month, Alphabet introduced the Gemini 2.5 Pro reasoning model, claiming it surpasses the latest offerings from OpenAI, Anthropic, DeepSeek, and even Elon Musk’s xAI in various benchmarks. Not only does it power a chatbot called Gemini, but it will also enhance new AI capabilities in Google Search—a critical component as advertising revenue from Search represents over half of Alphabet’s total earnings.

Last year, Alphabet debuted AI Overviews for Google Search, which combine text, images, and links to third-party sites, generating AI-based responses to nearly any query. These Overviews streamline the search process by placing responses at the top of traditional results, allowing users to save time.