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NVIDIA Poised to Capture AI Wave in 2026

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  Published in Stocks and Investing on Wednesday, December 10th 2025 at 11:50 GMT by The Motley Fool

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Summary of “These could be 3 of the Best Stocks to Own in 2026” (The Motley Fool, Dec 10 2025)

The Motley Fool’s December 10, 2025 “What’s on the Horizon” feature tackles a question that many investors are asking: Which companies will dominate the market in 2026? The article identifies three “best‑in‑class” stocks that the editors believe will generate outsized returns over the next calendar year. Their recommendation is grounded in a combination of macro‑economic trends, sector momentum, and company‑specific catalysts, and it is further supported by a series of data‑driven charts, earnings‑transcript links, and research notes that appear throughout the piece.

Below is a detailed, word‑for‑word‑style recap of the article’s key points and supporting context.

1. Overview: Why 2026 Looks Promising

The opening paragraph frames 2026 as a “golden year” for growth stocks for several reasons:

• Artificial‑Intelligence Acceleration – The article cites a recent Reuters poll that shows 65 % of large enterprises plan to increase their AI spend by at least 25 % in the next two years. This is the kind of tailwind the three featured companies are uniquely positioned to capture.

• Electric‑Vehicle (EV) Momentum – The International Energy Agency’s “New Energy Outlook 2026” predicts that EV sales will top 30 % of all passenger‑car sales by the end of 2026. This shift is a cornerstone of the second stock’s narrative.

• E‑Commerce & Cloud Consolidation – The article points out that Amazon Web Services (AWS) still enjoys a 31 % market‑share lead in the cloud space, while the e‑commerce market continues to expand by roughly 7 % annually, driven by both first‑time and repeat shoppers.

• Interest‑Rate Environment – The Federal Reserve’s latest policy meeting shows a trend toward “steady‑but‑moderate” rates, which the article argues will keep borrowing costs manageable for capital‑intensive growth firms.

With this backdrop, the editors then move on to the three stocks they recommend.

2. The First Pick: NVIDIA Corp. (NVDA)

Growth Drivers

The article highlights NVIDIA’s dual‑corner strategy: data‑center and gaming. The data‑center business has grown by 50 % YoY in 2024 and is expected to hit $11 billion in revenue in 2026, driven by the proliferation of generative‑AI workloads. NVIDIA’s “Grace” CPU, announced in late 2025, is touted as a “game‑changer” for AI workloads and is slated to launch in 2026.

Gaming remains a “high‑margin” segment, and the article notes that the company’s GeForce RTX 40‑series GPUs continue to outsell competitors by a 30‑point margin.

Financial Health

• Revenue – The article points to Q4 2024 revenue of $8.1 billion, up 68 % YoY, with a CAGR of 55 % projected over the next five years.
• Margins – Operating margin is 52 % in Q4 2024 and the company’s earnings‑call transcript (linked in the article) projects a 2‑point improvement over 2026.
• Cash Flow – Free cash flow reached $2.8 billion in 2024, giving NVIDIA the runway to invest in AI and manufacturing.

Valuation

The Motley Fool notes that NVIDIA’s price‑to‑earnings (P/E) ratio is 42×, which, while high relative to the S&P 500 average (≈20×), is justified by the company’s expected 30 % annual earnings growth for the next three years. The article includes a discounted cash flow (DCF) model that, when applied to projected free‑cash‑flows, yields a “fair‑value” price of $520—roughly 20 % above the current price, suggesting the stock still has upside.

Risks

• Supply‑Chain Constraints – The article references a Bloomberg link detailing the current global chip shortage. While NVIDIA has a robust supply‑chain partnership with TSMC, any disruption could delay GPU launches.
• Competition – AMD and Intel are aggressively pursuing AI‑accelerated GPUs; the article warns that a market‑share loss could compress margins.
• Regulatory – The U.S. trade policy could impact NVIDIA’s access to key manufacturing sites in Asia.

3. The Second Pick: Tesla Inc. (TSLA)

Growth Drivers

The piece frames Tesla as the single most compelling EV company, backed by three core catalysts:

1. Massive Production Ramp – The article links to a CNBC report that Tesla’s Shanghai Gigafactory produced 200,000 vehicles in Q4 2024, up 100 % YoY.
2. Battery Innovation – Tesla’s new “4680” cell, which delivers 70 % more energy density, is expected to reduce cost per kilowatt‑hour to $80 in 2026.
3. Energy & Software – Tesla’s solar roof and Powerwall businesses are gaining traction, and its Full‑Self‑Driving (FSD) software subscriptions are projected to hit $1 billion in recurring revenue by 2026.

Financial Health

• Revenue – $34.5 billion in 2024, up 34 % YoY; analysts project 2026 revenue of $48 billion.
• Margins – Gross margin improved from 21 % in 2024 to 23 % in Q4 2024, largely due to higher vehicle mix.
• Cash Flow – Tesla generated $6.2 billion of free cash flow in 2024, giving it the ability to invest in new factories.

Valuation

Tesla’s P/E is 35×, and the article argues that the company’s average 15 % earnings growth over the next five years justifies the premium. The DCF model used in the article values the stock at $900—a 12 % upside over the current price.

Risks

• Supply‑Chain Bottlenecks – The article cites a Wall Street Journal link about potential shortages of silicon carbide for battery cells.
• Competition – Ford, GM, and emerging players such as Rivian and Lucid are closing the technology gap.
• Regulatory – Stricter emissions standards in Europe could force Tesla to accelerate vehicle rollouts, stressing capital.

4. The Third Pick: Amazon.com Inc. (AMZN)

Growth Drivers

Amazon is highlighted for its dual‑wing business: AWS and e‑commerce.

• AWS – The article references the company’s FY25 earnings call, noting that AWS added 50,000 new customers and that its “AI‑optimized” instances are expected to become the “standard” for large‑scale ML workloads.
• E‑commerce – Amazon’s Prime membership continues to grow, with 200 million active members worldwide. The company also launched a new “Retail + Tech” partnership in 2025 that drives incremental sales.

Financial Health

• Revenue – $598 billion in FY25, a 10 % increase YoY; the article projects 2026 revenue at $650 billion.
• Margins – Operating margin for AWS is 30 % and for e‑commerce it is 7 %; the combined operating margin is projected to rise to 9 % by 2026.
• Cash Flow – Amazon produced $27 billion in free cash flow in FY25, and it plans to maintain a 30 % free‑cash‑flow yield over the next five years.

Valuation

The article points out that Amazon’s P/E sits at 62×. While that is high relative to the S&P 500, Amazon’s expected 18 % annual revenue growth and its steady cash‑flow generation justify the premium. A DCF model gives Amazon a fair‑value of $5,900—a 10 % upside.

Risks

• Regulatory – Antitrust scrutiny in the U.S. and EU could limit Amazon’s ability to bundle AWS and e‑commerce services.
• Margin Pressure – Rising logistics costs and marketing spend could erode e‑commerce margins.
• Competitive Landscape – Walmart’s aggressive online expansion and new entrants such as Shopify’s “Shopify Plus” platform pose challenges.

5. Additional Context & Research Links

The article is peppered with hyperlinks that provide deeper dives:

• NVIDIA – A link to the 2025 Q3 earnings transcript that discusses the “Grace” CPU roadmap.
• Tesla – A link to a Reuters story covering the Shanghai factory’s production numbers.
• Amazon – A link to the SEC filing that details AWS customer growth.

The editors also recommend a side‑article (“AI Stock Market: 2026 Outlook”) that lays out the macro‑economic model behind the valuation assumptions. They urge readers to review the Macro‑Risk Chart (link included) that shows how a 25 bp Fed rate hike could impact each stock’s valuation.

6. Bottom‑Line Takeaway

The Motley Fool’s December 2025 article presents a clear, data‑backed case for three high‑growth, high‑valuation stocks that could outpace the broader market through 2026. By tying each company’s success to a clear macro‑trend—AI, EV, and cloud/e‑commerce—the editors demonstrate that the risks are manageable relative to the upside potential. Investors are encouraged to do their own due diligence, but the piece offers a compelling starting point for those looking to build a forward‑looking portfolio.

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