The S&P 500 slid 0.6% in its latest up-and-down day after erasing a morning gain. The Dow Jones Industrial Average dropped 301 points, or 0.7%, and the Nasdaq composite lost 0.5%.

Zions Bancorp. tumbled 13.1% after the bank said its profit for the third quarter will take a hit because of a $50 million charge-off related to loans made to a pair of borrowers. Zions said it found “apparent misrepresentations and contractual defaults” by the borrowers and several people who guaranteed the loans, along with “other irregularities.”

Another bank, Western Alliance Bancorp, dropped 10.8% after saying it has sued a borrower, alleging fraud. It also said it’s standing by its financial forecasts given for 2025.

Scrutiny is rising on the quality of loans that banks and other lenders have broadly made following last month’s Chapter 11 bankruptcy protection filing of First Brands Group, a supplier of aftermarket auto parts. The question is whether the hiccups are just a collection of one-offs or a signal of something larger threatening the industry.

Thursday’s swings on Wall Street, where the Dow bounced from an early gain of 169 points to an afternoon loss of 472, fit the pattern of the week for stocks. They’ve been shaky since the end of last week, when President Donald Trump shattered a monthslong calm in the U.S. stock market by threatening much higher tariffs on China.

Thursday’s swoon erased an early morning gain driven by an encouraging signal about the artificial-intelligence boom.

Taiwan Semiconductor Manufacturing Co. reported a bigger jump in profit for the latest quarter than analysts expected. Chief Financial Officer Wendell Huang also said TSMC expects “continued strong demand for our leading-edge process technologies” going into the end of the year.

That’s important for the U.S. stock market because TSMC is a critical player in the AI frenzy, making chips for such companies as Nvidia. And Nvidia and other AI stocks have been central to Wall Street’s surge to records this year, even though inflation is still high and the job market is slowing.

AI-related stocks have shot so high that critics worry about a possible bubble, like the one that imploded for dot-com stocks in 2000.

U.S. companies broadly are under pressure to deliver stronger profits after the S&P 500 surged 35% from a low in April. To justify those gains, which critics say made their stock prices too expensive, companies will need to show they’re making much more in profit and will continue to do so.

Travelers dropped 2.9% Thursday even though the insurer reported a stronger profit for the latest quarter than analysts expected. Its revenue fell short of forecasts.

Hewlett Packard Enterprise fell 10.1% after detailing long-term financial targets that some analysts found underwhelming.

They helped overshadow a 4% gain for Salesforce, which unveiled a plan to deliver more than 10% in compounded annual revenue growth in coming years.

J.B. Hunt Transport Services trucked 22.1% higher after the freight company breezed past Wall Street’s profit targets in the third quarter.

All told, the S&P 500 fell 41.99 points to 6,629.07. The Dow Jones Industrial Average dropped 301.07 to 45,952.24, and the Nasdaq composite sank 107.54 to 22,562.54.

In the oil market, crude prices swung lower after Trump agreed to meet with Russia’s Vladimir Putin in Hungary in hopes of resolving the war in Ukraine. The war has had the United States trying to cut off purchases of Russian oil.

A barrel of U.S. crude gave up an early gain to drop 1.4% to $57.46. Brent crude, the international standard, fell 1.4% to $61.06 per barrel.

In stock markets abroad, indexes climbed across much of Asia and Europe.

South Korea’s Kospi soared 2.5% on hopes that a trade deal may be coming between Seoul and Washington. Samsung Electronics and automakers [hotlink]Hyundai Motor[/hotlink] and Kia Corp. were among the big gainers.

In the bond market, Treasury yields dropped as investors herded toward investments considered safer. The yield on the 10-year Treasury sank to 3.97% from 4.05% late Wednesday.

Gold also rose in the hunt for safer investments. It climbed 2.5% to $4,304.60 per ounce, bringing its stunning gain for the year so far to roughly 63%.

A report in the morning said manufacturing activity in the mid-Atlantic region is unexpectedly shrinking. It’s one of the few windows into the economy that the Federal Reserve has been getting recently as it tries to figure out whether high inflation or the weak job market should be the bigger concern for the economy.

The U.S. government’s shutdown is delaying important updates on the economy, such as a weekly update on unemployment claims that typically helps guide Wall Street’s trading each Thursday. A day earlier, an important report on inflation was also delayed.

___

AP Writers Teresa Cerojano and Matt Ott contributed.

1999 is back, and I’ve missed it. Ever since then, I’ve been chasing that next 50-bagger, the kind of life-changing winner that helped me come up with the down payment for my first property. But he’s been elusive.

I still remember sitting on the international trading floor at Goldman Sachs at 1 New York Plaza, glued to my screen as internet names like Commerce One and Yahoo soared higher almost daily. My firm had just gone public, instantly turning the partners into decamillionaires. The energy was electric – optimism everywhere, fortunes being made, CNBC blaring nonstop.

Fast forward to today: tech stocks are leading again, crypto investors are buying Lambos, and AI is woven into everything – our phones, portfolios, and daily conversations. San Francisco, once quiet during the pandemic, is buzzing again. Startups are hiring and everyone’s talking about the next big thing.

And I’ll admit, I’m hyped. We have the potential to get extremely rich over the next five years.

Then the 2000 dot-com crash vaporized trillions in wealth and taught me one of the most important lessons of my life: euphoria always feels rational until it doesn’t. Ah, cheers to irrational exuberance.

The Return Of The 1999 Atmosphere

I’m investing in public tech stocks, private growth stocks, a little bit of Bitcoin, and San Francisco real estate, which all feel poised for continued growth.

Back in 1999, I promised myself that if the mania ever returned, I’d lean in harder, but smarter. Now, with investors once again betting on infinite growth, that time has come.

So how do we balance greed with wisdom? How do we ride this wave of innovation without repeating the mistakes of the past? Let’s explore what history teaches us and how to navigate this AI-driven rocket responsibly.

Because frankly, with far more capital at stake, I don’t want to lose my shirt again. But even if I do, I’ve heard the “dad bod” is the most attractive male body type, making us feel approachable, stable, and mature.

What Makes This Time Different (and What Doesn’t)

Yes, this time is different, and that’s exactly what everyone says before every bubble bursts. But there are some key distinctions worth acknowledging.

• AI has tangible productivity effects. Unlike many dot-com ideas that never made money, AI is already saving companies billions.
• Balance sheets are stronger. Corporate debt loads are healthier than in 1999 and 2007, and many firms are flush with cash.
• Strong income and cash flow. In addition, the largest tech companies are generating enormous free cash flow.
• Consumers are also much stronger. Household leverage is lower than in 1999 and 2007 as well.
• Monetary policy is turning supportive again. Amazingly, the Fed is resuming its interest rate cuts with everything at all-time highs, providing a tailwind for risk assets.

That said, the psychology of manias never changes. People overestimate short-term gains and underestimate long-term disruption. AI is real, but that doesn’t mean every AI stock is. Some companies will go to the moon; the vast majority will go to zero.

That’s why perspective and diversification matter more than ever.

How I’m Positioning for The New Mania

Here’s how I’m approaching this cycle, and some suggestions if you’re feeling swept up by the hype. As we should all remember, there are no guarantees in risk assets. Always do your due diligence and invest according to your own goals and risk tolerance.

1. Stay Invested, But Maintain Exposure Limits

I’m fully participating in this bull run but will trim individual positions once they exceed 10% of my portfolio. A concentrated portfolio works, until it doesn’t.

The 10% threshold is somewhat arbitrary. You should come up with your own comfort level. According to modern portfolio theory and supporting studies, holding around 20 to 30 positions is typically enough to achieve most of the benefits of diversification along the efficient frontier, roughly a 3% to 5% allocation per position.

It’s not enough to just monitor your investment portfolio’s composition, you also need to view it in the context of your overall net worth. Look at how much you have in cash, real estate, alternatives, bonds, and low-risk assets.

Personally, I aim to keep public equities between 25% and 35% of my total net worth. That allocation gives me the confidence to stay the course during downturns. If the average bear market declines about 35%, that would translate to roughly a 10% hit to my overall net worth, which I can comfortably stomach.

Ascertain how much of your net worth you’re comfortable losing.

2. Shift More Towards Real Assets

1999 through 2009 taught me that stocks are funny money with no real utility. You can’t drink your stocks, live in your stocks, or physically enjoy them. The only way to benefit is to sell some shares from time to time to fund a better life.

The best asset I’ve found that offers both potential appreciation and real-world utility is real estate. There’s no better feeling than watching your home appreciate in value while you actually enjoy living in it. If you have children, that satisfaction multiplies. You’re not just building wealth, you’re providing stability and memories for your most precious assets.

I’m long as much San Francisco real estate as I can comfortably handle, a primary residence and three rentals. AI companies are expanding, housing demand is rebounding, and real estate remains one of the few tangible hedges against both tech volatility and inflation.

3. Increasing Private Company Exposure

I’m investing directly into AI companies through various closed and open-ended venture capital funds with up to 20% of my investable capital. All of the closed-end venture capital funds charge 2% and 20% of profits or more, and are invite only. While Fundrise Venture is open to everyone and doesn’t charge any cary.

Back in 1999, I had ~$8,000 to invest after receiving my signing bonus ($5,000 + my existing $3,000 from part-time jobs in college). So I invested $3,000 in VCSY, a Chinese internet company that 50Xed. However, to make life-changing money requires a much larger amount of invested capital. So this time around, I’m investing seven figures while staying within my 20% exposure limit.

Below is a chart that should both scare and excite you. Every venture capital general partner thinks they’ve invested, or will invest, in the next AI winner. But as a 20-year limited partner in venture capital, I’ve seen that roughly 90% of investments either go to zero or return only modest capital.

For that reason, a general partner must either have a tremendous track record or the fund must already own companies you strongly believe in before it’s worth investing. I’m hedged by investing in both types of venture capital funds.

4. Maintain Liquidity To Buy The Dip And Survive

After the 1999–2000 and 2008–2009 downturns, I promised myself I’d always keep at least one year of living expenses in cash or cash equivalents like Treasury bills, and I still do. Liquidity buys peace of mind. It lets you both survive and buy the dip when markets crash.

Thankfully, cash and Treasury bills now pay a handsome ~4% risk-free return. That makes the so-called “cash drag” in a 1999-style bull market far less heavy.

Corrections are inevitable. If you don’t have liquidity ready, you’ll be forced to sit on your hands instead of take full advantage.

5. Do Not Buy Risk Assets On Margin

Although the temptation to leverage up in a 1999-style bull market is high, don’t do it. If we really are reliving 1999, remember what came next: the NASDAQ crashed 39% in 2000 and ultimately fell 78% from peak to trough by 2002. Even if you were only 50% on margin back then, chances are you were wiped out.

Today, plenty of investors are making the same mistake in cryptocurrencies (altcoins), leveraging 2X to 50X in pursuit of quick riches. Some have made fortunes, but many have also lost years of hard-earned gains in a single day. That most recent day was October 10, 2025, when widespread liquidations (~$20 billion) erased entire portfolios due to leverage.

If you absolutely can’t resist the urge, limit your speculative capital. Carve out no more than 10% of your investable assets for leveraged punts. And go in knowing the worst-case scenario: not only can you lose everything, you might also owe money to your broker.

In a flash crash, prices can gap down before your broker executes a stop limit sale, leaving you with a negative balance. Investing on margin long-term is a bad idea. Resist the temptation.

https://twitter.com/bon_g/status/1976773795877994861

6. Embrace The Dumbbell Investing Strategy

During manias, investing FOMO often pushes investors to take excessive risk. You buy things you don’t fully understand simply because you can’t stand watching others get rich without you. More often than not, this type of investing leads to ruin.

One way to manage this is with a dumbbell strategy: split your portfolio or new investments between low-risk or risk-free assets and high-risk, speculative bets. This approach lets you capture upside if the mania continues, while still protecting your downside if it fizzles out.

Over the past several years, I’ve been regularly using the dumbbell strategy to invest in both private AI companies and in Treasury bills and bonds. This way, no matter what happens, I’m hedged.

7. Spend And Enjoy A Portion Of Your Profits

Every year during a bull market, I try to buy something tangible with my “funny money” profits. This ensures that if, and when, the bear market returns, at least I’ll have something to show for the gains.

For example, in 2003, I used profits from VCSY in 2000 to buy a two-bedroom condo with a park view in Pacific Heights, a property I still own today. It housed my girlfriend and me for two years and now generates semi-passive income to help fund our retirement.

You don’t have to invest your funny money in real estate. Fine art, rare books, ancient coins, or even memorable experiences like a family vacation or a cruise for your parents all count. Great experiences often appreciate in value in ways that money can’t measure, especially now that we can record them in stunning 4K.

As long as you continue taking profits to acquire meaningful experiences or material things you value, a 1999-style bull market can keep rewarding you long after it’s technically over.

7. Mentally Prepare For Financial Pain & Mental Anguish

A 1999-style bull market will eventually end badly. We could even face another lost decade, where risk assets provide little to no real returns. It could certainly happen again, especially with the S&P 500 trading at 23X forward earnings.

However, once you study history and understand how severe losses can get, the pain isn’t as shocking when they arrive. Here are some key statistics:

• 5% corrections: happen 3–4 times per year on average.
• 10% corrections: happen about once per year.
• Bear markets (-20%+ declines): from 1928–2025, there have been ~16, averaging one roughly every 5–6 years.
• Average bear market drawdown: ~35%.
• Median post-1946 bear market duration: 11 months, with an average decline of 33–35%.
• Median recovery time to all-time highs: 23 months.

In other words, mentally take your equity exposure and lop off 35% of its value immediately. Ask yourself: can you handle losing that much and waiting roughly two years to get back to even? If yes, you’re good to go. If not, you need to make adjustments.

You can even use my FS-SEER formula to quantify your risk tolerance in terms of time, helping you plan your allocations more confidently.

7. Revisit your income streams. 

Your income streams are crucial for staying afloat during a bear market, yet they often get overlooked in a bull market. That’s why it’s important to list out your various sources of income and rank them by reliability. When the bear market hits, how secure will they be?

If you know you’ll always earn enough to cover your family’s living expenses, you can afford to take more risk. But if many of your income streams are likely to collapse in a downturn, you need to adjust your exposure accordingly. Make a realistic estimation of how far they may decline.

The key is to build diverse sources of income before you actually need them. By the time you do, it may already be too late.

8. Focus On Health And Lifestyle

Bull markets can make you forget what really matters: health, friends, and family.

Back in 2009, my stress levels were through the roof as I watched roughly 40% of my net worth vanish in six months that took a decade to build. My back pain made it almost impossible to drive or sit, and I was grinding my teeth relentlessly. My TMJ was so bad I couldn’t talk comfortably for more than five minutes at a time. I had to find a way out of dedicating my life to finance.

Today, I strive for balance, a goal made far easier without a 60-hour-a-week job. I start the day with 1-2 hours of writing, then often play tennis, coach my kids, and remind myself that wealth is meaningless if you don’t have the energy to enjoy it.

In your pursuit of riches, please do not neglect your health! It will come to bite you in the arse eventually.

Don’t Confuse Brains With a Bull Market

It’s intoxicating to feel smart in a rising market. Gains reinforce confidence, and confidence feeds risk-taking. But the truth is, in bull markets everyone looks brilliant, until the rocket blows up.

When the 2000 crash hit, I I watched multimillionaire colleagues lose everything they’d built due to excessive leverage. The barber at the basement of 1 New York Plaza no longer bragged to me about his wins while he cut my hair. In fact, he said he had to sell his two Mercedes after the crash. Markets giveth, and markets taketh away.

Don’t let a bull market convince you that you’re invincible. Let it remind you that discipline is what keeps you rich once you get there.

The Happiness Hedge

It might sound counterintuitive, but one of the best hedges against financial loss is emotional contentment.

During boom times, it’s easy to keep raising the bar – more money, more property, more cars, more partying, more everything. But if you’re already at a 7 or 8 out of 10 on the happiness scale, chasing a 10 might actually send you backward.

Happiness comes from balance: meaningful work, good health, family time, friends, and enough money to control your schedule. Everything beyond that is gravy over your ego.

So yes, I’m leaning into this AI-driven bull market. But I’m also reminding myself that financial freedom is only worth it if you’re actually free. We can prevent ourselves from being slaves to money by having a properly structured portfolio and a financial plan under any scenario.

Ride the Wave, But Know A Jagged Shore May Await

The energy today feels electric, just like 1999. And I love it. I want to see people make great fortunes so they can have the freedom to do what they want. Imagine telling your micromanaging boss to screw off one day. Amazing!

Investors could experience an epic blow off like we 26 years ago. Just know how quickly the music can stop. Diversify, stay humble, and take some chips off the table when you can.

Bull markets make you rich. Bear markets make you wise. Together, they make you complete.

So let’s enjoy the ride, but with our eyes open!

For those who’ve been investing since 1999 or earlier, how does today’s market feel compared to back then? What similarities and differences stand out to you? Does the current AI-driven frenzy remind you of the dot-com boom, or does it feel like something entirely new? Are you positioning yourself for another potential blow-off top that could make us all a lot wealthier or are you bracing for the inevitable hangover? And for younger investors who didn’t live through 1999, how are you managing your FOMO as everyone around you seems to be getting rich again?

Get A Free Financial Analysis Offer From Empower

If you have over $100,000 in investable assets—whether in savings, taxable accounts, 401(k)s, or IRAs—you can get a free financial check-up from an Empower financial professional by signing up here. It’s a no-obligation way to have a seasoned expert, who builds and analyzes portfolios for a living, review your finances. 

A fresh set of eyes can uncover hidden fees, inefficient allocations, or overlooked opportunities to optimize. A 1999-style bull market has a way of making even the most disciplined investor a little delusional. That’s when proper risk management tends to disappear.

The statement is provided to you by Financial Samurai (“Promoter”) who has entered into a written referral agreement with Empower Advisory Group, LLC (“EAG”). Click here to learn more.

Subscribe To Financial Samurai 

Pick up a copy of my USA TODAY national bestseller, Millionaire Milestones: Simple Steps to Seven Figures. I’ve distilled over 30 years of financial experience to help you build more wealth than 94% of the population—and break free sooner.

Listen and subscribe to The Financial Samurai podcast on Apple or Spotify. I interview experts in their respective fields and discuss some of the most interesting topics on this site. Your shares, ratings, and reviews are appreciated.

If you want to stay ahead of the markets, join over 60,000 readers and subscribe to my free Financial Samurai newsletter. You can also get my posts in your e-mail inbox as soon as they come out by signing up here. My goal is simple: help you achieve financial freedom sooner so you can live life on your own terms.

Although artificial intelligence (AI) investing gets a ton of attention from the market, there’s a good reason for that. It’s where the majority of cash flows are being poured into, and following the money to where it’s being spent is a genius investing strategy.

Right now, most of the AI hyperscalers are still building their computing capacity, making companies that sell this equipment into great investments. I believe stocks like Nvidia (NVDA 0.27%), Taiwan Semiconductor (TSM -1.17%), and Broadcom (AVGO -0.48%) are among the best buys now, as they receive a boatload of this spending.

1. Nvidia

Nvidia has topped the list of best AI companies to invest in since the trend began in early 2023. Its graphics processing units (GPUs) are the computing muscle behind most of the AI technology people experience today, and show no signs of slowing down. Nvidia’s management projects that the AI hyperscalers will spend $600 billion on capital expenditures for AI data centers this year, but that figure could reach $3 trillion to $4 trillion globally by 2030. Nvidia captures a sizable chunk of that spending, as Wall Street analysts expect Nvidia to generate around $206 billion in revenue this year.

Time will tell if Nvidia can capture a large chunk of that projected spending, and a lot of it will hinge on whether its products are accepted back in China once the U.S. government grants Nvidia’s export license. However, I think that Nvidia still has the world’s best technology for general-purpose computing, making its products a no-brainer choice when building artificial intelligence computing capacity.

Nvidia remains a top stock pick in the AI realm, even if it has been a massive success over the past few years.

2. Taiwan Semiconductor

Nvidia is what’s known as a fabless chip company. It designs the products, but relies on other companies to manufacture the components that go into them. One of the most important companies in this setup is the chip foundry, which produces the microchips in the devices. Nvidia uses Taiwan Semiconductor for this work, and TSMC has made a name for itself in the industry by providing best-in-class technology and production yields.

Nearly all leading tech companies use TSMC’s chips. Often, two competitors both use chips produced by TSMC, such as Nvidia and AMD (AMD -1.05%). Because Taiwan Semiconductor is acting as a neutral party fabrication facility, this arrangement works great and allows it to capitalize on massive technology trends.

An investment in Taiwan Semiconductor is a bet that companies are going to use more advanced chips, and a greater quantity of them, in the future. I think that’s a very safe assumption, making TSMC a great stock to buy now.

3. Broadcom

Broadcom is challenging Nvidia’s dominance in the AI computing market by partnering with AI hyperscalers to design custom AI accelerator chips.

Nvidia GPUs are the undisputed leader of multi-purpose computing, and can handle many types of workloads, whether it’s AI training, cryptocurrency mining, or engineering simulations. However, if a client only uses an Nvidia GPU for one workload, these capabilities are wasted. By designing an AI chip with one workload in mind, Broadcom can achieve greater performance at a cheaper price.

This makes Broadcom’s custom AI accelerators a potentially massive business, and it’s starting to show up in the company’s results. In third-quarter fiscal year 2025 (ended Aug. 3), Broadcom’s AI revenue soared 63% year over year, outpacing Nvidia’s 56% growth rate.

This shows that Broadcom is gaining market share in this area, and it could be a force to reckon with over the next five years. I think Broadcom will be a great investment over the next few years as a result, and investors should consider scooping up shares alongside Nvidia and Taiwan Semiconductor.

Keithen Drury has positions in Broadcom, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool recommends Broadcom. The Motley Fool has a disclosure policy.

The S&P 500 has continued to notch new record highs this year, thanks in large part to soaring interest in artificial intelligence (AI) technology, which is fueling massive spending on both hardware and software. But as impressive as the S&P 500’s 17% gains over the past year have been, they pale in comparison to AI data analytics company BigBear.ai Holdings‘ (BBAI 9.63%) 273% climb over that period.

When a stock delivers returns like this in such a short amount of time, it’s understandable that some investors might start to think that buying and holding it could help them retire as millionaires. We’re in the early innings of AI, after all, so why can’t brighter days still be ahead for this stock?

Unfortunately, I don’t think that’s the right way to think about BigBear.ai. In fact, it might be best not to own this stock right now at all. 

Why BigBear.ai stock is soaring

There’s a lot of optimism among investors right now surrounding artificial intelligence stocks, as companies and governments invest in AI data center infrastructure and increase their use of AI software. One way BigBear.ai is tapping into this demand is by offering AI logistics and analytics, which can improve the efficiency of everything from supply chains to national security.

Management says the company’s total addressable market was $80 billion in 2024, but it forecasts that it could grow to $272 billion by 2028 for the combined private and public sectors. Part of the enthusiasm for the company’s shares comes as the U.S increases its spending on AI defense, a market that could be worth up to $70 billion by the mid-2030s. BigBear.ai makes a “significant portion” of its revenue from government contracts, and AI defense is an important component of its potential.

Also, because AI stock enthusiasm is sky high right now, BigBear.ai has at times surged for no obvious reason. Case in point: Last week, after trending down over a period of a couple of months, it jumped by more than 10% in a single session on no news at all.

Why BigBear.ai won’t help you retire a millionaire

If the good news is that BigBear.ai’s stock has made impressive gains over the past year (albeit quite bumpy ones), the bad news is that the company has little to show in the way of growth. Revenue fell 18% year over year to $32.5 million in Q2, following another decline in Q1.

With sales slipping, management recently cut its revenue guidance for the year to about $132 million — 22% lower than the midpoint of its previous forecast. Lower sales volumes from some government contracts were the problem during the quarter, but upon closer inspection of the details, BigBear.ai’s situation doesn’t look much better.

The company’s gross margins slid to 25% in the quarter, down from nearly 28% in the year-ago period. That continued a pattern of inconsistency over the past year. Worse, BigBear.ai is nowhere near profitable. Its non-GAAP (adjusted) earnings before interest, taxes, depreciation, and amortization (EBITDA) came to a loss of $8.5 million in the quarter, significantly worse than its adjusted loss of $3.7 million in Q2 2024.

The picture that should be coming into focus here is that BigBear.ai isn’t much of a growth stock. A temporary slowdown in business could be forgivable, but that’s not happening with the company. Instead, its sales continue to slide, and its losses are widening.

With all that in mind, I have serious doubts that BigBear.ai stock could grow from here in a way that would help its shareholders retire as millionaires. The stock is riding the AI wave right now, but financial reality will eventually catch up with it.

Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

There’s no denying the trajectory of artificial intelligence (AI) over the past few years. Many of the companies that have pivoted to adopt this game-changing technology have ascended the ranks of the world’s largest companies when measured by market cap. When the stock market closed on Tuesday, there were 11 members of the vaunted $1 trillion club, the vast majority of which have significant ties to AI.

After the market close, industry stalwart Oracle (ORCL 1.37%) reported its recent quarterly results, and despite missing Wall Street’s expectations, the stock surged higher and never looked back. Why? In a stunning turn of events, the company signed numerous multibillion-dollar contracts that kicked its future growth potential into overdrive.

Given the magnitude of these deals, it seems the writing is on the wall for Oracle to join this elite fraternity. The company’s growth is at a tipping point, and management’s commentary suggests the company has a long AI-centric runway for growth ahead.

A trusted partner

Oracle holds a coveted place in the technology community, as roughly 98% of Global Fortune 500 companies make up its customer rolls. The industry stalwart provides its customers with a strategic combination of cloud, database, and enterprise software. Naturally, when the shift to AI began in earnest, this captive audience began to turn to Oracle for its expanding collection of cloud and AI solutions.

The company’s growth has been uneven, but the future looks bright. During Oracle’s fiscal 2026 first quarter (ended Aug. 31), total revenue grew 11% year over year to $14.9 billion, while its adjusted earnings per share (EPS) of $1.47 grew by 6%. Both numbers accelerated compared to Q4, but missed Wall Street’s consensus estimates, which called for revenue of $15 billion and adjusted EPS of $1.48.

However, that wasn’t the headline. Last quarter, CEO Safra Catz noted that the company had reached a “tipping point,” noting that revenue growth was accelerating, “and it’s only going up from here.”

That turned out to be an understatement. Oracle reported explosive growth in its remaining performance obligation (RPO) — or contractual obligations not yet included in revenue — which skyrocketed 359% year over year to $455 billion, up from $138 billion in Q4.

Catz explained, “We signed four multibillion-dollar contracts with three different customers in Q1,” calling the results “astonishing.” He went on to say that demand for Oracle Cloud “continues to build.” The company expects to sign “several additional multi-billion-dollar customers and RPO is likely to exceed half a trillion dollars.”

Looking to the future, Oracle is forecasting Oracle Cloud Infrastructure revenue to grow 77% to $18 billion this year — but that’s just the beginning:

• Fiscal 2027 cloud revenue of $32 billion, up 78%.
• Fiscal 2028 cloud revenue of $73 billion, up 128%.
• Fiscal 2029 cloud revenue of $144 billion, up 97%.

Mind you, this is just Oracle Cloud Infrastructure revenue, and Catz noted that “most of the revenue in this five-year forecast is already booked in our reported RPO.” That means that any future contracts will probably increase those growth targets.

The path to $1 trillion just got much shorter

Oracle is leveraging its position as a trusted partner to help customers choose suitable AI and cloud solutions and profit from the growing adoption of generative AI.

Before today’s results, Wall Street was expecting Oracle to generate revenue of $66.75 billion in its fiscal 2026 (which began June 1), giving it a forward price-to-sales (P/S) ratio of about 10. Assuming its P/S remained constant, Oracle needed to generate revenue of approximately $98 billion annually to support a $1 trillion market cap. Given those figures, Oracle could have achieved a $1 trillion market cap before 2028.

Wall Street hasn’t yet had time to update its models, but given the magnitude of the company’s results, previous forecasts are out the window. Barring unforeseen circumstances, I predict Oracle will join the $1 trillion club within the next 12 months.

Estimates regarding the market potential of generative AI continue to ratchet higher. Big Four accounting firm Price Waterhouse Coopers (PwC) calculates the opportunity could be worth as much as $15.7 trillion annually by 2030, which illustrates the magnitude of the opportunity.

Given the recent contract wins, Oracle has proven that it is leveraging its experience to profit from this windfall. The writing is on the wall, and Oracle is poised to join the fraternity of trillionaires in short order.

Danny Vena has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Oracle. The Motley Fool has a disclosure policy.

Apple is the world’s third-largest company by a wide margin, with a $1 trillion gap between it and fourth-place Alphabet . However, I think several companies are slated to pass Apple in market share over the next five years, including fifth-place Amazon (AMZN -0.00%), which is valued at around $2.4 trillion compared to Apple’s $3.5 trillion.

That’s a wide gap to make up in five years, but looking at Amazon’s growth tailwinds versus Apple’s makes it fairly clear that Amazon is the much better stock pick.

Amazon has two business units driving profit growth

Apple’s business is fairly straightforward; it’s the leading consumer tech brand and generates significant revenue selling iPhones and other products in the Apple ecosystem. Amazon is a bit more complex, as it has the online store that most investors are familiar with, but that’s not the best reason to invest in it.

Although its online stores division posted the best quarter in a long time (revenue rose 11% year over year), the real stars of the show are Amazon Web Services (AWS) and its advertising services division.

AWS is Amazon’s cloud computing platform, and it is seeing strong demand fueled by the migration of traditional workloads to the cloud, as well as by new artificial intelligence (AI) workloads. AWS grew revenue by 17% year over year in Q2, which is strong growth considering it generated nearly $31 billion in revenue during the quarter. However, AWS’s primary competitors (Microsoft‘s Azure and Google Cloud) posted stronger growth rates in their corresponding quarters, so investors are worried about AWS’s long-term ability to perform in this sector despite its being the market-share leader.

AWS will likely continue to underperform its peers due to its size, but 17% growth is nothing to sneer at. AWS is also a large part of Amazon’s profit picture. In Q2, it accounted for 53% of Amazon’s operating profits despite accounting for only 18% of revenue. Analysts still expect cloud computing to grow rapidly over the next few years, and if Amazon surpasses Apple in market cap, this will be a primary reason why.

Advertising services is Amazon’s fastest-growing segment, with revenue rising 23% year over year, an acceleration over previous quarters’ growth rate. Amazon has one of the most lucrative places to advertise on the internet, as consumers are already coming to their platform to make purchases. Paying to place a product at the top of an Amazon search almost guarantees increased sales. This is worth a lot to its advertising clients and will be a key part of Amazon’s investment thesis over the next few years.

Amazon’s margins are rising

Amazon isn’t a revenue growth story; it’s a profit growth story. The rise of high-margin businesses like AWS and advertising services has helped Amazon boost its profit margins over the past few years.

AMZN Profit Margin data by YCharts

With its two high-margin business segments growing faster than other parts of its business, Amazon will naturally have elevated profit growth rates. In Q2, Amazon’s operating income rose 31% year over year.

Contrast that with Apple, whose Q3 FY 2025 (ending June 28) operating income increased by 11%. Amazon’s profit growth rate is much faster. Over five years, a 30% growth rate will increase its operating income by 271% while an 11% growth rate increases operating income by only 69%.

That would be enough to drive Amazon’s profits higher than Apple’s, propelling it to surpass it in size along the way. Amazon is an excellent stock pick for the next five years and a no-brainer buy at today’s prices.

Keithen Drury has positions in Alphabet and Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, and Microsoft. 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.

Consistent with artificial intelligence (AI) stocks in 2025, shares of SoundHound AI (SOUN -0.28%) have outperformed the market. From the impressive 58% year-to-date rise in semiconductor powerhouse Nvidia‘s stock to shares of AI hyperscaler CoreWeave skyrocketing 160% since the start of the year, numerous AI stocks have produced significant gains for investors in 2025, yet SoundHound stock has provided a more measured gain. Shares of the AI voice services company are up 19% as of this writing.

But is the story the same for investors who have held SoundHound stock since it debuted on public markets? Let’s take a look at what an initial investment of $10,000 would be worth today.

SoundHound made a lot of noise out of the gate

After completing a business merger with a special purpose acquisition company (SPAC), SoundHound began trading on the Nasdaq on April 28, 2022. Investor appetite for the stock quickly followed. In its first week of trading, shares of SoundHound roared 99.7% higher.

The gain didn’t last, however, and shares of SoundHound plummeted in the ensuing months.

In 2024, the AI voice recognition stock shouted to investors that it still provided an attractive opportunity. Shares skyrocketed more than 835% during the year as the company provided investors with encouraging financial results as well as news of new customers, signaling that the company was fully engaged in growth mode.

This year, though, isn’t setting up to produce the same results. With Nvidia exiting its position in SoundHound, investors have found the stock a lot less appealing.

Despite swings in both directions, SoundHound stock has provided positive returns for early investors. Those who invested $10,000 on April 28, 2022 have seen their investment grow in value to $13,480.

Is SoundHound a smart pick for AI investors?

Like many growth stocks, SoundHound stock has demonstrated volatility in the company’s early days of being public, but that doesn’t mean it’s undesirable. With great growth prospects, SoundHound could be a great way to expand one’s AI exposure for those with long investing horizons.

Scott Levine has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia. The Motley Fool has a disclosure policy.

If you’ve got $500 and a long-term mindset, you don’t need to chase the riskiest penny stock or the next meme rocket. A smart growth stock — one with real revenue, real users, and a clear path to profitability — can do a lot of heavy lifting on its own. Especially in this market, where interest rates may have peaked, AI is reshaping entire industries, and consumers are flocking to platforms that feel both human and fun.

So where should that $500 go? Here are two stocks that combine strong business fundamentals with a credible story for the next decade.

Super Micro Computer

Not everyone wants to guess which AI model will win. Super Micro Computer (SMCI 3.73%) makes that decision easier by selling the servers that power all of them.

Over the years, Supermicro carved out a lead in the AI server race by moving faster than rivals like Dell Technologies and Hewlett Packard Enterprise, thanks in large part to its close ties with Nvidia and Advanced Micro Devices. Those close relationships gave it access to chips earlier than competitors — Supermicro’s California headquarters are, as Reuters pointed out, only 10 miles from Nvidia and AMD — helping it prototype and ship customized servers in a matter of weeks. That competitive advantage, together with the strong demand for its liquid cooling systems, made it a go-to supplier for AI infrastructure.

For the trailing 12 months, Supermicro posted $21.57 billion in revenue, nearly triple its total from two years ago. And although fiscal third-quarter 2025 net sales dropped to $4.6 billion (down from $5.68 billion in the second quarter), the company expects net sales of $5.6 billion to $6.4 billion in Q4, a strong rebound likely tied to delayed customer orders.

Growth like this won’t come easy, nor cheap for that matter. Indeed, Q3 operating expenses surged to $293.4 million, up 34% from $219.1 million in the year-ago period, while gross margins dropped to 9.6% from 15.5% in Q3 2024. And with competitors like Dell expanding into its space, those margins could get harder to improve.

Still, Supermicro has leverage. Its modular rack systems offer a plug-and-play approach at a time when enterprises need to move fast but build smart. As more second-tier AI players like hospitals and financial institutions look to stand up their own models, they’ll need hardware that doesn’t require months of integration. Supermicro’s flexibility here could open up a secondary growth channel that’s less dependent on hyperscalers and more tied to the next wave of AI adoption.

Duolingo

Duolingo (DUOL 0.93%) is still the world’s most popular education app.

It’s also still growing. In the first quarter of 2025, the company reported a 38% year-over-year revenue jump to $230.7 million, its highest quarterly haul yet. Monthly active users (MAU) climbed to over 130 million, a 33% year-over-year increase, and the number of paid subscribers rose 40% year over year to a record 10.3 million. A growing slice of that base, about 7%, now pays for the premium Max subscription, which offers AI-driven tutoring and more personalized feedback. Since Max carries a higher price point, its adoption signals a willingness among users to pay more for deeper value, something that could lift Duolingo’s long-term margins.

But even for a company with these credentials, the stock struggled lately. Shares dropped about 33% from their May highs, as Duolingo’s daily active users (DAU) rate slipped from 56% in February to 37% by June, according to a Jefferies analyst. The stock is also trading at over 175 times earnings, which is several multiples higher than the S&P 500 index’s price-to-earnings ratio of 30. A valuation like that leaves little room for error, especially when engagement metrics are trending the wrong way.

Still, that premium might be easier to swallow when you zoom out and consider just how fast the education technology market is expanding. By 2030, edtech is expected to hit $348 billion, up from $164 billion in 2024, or a compound annual growth rate (CAGR) of 13.3 %. Meanwhile, the language learning market — Duolingo’s primary stomping ground — is forecast to hit $125 billion by 2034 (up from $11.2 billion in 2024), or a CAGR of 26.7 %.

Given that Duolingo is already the industry’s leading paid language-learning app, it’s not hard to imagine a scenario in which it grows into its valuation, especially if it keeps converting users into paid subscribers.

Bet on fundamentals, not hype

Both Duolingo and Supermicro are playing long games in markets that are only getting bigger. Duolingo is turning language learning into revenue, while Supermicro is selling the picks and shovels of the AI boom. If you’re thinking long-term, investing $500 in one (or both) could buy you a meaningful slice of the future.

Steven Porrello has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices and Jefferies Financial Group. The Motley Fool recommends Duolingo. The Motley Fool has a disclosure policy.