The latest buzz on Wall Street is centered around an emerging investment strategy known as the TACO trade—an acronym for “Trump always chickens out.” This term has arisen in the context of fluctuating market conditions closely tied to President Trump’s tariff announcements.
As of May 29, major stock market indices, including the S&P 500, Nasdaq Composite, and Dow Jones Industrial Average, essentially returned to breakeven for the year. While stagnant returns may typically warrant discontent, the recent resilience in the markets serves as a welcome change after experiencing significant drops just a month prior. Analyzing the patterns of volatility reveals that the most significant market movements can often be traced back to pivotal announcements from Washington, D.C.
When tariffs are introduced, markets react negatively; conversely, easing tariff pressure leads to sharp rebounds. Given this landscape, investors are faced with heightened uncertainty, especially as ongoing tariff discussions could impact various sectors. Amidst this volatility, however, there are still opportunities, particularly in the realm of artificial intelligence (AI).
Focusing on long-term growth, two no-brainer AI stocks standout currently: Nvidia and Amazon. Both companies present compelling investments, regardless of TACO trade dynamics.
### Nvidia: The Semiconductor Powerhouse
First on our list is Nvidia (NVDA), a leading player in the semiconductor market. Their superiority lies in high-performance chipsets known as graphics processing units (GPUs). Nvidia’s growth is increasingly viewed as a crucial indicator for the entire AI industry. When Nvidia flourishes, confidence in the AI boom tends to follow suit.
From a macro perspective, Nvidia stands to gain significantly from continuous investment in AI infrastructure. Major tech firms like Amazon, Microsoft, and Alphabet are expanding data centers and acquiring chips, creating a lucrative opportunity for Nvidia in an increasingly AI-driven economy.
However, Nvidia does face challenges. Its exposure to China may prove concerning due to stringent export controls and intensifying competition from companies such as Huawei. Nevertheless, the company has managed to secure contracts in the United Arab Emirates and Saudi Arabia that are aimed at outfitting AI data centers with Nvidia’s latest Blackwell GPUs.
Rumors of Elon Musk’s new AI startup, xAI, potentially purchasing $40 billion worth of chips for its upcoming GPU cluster add an extra layer of optimism for Nvidia stock. With a favorable belief that tariff-related fears will diminish in the latter half of 2025, Nvidia appears positioned for a remarkable rebound.
### Amazon: A Multifaceted Powerhouse
The next stock to consider is Amazon. While their core e-commerce business faces vulnerabilities from tariffs, it’s essential to look beyond these headwinds. A significant segment of Amazon’s operations, its cloud infrastructure unit, Amazon Web Services (AWS), continues to thrive, showing accelerated sales and expanding operating margins. This growth signals that Amazon’s investments in AI are beginning to bear fruit.
A noteworthy aspect of AWS is that it provides the majority of Amazon’s operating profits. During turbulent economic times, AWS has remained robust, generating substantial cash flow. This operational success allows Amazon to reinvest in future growth areas, particularly in integrating AI-driven innovations across its diverse range of services—including logistics, advertising, and even direct-to-consumer healthcare.
Recently, high-profile investors like billionaire hedge fund manager Bill Ackman have taken note, adding Amazon to their portfolios. With expectations that Amazon could become Wall Street’s first $5 trillion company, it’s clear that the firm is on a trajectory for substantial long-term growth. Although it may face short-term turbulence due to tariffs, Amazon’s diversified platform and proven ability to navigate regulatory challenges position it as a viable opportunity.
### Conclusion
While the TACO trade continues to shape market sentiment, savvy investors would do well to keep an eye on solid AI-driven companies like Nvidia and Amazon. Both are more than just stocks; they’re potential drivers of a future heavily reliant on technological advancement.
Investing in AI stocks doesn’t just involve riding the waves of market volatility related to geopolitical events. Instead, it’s about identifying solid long-term opportunities poised for growth despite short-term uncertainties. As we navigate the evolving landscape of the stock market, Nvidia and Amazon represent strong candidates for those looking to capitalize on the burgeoning AI sector.
In conclusion, as the markets continue to fluctuate based on external uncertainties, focusing on established companies within the AI sector may provide investors not only with stability but also a path towards significant future gains. So while the TACO trade captures current attention, it’s the fundamentals of companies like Nvidia and Amazon that will ultimately pave the way for sustained growth. Whether you’re an experienced investor or just getting started, keeping an eye on these two powerhouses might just yield fruitful results in the longer term.
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