Looking ahead, investors have S&P 500 stocks to buy as share prices fall.
In the summer of 2022, the absence of negative news propelled the S&P 500 (NYSE:SPY) to erase some earlier losses.
On Sept. 13 the U.S. Bureau of Labor Statistics posted a consumer price index of 8.3%. The energy index fell by 5% over the month. However, core inflation increased. Last week, the Fed announced it would raise rates by 75 basis points. It is steadfast in triggering a recession and job loss. The economy may withstand increased unemployment.
Investors sold off the S&P 500. Still, amid the bear market is a bull market for stock pickers. Within the index, there are still S&P 500 stocks to buy. They are entering a hidden bull market.
After working through short-term challenges, they have strong prospects ahead. Markets are discounting them now for fear those companies will not deliver on their turnaround plan.
Advanced Micro Devices
Advanced Micro Devices (AMD)
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Advanced Micro Devices (NASDAQ:AMD) fell into a downtrend ahead of its desktop processor refresh announcement. After it announced the fastest core in gaming with the Ryzen 7000 series, AMD stock fell further.
Alongside its Zen 4 generation refresh is the update in its server portfolio. AMD’s Genoa has 96 cores in power for the data center. Cloud computing applications will benefit from this power. Bergamo has even more computing power. It has up to 128 cores and supports high-demand workloads in the cloud computing space.
The total addressable market for 128-core server systems is growing. Unlike desktop computers, where consumers want 4 GHz or 5 GHz in power, servers are power constrained. AMD has highly efficient solutions that the market needs. Corporate customers may scale their hardware as cloud workload rises.
AMD profits more by selling Genoa, which has bigger caches. This design gives systems more bursting capacity for each core. The economy is slowing but the demand for higher computing power is not making AMD one of the best chip S&P 500 stocks to buy.
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Broadcom (NASDAQ:AVGO), a global technology firm that designs semiconductor and infrastructure software solutions, posted strong third-quarter results.
It earned $4.424 billion and paid a stock dividend of $4.10 a share. It expects to pay out $16.40 a share in dividends for the fiscal year making it one of the hot S&P 500 stocks to buy.
Broadcom issued a strong revenue and adjusted EBITDA forecast for the fourth quarter. It is thriving amid strong demand across all end markets. Customers are upgrading their data centers and broadband. They are getting ready for higher network usage from the iPhone and Google Pixel smartphone refresh.
Broadcom’s positive prospects contradict the macro headwinds other sectors face. Customers are committed to technology projects.
In addition, Broadcom has 50 weeks in lead time in its backlog. Furthermore, Chief Executive Officer Hock Tan said that its products faced no disruptions from China’s Covid restrictions. CEO Tan predicts that semiconductor demand will continue in the 5% range for the long term.
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It needs to reward its creator entrepreneurs or risk losing them to ByteDance’s TikTok. Before it took this initiative, creators had only the horizontal video format. They depended on ads as the main source of revenue.
Within Shorts, which is as short as 15 seconds, YouTube content creators have a chance to make more money. This would increase the site’s ad revenue.
Google has high near-term costs to address. It added too many workers before the Federal Reserve started raising interest rates. Shortly thereafter, the economy slowed. The search engine giant is bracing for customers to slash advertising spending.
Further cost cuts will improve Alphabet’s profit margins. On September 14, 202, the company cut half of its internal research and development spending in “Area 120.” The cuts are necessary. The company needs to focus on growing markets first. This includes artificial intelligence projects.
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Intel (NASDAQ:INTC) is struggling to grow its personal computer chip market. Investors may bet that INTC stock’s low ~6 times price-to-earnings priced-in its hard times ahead. In addition, the company declared its quarterly dividend recently. Income investors get a dividend that yields moret han 5% just for waiting.
In the CPU market, Intel’s 13th-generation Raptor Lake will offer consumers more power.
Intel spent two years hyping its graphics card, called Intel Arc Alchemist. It enters the GPU product at a turbulent transition. Ethereum decommissioned crypto mining. By adopting proof-of-stake, miners with expensive GPUs cannot profit.
If it ever releases a GPU in mass volumes, Intel becomes the third supplier after AMD and Nvidia (NASDAQ:NVDA).
Intel only needs to grow its market share in the mainstream segment. It does not need to offer high-end performance products that Nvidia and AMD sell. It simply cannot afford more delays trying to capture that level of the market.
Once Intel gains the consumer’s trust in the graphics card market, its revenue will expand again.
Meta Platforms (META)
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Meta Platforms (NASDAQ:META) is taking a huge bet on the metaverse. It is spending billions annually over the next decade to invest in the augmented and virtual world.
On Oct.11 it might give its audience hints on its AR/VR headset offering. The headset is code-named Project Cambria.
The product is the successor to Meta Quest 2. The media speculates this headset is a high-end machine. It will have a higher price tag, which should lower Meta’s loss per unit sold. In addition, it will have advanced sensors. Meta hopes to convince potential buyers that the exclusive mixed-reality offering justifies the higher price.
Meta Quest 3 is still under development. At a higher price, the company likely needs more time to develop the hardware. Investors may assume it releases this high-end product with no bugs or fanfare. As a result, it pivots Meta Platforms away from Facebook and into the metaverse.
Nvidia announced the RTX 40 Series, which introduced Ada Lovelace architecture.
The company promises to deliver AI-powered graphics. Gamers will experience lifelike virtual worlds. They will enjoy higher frames per second (FPS) gaming. In addition, ray tracing increases the graphics quality in games.
Nvidia priced the RTX 4090 for $1,599. It will be available on October 12, 2022. The RTX 4080 16GB and 12GB will cost $1,199 and $899, respectively.
Nvidia’s centralized omniverse platform scales easily. Currently, omniverse is running on Amazon’s (NASDAQ:AMZN) Web Services EC2 G5 instances. As it adds more customers to it, the company will give early access to them if they apply.
Investors are not buying Nvidia stock despite the product announcements and cloud development news. They are worried that gamers are sensitive to the four-figure price tag.
Furthermore, GPU demand during the pandemic benefited from cryptocurrency mining. Although those miners are selling GPUs on auction sites, it should not hurt Nvidia’s sales. Gamers are unlikely to buy those used cards.
Raytheon Technologies (RTX)
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Raytheon Technologies (NYSE:RTX) is a military defense contractor. While the rest of the economy struggles, the War Economy is thriving.
The company won a ~ $770 million modification contract. Raytheon’s work in the award is with the propulsion system spare parts and the related handling of the F-135 propulsion system.
On Sept. 22 the company won a $985 million contract. It will supply the U.S. Department of Defense with Hypersonic Attack Cruise Missiles. On Sept. 21 Raytheon won a $160.2 million contract for a Dual Band Radar. The contract includes options that increase the total value to $440.64 million.
The contracts mentioned add up. While companies outside of the military defense sector struggle to grow contract deals, Raytheon is adding new ones regularly.
RTX stock is trading below its $90 – $95 trading range. The stock pays a dividend of $2.20 per share. Investors get paid to wait while the firm wins more contracts from the U.S. government.
On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Lau is a contributing author for InvestorPlace.com and numerous other financial sites. Chris has over 20 years of investing experience in the stock market and runs the Do-It-Yourself Value Investing Marketplace on Seeking Alpha. He shares his stock picks so readers get actionable insight to achieve strong investment returns.
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