Market Digest: AMZN, CAKE, MKC, TDOC

Argus

•

Mar 27, 2025

Summary

Ranking the Magnificent Seven During the archetypal signifier of unbridled AI enthusiasm, each of the truthful called 'Magnificent Seven' stocks were loved arsenic their accidental appeared to beryllium unlimited. The marketplace is present much skeptical toward perceived AI winners, which has led to a earthy inclination to fertile the Mag 7 connected their go-forward prospects. We spot Amazon moving up successful the ranks, portion Nvidia continues to bid the apical spot. If we were to fertile the Mag 7 connected their intermediate-term prospects (which we are not doing officially), our database successful descending bid would beryllium Nvidia, Meta Platforms, Amazon, Apple, Microsoft, Alphabet, and Tesla. All the Mag 7 names person thing successful common. They are each ascendant successful astatine slightest 1 halfway competency; and they person leveraged the immense currency flows thrown disconnected by their halfway competencies to put successful and make the generative AI opportunity. 'Ranking' the Mag 7 connected their intermediate-term prospects, therefore, involves assessing each company's quality to support and nurture its halfway concern portion utilizing that spot to summation stock wrong the AI ecosystem. We proceed to enactment Nvidia astatine the apical of the Mag 7 list. Unlike the different six names, Nvidia's halfway competency is artificial intelligence. The request for realistic rendering successful GPU-based gaming, Nvidia's founding business, laid the groundwork for the applications acceleration and the massively parallel computing that are cornerstones of grooming ample connection models (LLMs) and enabling inference. We fertile Nvidia fig 1 based connected the grounds successful the company's ain maturation numbers, which are stellar. In its caller fiscal 4Q25, gross of $39 cardinal grew 78% annually. At its GTC lawsuit successful March 2025, Nvidia forecast that data-center gross would transcend $1 trillion annually successful the adjacent fewer years, and that the full planetary concern infrastructure represented a $50 trillion accidental for AI renewal. Nvidia besides provides overmuch much than its manufacture starring GPUs, including its CUDA bundle library, and is 'turbo-charging' agentic AI improvement with open-reasoning models, platforms, and partnerships. The champion grounds of Nvidia's momentum is the maturation of the endeavor infrastructure companies utilizing Nvidia solutions to enactment the mainstreaming of AI. Micron's data-center gross tripled twelvemonth implicit twelvemonth and present exceeds 50% of full institution revenue. Micron accrued the TAM for its high-bandwidth representation (HBM) accidental to $35 cardinal arsenic of March 2025, up from $20 cardinal astir fractional a twelvemonth ago. Among the starring U.S.-based GPU server providers, Dell Technologies posted $10 cardinal successful AI sever gross successful FY25 and expects $15 cardinal successful FY26. Hewlett-Packard Enterprise exited fiscal 1Q25 with $8.3 cardinal successful cumulative AI systems and services orders. The leaders successful information halfway interconnects (DCIs), Broadcom and Marvell, are some reporting explosive maturation successful these categories. We enactment Meta Platforms successful 2nd spot due to the fact that it has been among the astir palmy successful leveraging its halfway competency (social media) into a enactment relation successful gathering LLMs, including multi-modal models. Snap has a constricted opportunity, and X is stunted by self-inflicted wounds and perceived Musk contagion. Only Asia-based companies specified arsenic ByteDance (TikTok) correspond a existent threat. We spot immoderate hazard to the halfway concern from seemingly endless EU and U.S. legislature opposition; and Meta's social-media cornerstones (Facebook, Instagram, and WhatsApp) could beryllium carved cleanly successful three. We bash not spot that happening, however. Meta has successfully pivoted from the Zuckerberg's costly obsession with the metaverse to the more-practical and fast-developing AI opportunity. Unlike AWS, Microsoft Azure, and Google Cloud, Meta is successfully enabling and advancing starring LLMs adjacent though it is not a large supplier of hybrid unreality services. We spot Meta archetypal and foremost deploying AI internally to amended operating ratio and idiosyncratic targeting truthful arsenic to optimize the company's societal media idiosyncratic base, which exceeds 3.3 billion. Facebook Reality Labs, which houses Meta's Gen AI business, posted gross of $2.1 cardinal successful 2024, conscionable 1% of full Meta revenue. Currently, this is chiefly a hardware-based concern (Quest VR headsets, Ray-Ban AR glasses), but we spot semipermanent maturation accidental arsenic Meta's Llama LLMs spell mainstream. Much arsenic Apple capitalized connected the immense iOS installed basal and targeted the idiosyncratic with iCloud, Meta could connection a personalized AI offering to its more-than 3 cardinal users. We enactment Amazon successful 3rd spot connected a assortment of metrics. The company's online retail operations and peculiarly its Prime concern are without a planetary peer. The combined retail operating borderline (Americas and International) for 4Q24 was 6.1%, by acold the highest successful our exemplary going backmost to company's inception. Prime's media is present rivaling Netflix successful contented prime and volume. AWS is the starring CSP globally, and its rising margins and currency flows are backing the company's Gen AI opportunity. Amazon was speedy to regenerate the caput of AWS successful May 2024 erstwhile the committee perceived that the institution was lagging successful Gen AI. AWS is astatine a $110 cardinal yearly gross tally complaint and margins are astatine oregon adjacent grounds highs. Both internally and successful concern with Anthropic and others, AI has produced Bedrock Marketplace, wherever clients tin take from implicit 100 LLMs; Trainium and Trainium 2 accelerators; and Amazon Nova, an extended household of foundational models. In 4th spot is Apple, whose halfway competency is planetary enactment successful exertion devices and services. Apple has been somewhat disappointing successful its aboriginal efforts successful AI. The institution is adjacent going extracurricular its accustomed reliance connected interior capabilities to enlist enactment from companies specified arsenic OpenAI. But we person agelong regarded Apple arsenic a merchandise perfector, not a merchandise pioneer; aboriginal iteration mobile phones specified arsenic DynaTAC and StarTAC amazed, but they are agelong gone portion iPhone grows successful dominance. Investors are besides acrophobic astir Apple's declining China sales. Yet successful the most-recent fiscal 1Q25, Apple grew gross successful each different regions. The company's monolithic iOS installed basal exceeds 2.2 billion, providing fertile crushed for continued maturation successful services. In 5th spot is Microsoft, which has leveraged is halfway competency successful endeavor bundle into Azure, the fig 2 CSP down AWS. Like each of the companies mentioned supra that are not named Nvidia, Microsoft is challenged successful getting capable proviso of precocious Blackwell products to physique and tally its most-advanced models. Microsoft's unreality concern has ne'er been arsenic profitable arsenic AWS, though that whitethorn partially beryllium owed to which assets are allocated to the unreality division. Microsoft has had a fewer missteps successful rolling retired its Gen AI models, and some CNBC and Invezz precocious questioned whether Microsoft was beryllium