The bullish trend on Wall Street remains strong, supported by companies such as Nvidia and Microsoft, which are benefiting significantly from the growing artificial intelligence (AI) market. With the stock market nearing all-time highs, timing investments can be challenging. Investors are optimistic about continued market gains due to a perceived business-friendly administration and major tech investments in AI. These companies are expected to invest $250 billion in capital expenditures next year. Furthermore, AI revenues are projected to surpass $820 billion by 2030.
Chart by Statista.
However, it’s essential to consider that stock prices may not keep rising indefinitely, as risks are always present. Below, we will explore buying strategies suitable for a bull market and discuss two distinct companies that hold promise for long-term investments.
Dell: A Leader in Data Center Growth
This year, the number of hyperscale data centers (over 100,000 square feet) has exceeded 1,000, with projections suggesting at least 120 more will come online every year for the foreseeable future. These vast centers require immense infrastructure, including servers, and Dell (NYSE: DELL) leads the market in this area. The Infrastructure Solutions Group at Dell posted record revenue of $11.6 billion last quarter, reflecting a growth of 38%. Overall, Dell’s sales rose by 9% to $25 billion for the quarter.
Dell anticipates that its addressable AI market will reach $124 billion and the total infrastructure market will be $265 billion by 2027. Challenges faced by its competitor, Super Micro Computer, may further enhance Dell’s market position. Supermicro is dealing with a negative short report, postponed financial filings, and the exit of its auditors, potentially benefiting its rivals, including Dell. Consequently, analysts have been revising their price targets for Dell upward this month.
Wells Fargo increased its target from $140 to $160 per share, while Morgan Stanley raised its target from $136 to $154. These new targets are 7% to 11% higher than Dell’s current price. If Dell continues its stronghold in the server market, further increases could follow. Additionally, shareholders can benefit from a dividend and share buyback plan that returned a total of $1 billion last quarter. Dell aims to raise its dividend by 10% annually through at least fiscal 2028, making it an attractive stock option in the coming years.
Amazon: Expanding Data Processing Power
Shifting focus from a company that supplies data centers to one that constructs them brings us to Amazon (NASDAQ: AMZN). Construction has commenced on Amazon’s $11 billion data center in Indiana, crucial for enhancing the processing and storage capabilities of Amazon Web Services (AWS).
Though many still view Amazon primarily as a retail company, AWS plays a vital role in its business model. This segment contributed 60% of Amazon’s total $60.5 billion operating income in the last year, boasting a remarkable operating margin of 38% last quarter, while the other two segments combined achieved just 5%.
As shown in the chart below, Amazon’s operating cash flow has surged significantly, driven largely by AWS.
AMZN Cash from Operations (TTM) data by YCharts
Interestingly, Amazon’s stock currently trades below its five-year averages for sales, operating cash flow per share, and earnings—an unusual situation in today’s high-flying market.
So, what strategies should investors consider in a thriving bull market? Investing at market peaks can be risky, yet it is vital not to attempt to time the market. Even with major stock indexes hovering around all-time highs, there’s potential for further growth. Here are two methods to minimize risk.
First, think about dollar-cost averaging—gradually accumulating shares over several months. This technique helps capitalize on price dips and reduces the risk of buying at a peak. Alternatively, a “buy-the-dip” approach can be effective. The market often experiences corrections (declines of over 10%), although none occurred in 2024 yet; before that, there were instances in 2023, 2022 (four times), and 2020 (five times). Whatever method you choose, keep Dell and Amazon in mind as valid options for participating in the AI market.
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Wells Fargo is an advertising partner of Motley Fool Money. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Bradley Guichard has positions in Amazon and Dell Technologies. The Motley Fool has positions in and recommends Amazon, Microsoft, and Nvidia. 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.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
