“Strike while the iron is hot.”
The expression originally related to a blacksmith shaping iron. However, it applies today to lots of things — including investing.
There are good reasons to invest in a hot stock. The dynamics that can cause any given stock to take off often remain in place for a long time. On the other hand, some fast-rising stocks quickly give up their gains.
Which stocks are likely to keep their momentum going? Here are two sizzling hot stocks to buy right now.
Amazon: Higher profits plus tailwinds from AI and advertising
Amazon (AMZN 2.10%) has delivered a year-to-date gain of nearly 70%. The stock won’t need to move much higher to enjoy its best year since 2020, when online shopping soared due to the COVID-19 lockdowns.
It’s important to understand why Amazon stock is so hot these days. I think that there are three main reasons — and all of them should continue to benefit the company for a long time to come.
First, it is now laser-focused on profitability. Just look at Amazon’s Q3 results. Earnings more than tripled year over year to $9.9 billion. The company’s streamlining efforts are working. So is another big change for Amazon.
“The benefits of moving from a single national fulfillment network in the U.S. to eight distinct regions are exceeding are optimistic expectations,” said CEO Andy Jassy in the Q3 update.
Second, generative AI is providing a massive tailwind. Sure, that tailwind so far has been primarily related to investors’ expectations for Amazon. But Jassy noted that all of the company’s business units are developing generative AI apps to help customers, and more are coming. More importantly, Amazon Web Services (AWS) should benefit as organizations shift more of their IT spending to the cloud to take advantage of AWS’ AI capabilities.
Third, Amazon is steadily becoming a giant in the digital advertising market. Its advertising services revenue soared 26% year over year in Q3 to over $12 billion. Jassy thinks that Amazon has “barely scraped the surface with respect to figuring out how to intelligently integrate advertising into video, into audio, and into grocery.” I think that advertising represents a major growth opportunity for Amazon over the next decade and beyond.
Meta Platforms: An even bigger AI winner
Meta Platforms (META 2.56%) ranks as an even bigger AI winner than Amazon. Shares of the technology giant have skyrocketed by more than 160% so far in 2023. Meta appears to be on track to easily deliver the best yearly stock performance in its history.
Any assertions that Meta’s social media platforms were losing their appeal have been blown out of the water. In the third quarter, the average numbers of daily and monthly active people on Facebook, Instagram, Messenger, and WhatsApp increased by 7% year over year to 3.14 billion and 3.96 billion, respectively. The latter number is nearly half of the world’s population.
Advertisers understandably want to get their products and services in front of such a huge audience. Meta’s advertising revenue jumped close to 24% year over year in Q3 to $33.6 billion.
The company continues to invest heavily in AI, and is already seeing these efforts bear fruit. CEO Mark Zuckerberg said in the Q3 earnings call that AI-driven feed recommendations had boosted time spent on Facebook by 7% and on Instagram by 6% so far this year. Meta’s AI tools for advertisers have also helped its Advantage+ shopping campaigns hit a $10 billion revenue run rate.
Zuckerberg believes that Meta’s “next major pillar” will be business messaging. The company plans to use AI to help businesses communicate with customers and prospects via text in a cost-effective way.
The metaverse also remains a key long-term focus for Meta. The company recently launched its Quest 3 mixed-reality headset and the next generation of its Ray-Ban Meta smart glasses. It’s also adding new worlds to Horizon and expanding the metaverse platform to mobile devices.
This content was originally published here.
