Top 3 “Magnificent Seven” Tech Stocks to Buy in July

Introduction

The “Magnificent Seven" is a term that describes seven of the world's largest tech companies, many of which have been among the best-performing stocks over the past few years. These companies—Apple, Microsoft, Amazon, Alphabet, Meta Platforms, Nvidia, and Tesla—are industry leaders and at the forefront of numerous innovations. However, among these giants, three companies stand out as particularly good buys in July and moving forward. If you're looking for tech stocks with appealing growth opportunities to add to your portfolio, they're well worth considering.

Summary 

1. Microsoft

2. Alphabet

3. Amazon

1. Microsoft 

Nvidia's stock surge over the past two years has garnered much attention, but Microsoft has also experienced significant growth. It's the second-best performing Magnificent Seven stock over the past three years and has risen over 22% in 2024 (as of July 12). While the rising valuations of big tech companies have been widely discussed, Microsoft's price-to-earnings (P/E) ratio of around 39 makes it expensive by virtually all standards, leaving it susceptible to a market correction.

Thankfully, Microsoft has developed a vast ecosystem over the years, serving countless businesses globally. Its product suite includes PCs, Office software, the Azure cloud service, and LinkedIn, positioning it across multiple crucial enterprise-focused industries. This diverse ecosystem helps shield Microsoft against downturns, as businesses find it harder to abandon its services compared to consumer-focused tech companies. Although not a foolproof investment, Microsoft's long-term stability and growth trajectory are almost certain. If its valuation worries you, consider dollar-cost averaging into a stake.

2. Alphabet

Despite surging over 34% this year, Alphabet still seems like a bargain compared to other Magnificent Seven stocks. Google's search business is a clear example of market dominance, with around a 90% global market share. This dominance has led to a bustling advertising business, generating $61.7 billion in revenue in Q1 2024, with Google search contributing $46.2 billion. Advertising accounted for over 78% of Alphabet's Q1 revenue and grew 13% year over year.

While advertising keeps Alphabet's lights on, the growth of Google Cloud should not be overlooked. Google Cloud has turned the corner on profitability, with its operating income growing 371% to $900 million in Q1. With a dominant search business, a fast-growing cloud segment, and a newly announced quarterly dividend of $0.20, Alphabet is well-positioned for sustained long-term growth.

3. Amazon

Amazon became the powerhouse it is today through its e-commerce business, but it has successfully diversified to ensure its business isn't overly dependent on this segment. Amazon Web Services (AWS), the global leader in cloud computing, generated just over 17% of Amazon's revenue but over 61% of its operating income in Q1. Cloud computing's higher margins compared to e-commerce will continue to boost Amazon's profitability, especially with emerging AI innovations making AWS a one-stop shop for cloud and AI solutions.

Amazon has invested billions in its e-commerce and cloud infrastructure, now leveraging these investments to generate new revenue streams. For example, Supply Chain by Amazon allows sellers to use Amazon's logistics network. Built for sustained growth, Amazon offers investors confidence for the long haul.

Frequently Asked Questions

Q.1. What makes Microsoft a good investment?

A.1. Microsoft's vast ecosystem, including PCs, Office software, Azure, and LinkedIn, serves countless businesses globally, providing stability and growth potential even during market downturns.

Q.2. Why is Alphabet considered a bargain despite its recent surge?

A.2. Alphabet's dominant position in the search market, combined with a thriving advertising business and a growing, profitable cloud segment, makes it a strong long-term investment.

Q.3. How has Amazon diversified beyond e-commerce?

A.3. Amazon has expanded into cloud computing with AWS, which generates high margins and significant profits, positioning it for sustained growth and profitability.

Q.4. What is the significance of Google Cloud's profitability?

A.4. Google Cloud's profitability, with a 371% increase in operating income, highlights its rapid growth and potential to contribute significantly to Alphabet's overall revenue and profit.

Q.5. How does dollar-cost averaging work for investing in Microsoft?

A.5. Dollar-cost averaging involves regularly investing a fixed amount of money into Microsoft stock over time, reducing the impact of market volatility and helping build a position gradually.

Conclusion

The Magnificent Seven companies are industry leaders with significant growth potential. Among them, Microsoft, Alphabet, and Amazon stand out as particularly promising investments for July and beyond. Each of these companies has unique strengths that position them well for long-term success. Whether it's Microsoft's extensive ecosystem, Alphabet's market dominance in search and advertising, or Amazon's leadership in cloud computing, these stocks offer appealing growth opportunities.

Important Note: Please Read Before You Invest

We're just sharing some helpful tips, but remember, investing comes with risks. We can't promise that these tips will always work or that you'll make money. Everyone's financial situation is different, so it's smart to do your research or talk to a financial advisor before you invest. Using these tips, you agree that you're responsible for your investment decisions and results.