The Dow Jones Industrial Average tracks the performance of 30 blue chip stocks. The index has returned 10% year to date, but companies making big splashes in artificial intelligence (AI) could fare much better over the next year and beyond.
Here are two Dow stocks to buy right now.
1. Amazon
Amazon (NASDAQ: AMZN) stock has delivered wealth-building returns for shareholders over the last few decades, and it's currently up 22% in 2024. Amazon still has plenty of growth opportunities in retail and enterprise cloud services to fuel the stock higher.
Amazon's expanding same-day delivery and growing selection of items will be important advantages in capturing a growing share of the global e-commerce market. Data and intelligence platform Statista predicts that online retail spending will surpass $8 trillion by 2027.
What makes the stock particularly attractive right now is the company's improving profit margin. Operating income nearly doubled in the second quarter over the year-ago quarter, and there are still several opportunities to improve retail margins further, including decreasing transportation costs by getting closer to customers with more same-day delivery facilities.
Meanwhile, Amazon's cloud service business, which generates two-thirds of the company's operating income, is showing even greater growth potential. Companies are migrating their data from on-premises servers to Amazon Web Services to take advantage of tools like Amazon Bedrock, which helps companies build their own AI applications. Amazon also offers custom AI chips that offer better price performance than higher-priced chips from top hardware supplier Nvidia. These are a few of the reasons why AWS' revenue growth accelerated in Q2 to 19% over the year-ago quarter.
The opportunities in online commerce and cloud services are great reasons to consider buying Amazon shares in 2024. Analysts expect Amazon's earnings to grow at double-digit rates in the coming years, and that points to more new highs for the stock.
2. Apple
A significant driver of economic growth will be the AI market. AI software will simplify tasks and help people find what they need a lot faster, which could lead to significant increases in productivity. There's no consumer brand that is better positioned to benefit from this trend than Apple (NASDAQ: AAPL).
The iPhone is an essential device that people check as soon as they wake up in the morning. With over 2.2 billion active devices, Apple will be the face of AI for millions, which is why the stock is up this year heading into the upcoming launch of Apple Intelligence.
Apple Intelligence will begin rolling out to U.S. users as a free update in the next month. The opportunity for Apple is that Apple Intelligence requires devices with the more recent M1 and later-generation processors. This provides a natural incentive for users to upgrade to the new iPhone 16.
Citigroup's internal research shows that customers pre-ordering the new iPhones are opting to go for the premium Pro Max model. This bodes well for Apple's margins, which have already been moving higher in recent years from growth in paid subscriptions and other offerings as part of its services segment.
IDC expects smartphone shipments with generative AI features to grow 364% in 2024 to 234 million. By 2028, that figure is expected to reach 912 million. Apple Intelligence will help the company further distinguish its brand, which could lead to market share gains, growth in its installed base of devices, and more demand for high-margin services.
Analysts expect Apple's earnings to increase by 17% in fiscal 2024 (ending in September) and 11% next year. Apple should be able to sustain double-digit earnings growth for several more years and deliver superior returns for investors.
Should you invest $1,000 in Amazon right now?
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Citigroup is an advertising partner of The Ascent, a Motley Fool company. John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Amazon, Apple, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
