The “Magnificent Seven’s” Capex Spending Spree Has Given Birth to 2 Millionaire-Maker Stocks Hiding in Plain Sight. Here’s the Best of the Bunch
The “Magnificent Seven” are a group of seven mega-cap technology companies with enormous valuations that have a sizable influence on the stock market. Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia (NASDAQ: NVDA), and Tesla make up the Magnificent Seven, and their earnings growth is expected to be significantly higher than the broader market over the…
The “Magnificent Seven” are a group of seven mega-cap technology companies with enormous valuations that have a sizable influence on the stock market.
Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia(NASDAQ: NVDA), and Tesla make up the Magnificent Seven, and their earnings growth is expected to be significantly higher than the broader market over the next couple of years. It is worth noting that this group has been spending heavily to build artificial intelligence (AI) infrastructure.
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Alphabet, Amazon, Microsoft, and Meta are poised to spend a collective $725 billion on capital expenses this year, up by 77% from last year’s record outlay. Meanwhile, Tesla’s capital spending is expected to jump to more than $25 billion this year from $8.5 billion last year, driven by investments in humanoid robots and robotaxis. Though Apple has been conservative with capital spending, the iPhone maker has still spent a notable $4.3 billion on capex over the past couple of quarters.
So, the total capex of the Magnificent Seven could exceed $750 billion in 2026. Investors looking to build a million-dollar portfolio can capitalize on this spending spree by buying top tech stocks poised to grow earnings faster than the broader market. Nvidia and Sandisk(NASDAQ: SNDK) are two stocks with massive upside potential that are benefiting from this enormous AI infrastructure spending.
Let’s see why these stocks are ideal fits for a potential million-dollar portfolio and check which one is the pick of the lot.
Image source: The Motley Fool.
The AI spending spree is driving phenomenal growth for Nvidia and Sandisk
While Nvidia is part of the Magnificent Seven, it is one of the biggest beneficiaries of this group’s massive capital spending. Nvidia’s chip systems are the cornerstone of the AI infrastructure that’s being built by the major hyperscalers in the U.S. When Nvidia revealed its next-generation Vera Rubin AI processors earlier this year, the company noted that this platform will be deployed widely by the top four hyperscalers in the U.S.
Additionally, there is strong demand for Nvidia’s Vera Rubin processors from pure-play AI companies such as OpenAI and Anthropic. At the same time, AI start-ups, neocloud providers, and server makers are also expected to deploy these chips on a big scale. The good part is that the strong demand for Nvidia’s AI chips is poised to translate into stronger growth for the company.
Nvidia reported 85% year-over-year revenue growth in the first quarter of fiscal 2027 (which ended on April 26). Its $91 billion revenue estimate for the current quarter points toward a stronger jump of 95% from the year-ago period. So, it is easy to see why analysts are predicting a larger increase of 88% in its earnings per share this fiscal year to $8.94 per share. That’s well above the 60% growth it delivered in the previous fiscal year.
With the stock trading at just 25 times forward earnings, a discount to the tech-laden Nasdaq-100 index’s forward earnings multiple of 27, investors are getting a great deal on Nvidia stock right now. After all, it should ideally trade at a premium after a year, given its market-beating earnings growth potential.
Similarly, Sandisk is also trading at an attractive 22 times forward earnings. The storage specialist’s bottom line has been growing exponentially, as the demand for its NAND flash storage solutions is exceeding supply. Importantly, the AI boom should ensure that storage demand continues to grow at an exceptional pace.
According to a research report, the AI-focused storage market’s revenue could increase from $36 billion last year to almost $322 billion in 2035. That’s not surprising, as supporting AI workloads such as training models and running inference applications requires large datasets that must be quickly fed to AI accelerators in data centers and at the edge.
This explains why McKinsey is estimating 35% annual growth in sales of enterprise solid-state drives (SSDs) that Sandisk manufactures through 2030. The consulting firm notes that AI training needs will drive an 11x increase in SSD content per server between 2024 and 2030, while AI inference will drive a 7x jump in the same.
Given that the memory chip shortage could continue until 2030, it is easy to see why Sandisk’s earnings are set to rise at a parabolic pace from fiscal 2025 levels of $2.99 per share.
Data by YCharts
But which stock should you be buying right now?
It isn’t too difficult to see which one of these two AI stocks is worth buying hand over fist right away. While both of them are growing at solid rates, Sandisk’s growth is outpacing Nvidia’s significantly. Of course, Nvidia is anticipated to deliver healthy double-digit earnings growth over the next three years, but its average growth rate isn’t expected to be anywhere close to Sandisk’s.
Data by YCharts
Additionally, Sandisk has a slightly cheaper forward earnings multiple. If Nvidia and Sandisk were to trade at an identical 30 times forward earnings after three years, the latter’s stock price upside will be much higher. That’s why Sandisk looks like an ideal investment for anyone looking to build a million-dollar portfolio. The key role that memory chips are playing in AI infrastructure should ensure that Sandisk’s red-hot earnings growth continues beyond the next two to three years, paving the way for multibagger gains in the long run.
Should you buy stock in Sandisk right now?
Before you buy stock in Sandisk, consider this:
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
The “Magnificent Seven’s” Capex Spending Spree Has Given Birth to 2 Millionaire-Maker Stocks Hiding in Plain Sight. Here’s the Best of the Bunch was originally published by The Motley Fool
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