In this article, we will take a look at the 8 best FAANG stocks to buy according to analysts.

“We Are Just at the beginning of the AI Buildout”

Each of the big tech stocks has revealed its plans to invest $50 to $100 billion in GPU compute, evidence that Artificial intelligence may be the biggest theme right now. On October 21, Ray Wang, Constellation Research’s principal analyst, founder, and chairman, joined CNBC’s ‘Squawk Box’ to share his stance on the tech sector, especially the Magnificent Seven, and the role of artificial intelligence.

The third quarter earnings season is upon us some of the mag seven are yet to report their quarterly results. Wang suggests artificial intelligence is just beginning to pan out and will stand as the major theme for a long while. He adds that companies, among the mega-caps, have poured hundreds of billions into AI during the first half of the year, and plan to add more during the second. He also shared that these mega-cap companies are driving demand as well.

READ ALSO Jim Cramer’s Game Plan: 23 Stocks to Watch and 10 AI Stocks to Watch for the Rest of 2024.

While these expenditures may seem to have little to no payoff, historically investors were also worried about companies investing in the Internet. However, Wang dissects that the internet is not the same as artificial intelligence. The internet was rather open and decentralized and had many winners. AI, on the other hand, is more centralized, closed, and expensive, meaning that only a few players are going to make a mark.

Wang also shares that he owns all of the magnificent seven stocks. An interesting conjunction, highlighted by Wang, is that across search, social media, and commerce, most of the stocks in the Mag 7 have digital ads. Across all these three avenues, the next players cannot compete with the Magnificent Seven, especially in terms of revenue. On the regulatory front, he emphasized that the sector needs some relief. He adds that the tech sector needs to play out mergers and currently IPOs are lined up, explaining why everything is on hold.

FAANG is an acronym, which originally began as FANG, consisting of five major technology companies. The original term, FANG was coined by Jim Cramer in 2013 because, according to him, the four tech stocks belonged together as they functioned across similar themes of digitization and the web. FAANG today is much broader and includes technology companies that are shaping the future, which may also be categorized as the magnificent seven. That said, let’s take a look at the 8 best FAANG stocks to buy according to analysts.

Our Methodology

To come up with the 8 best FAANG stocks to buy according to analysts, we went over the NYSE FANG+ index and picked the latest holdings. We then examined the stocks and picked the ones with the highest analyst upside potential as of October 22, 2024. We also added the hedge fund sentiment of each stock as of Q2 2024. The list is in ascending order of analyst upside primarily and hedge fund holders, as of Q2 2024, secondarily.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

8 Best FAANG Stocks To Buy According to Analysts

8. Meta Platforms Inc (NASDAQ:META)

Analyst Upside as of October 22, 2024: 3.5%

Number of Hedge Fund Holders: 219

Meta Platforms Inc (NASDAQ:META) is a technology conglomerate and is the company behind Facebook, Instagram, Threads, and WhatsApp. The company has a large user base of over 3.27 billion daily active users across all its platforms.

Over the past few months, the company has ventured into AI and augmented reality, having launched its debut AR glasses, Orion, in September. On the same day, the company released its most affordable mixed-reality headset, Meta Quest 36. Meta Platforms Inc (NASDAQ:META) is striving to become one of the best recommendation technology companies, and to reach that position META launched new features that allow users to explore their interests and like-minded people.

On October 3, Barton Crockett, Rosenblatt’s senior research analyst, appeared in an interview on Yahoo Finance, to discuss his bull thesis on META. He shares that people have started to get comfortable with the company’s strategic positioning and that its investments in AI have yielded positive returns for marketers especially. Crockett adds that ad technology is a new niche the company has stepped into and has pioneered. While he is concerned about Meta’s investments in the reality segment, he believes that the company is working on its execution. Crockett also states that advertising is META’s strongest suit, making a great argument for the stock.

Meta Platforms Inc (NASDAQ:META) has a strong business model and its position as one of the FAANG stocks is evidence of that. The company is pioneering adtech using artificial intelligence, challenging for any other company to replicate.

Rowan Street Capital stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q2 2024 investor letter:

“We are pleased to report that Meta Platforms, Inc. (NASDAQ:META), our largest position in the fund, has delivered a remarkable performance, +450% since our November 2022 note. Our investment in Meta dates back to 2018, with an average cost basis of approximately $172 per share. Today, the stock trades around $535, reflecting a 3x return over the six-year holding period, equating to a 20% annualized return.

We would like to remind you that achieving these types of returns is never a straight path. From time to time, we might experience volatility — that’s simply part of the investment journey. In fact, wealth creation and volatility go hand in hand. There’s no escaping it; it’s the “price of admission” the market demands. If you take a look at the chart below, you’ll notice the drawdowns META stock has faced over the years, with 2022 standing out as a particularly challenging period, where the stock saw a 75% drop….. ” (Click here to read the full text)

7. NVIDIA Corporation (NASDAQ:NVDA)

Analyst Upside as of October 22, 2024: 4.29%

Number of Hedge Fund Holders: 179

NVIDIA Corporation (NASDAQ:NVDA), commonly referred to as the AI star and AI winner, ranks 7th on our list of the best FAANG stocks to buy according to analysts.

On October 19, Ram Ahluwalia, Lumida Wealth Management CEO, appeared in an interview on Yahoo Finance where he suggested that Nvidia, without a doubt, is the AI winner and will be the first company to reach a $4 trillion valuation. He adds that he expects the stock to reach $150 by the end of 2024, as other companies continue to make investments in GPU compute. Previously on October 15, Ben Reitzes, Melius Research’s head of technology research, appeared in an interview on CNBC, where he shared his stance on the stock. Like Ahluwalia, Reitzes is also bullish on NVIDIA Corporation (NASDAQ:NVDA) and expects the stock to trade at one time its P/E to growth ratio in 2025, highly attractive for an influential name like NVDA.

There is no doubt about NVIDIA’s position in the technology and AI sector. On October 21, the company announced a partnership with Deloitte to deploy digital AI agents for healthcare. On the same day, NVIDIA Corporation (NASDAQ:NVDA) joined hands with Microsoft to support AI startups across the globe with a focus on healthcare and life sciences in the first phase. The two companies will pan out to other industries in future phases. NVDA will provide inference credits to run GPU-optimized AI models and MSFT will offer Azure credits to access leading AI models.

Overall, NVIDIA Corporation (NASDAQ:NVDA) provides AI hardware and software products to high-growth markets, medium-sized companies, and mega-cap stocks, that have been pouring billions into enhancing their AI infrastructure. In the fiscal third quarter of 2024, the company expects to generate $32.5 billion in revenue, which is likely to come from its rapidly growing Hopper architecture and its new and improved Blackwell Chips.

Ithaka Group’s Ithaka US Growth Strategy stated the following regarding NVIDIA Corporation (NASDAQ:NVDA) in its Q2 2024 investor letter:

“NVIDIA Corporation (NASDAQ:NVDA) is the market leader in visual computing through the production of high-performance graphics processing units (GPUs). The company targets four large and growing markets: Gaming, Professional Visualization, Data Center, and Automotive. NVIDIA’s products have the potential to lead and disrupt some of the most exciting areas of computing, including: data center acceleration, artifi cial intelligence (AI), machine learning, and autonomous driving. The reason for the stock’s appreciation in the quarter was twofold: First, the stock benefi ted from tremendous excitement surrounding the further development of generative AI and the likelihood this would necessitate the purchase of a large number of Nvidia’s products far into the future; Second, Nvidia posted another strong beat[1]and-raise quarter, where the company upped its F2Q25 revenue guidance above Street estimates, showcasing its dominant position in the buildout of today’s accelerated computing infrastructure.”