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.”
6. CrowdStrike Holdings, Inc. (NASDAQ:CRWD)
Analyst Upside as of October 22, 2024: 5.3%
Number of Hedge Fund Holders: 69
CrowdStrike Holdings, Inc. (NASDAQ:CRWD) is a cybersecurity company that ranks 6th on our list of the best FAANG stocks to buy according to analysts. The company provides a range of security products including identity management, threat intelligence, and threat detection.
The company has 29,000 clients in multiple sectors including healthcare, retail, technology, and the government, reflecting its strong position in the market. Its AI native cybersecurity platform, Falcon is its primary product, growing at 80% year-over-year, in FQ2 2025. CrowdStrike Holdings, Inc. (NASDAQ:CRWD) has recently closed crucial partnerships, added innovations to its Falcon Platform, and expanded its CrowdStrike Marketplace to meet the growing demand for cybersecurity solutions.
Despite the July 19 incident, CrowdStrike Holdings, Inc. (NASDAQ:CRWD) has been resilient and showcased transparency and accountability to its customers. However, the company must sustain its efforts towards making customers happy. On August 28, Fatima Boolani, Citi US software equity research co-head, appeared in an interview on Yahoo Finance to discuss CRWD following the global outage. She shares that CRWD management has a lot of tasks especially when it comes to rebuilding its trust among investors and managing the impact of their business impact. She adds that the company has an appetite and regaining consumer confidence should remain the primary focus. Boolani argued that since there is a lack of talent in cybersecurity, AI can potentially fill the gap, that CRWD is in the crosshairs of in a positive way.
As Boolani said, the market currently lacks talent in cybersecurity, giving CrowdStrike Holdings, Inc. (NASDAQ:CRWD) an edge and putting it ahead of its competitors. 69 hedge funds were bullish on the stock as of Q2 2024, according to our Insider Monkey database.
ClearBridge Investments’ ClearBridge Growth Strategy stated the following regarding CrowdStrike Holdings, Inc. (NASDAQ:CRWD) in its Q3 2024 investor letter:
“Shares of CrowdStrike Holdings, Inc. (NASDAQ:CRWD), a global cybersecurity leader, came under pressure following a software content update in July that caused widespread disruptions across its client base. Importantly, the outage was not caused by a security breach and we are encouraged that the company was swift and transparent in its response and support for customers. While some level of recompense will be required, after ongoing dialogue with company management, we are optimistic that thoughtful remediation efforts, such as offering flexibility around new module uptakes, will position the company well for future growth. Shares have since rebounded on the back of better than feared channel feedback, which suggests CrowdStrike remains a best-in-class provider in the eyes of customers.”
5. Apple Inc. (NASDAQ:AAPL)
Analyst Upside as of October 22, 2024: 6.3%
Number of Hedge Fund Holders: 184
Apple Inc. (NASDAQ:AAPL) is one of the best FAANG stocks to buy according to analysts. The company behind the iPhone also sells a range of digital and entertainment products including iCloud, Apple Pay, Apple Music, and Apple TV+.
In the fiscal third quarter of 2024, the company launched Apple Intelligence, a personal intelligence system by Apple backed by AI. The new system is integrated into all new products by Apple. On October 21, Samik Chatterjee, an analyst at JPMorgan, joined CNBC’s “Squawk on the Street” where he discussed the demand for iPhone 16 and the influence Apple Intelligence will have on it. He argued that Apple Intelligence will likely drive the demand for iPhone 16. Momentum did not build up early this year due to a delay in Apple Intelligence, but now we are looking at a recovery.
Chatterjee adds that AAPL and its consumers are waiting for the new Apple Intelligence features to launch, which will lead to a surge in demand for the iPhone 16 and an even greater surge will be seen for the iPhone 17 launching next year. With or without AI, its proprietary products, especially the iPhone, reported robust earnings. In the fiscal third quarter of 2024, the iPhone generated revenue worth $39.3 billion during FQ3 2024, making up for nearly 45% of the total revenue.
Overall, Apple Inc. (NASDAQ:AAPL) has grown its revenue and net income by 8% and 10% respectively, over the past 10 years. AAPL holds a legacy with a loyal customer base. The company has had a decent growth trajectory over the years and the integration of AI will only accelerate it further.
Columbia Contrarian Core Fund stated the following regarding Apple Inc. (NASDAQ:AAPL) in its Q2 2024 investor letter:
“Apple Inc. (NASDAQ:AAPL) – Despite the stock falling after announcing earnings in late May, Apple regained ground toward the end of the quarter, fueled by the company’s long-awaited AI announcement at its annual Worldwide Developers Conference (WDC). At the conference, the company showcased some of its new AI features powered by Apple Intelligence that would be coming to Apple products and also announced a partnership with ChatGPT. Investors greatly welcomed the announcement of Apple’s AI strategy and the stock surged, passing Microsoft as the world’s most valuable company (although this hallmark wouldn’t last). Beta testing of these new features will be coming later this summer, but the initial promise and excitement looks to be a potential catalyst for an upgrade cycle, as the company looks to persuade users who have had the same smartphone for years to consider an upgrade.”
4. Broadcom Inc. (NASDAQ:AVGO)
Analyst Upside as of October 22, 2024: 10.9%
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) is a semiconductor company that designs, develops, and supplies semiconductor and infrastructure software products. Some of its products include cable modems, networking processors, and storage adapters.
2024 has been quite a feat for Broadcom Inc. (NASDAQ:AVGO). During the year, the company launched two breakthrough technologies such as the industry’s first switch platform for scalable AI systems and Retimers, facilitating the management of large datasets for AI tasks. To keep its strategy active, on October 15, Broadcom Inc. (NASDAQ:AVGO) expanded its 20-year partnership with Deutsche Telekom’s subsidiary, T-Systems. The subsidiary is now a VMware Cloud Service Provider.
On June 13, Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments, appeared in an Interview on Yahoo Finance where she shared her bullish stance on AVGO. Tengler states that AVGO is like the poor man’s NVIDIA and is part of her 12 best ideas portfolio. She adds that the company is in the sweet spot in the generative AI sector for both the hardware and software components.
As Tengler states, AVGO indeed is in a sweet spot for AI. In the fiscal fourth quarter of 2024, Broadcom expects revenue from AI to grow by 10% sequentially reaching $3.5 billion, bringing the full-year total to $12 billion. In addition to that, its cloud computing platform for enterprises promises a solid growth opportunity as AVGO leverages artificial intelligence.
ClearBridge Investments’ ClearBridge Large Cap Value Strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q3 2024 investor letter:
“In IT, we bought Broadcom Inc. (NASDAQ:AVGO) as we believe the company has a long runway for growth with its custom silicon business, which should be more durable and less volatile than other components within the AI food chain. We also believe the acquisition of VMware creates another opportunity for steady, subscription-based durable growth that is still in its early innings. We believe the stock has an attractive risk/reward profile given the reasonable visibility toward mid-teens EPS growth at a low-20s P/E multiple. We made room for Broadcom by exiting Lam Research, whose shares we believed priced in a full recovery, while we grew increasingly concerned that China exposure might create an air pocket.”
3. Amazon.com, Inc. (NASDAQ:AMZN)
Analyst Upside as of October 22, 2024: 15.9%
Number of Hedge Fund Holders: 308
Amazon.com, Inc. (NASDAQ:AMZN) ranks third on our list of the best FAANG stocks to buy according to analysts. The technology company is an e-commerce giant that also provides streaming and data cloud services.
Amazon.com’s (NASDAQ:AMZN) growth trajectory is exceptional. On August 2, Nick Jones, Citizens JMP equity research analyst, joined Yahoo Finance to discuss his case for AMZN. He shares that AWS has outperformed market expectations, despite the total revenue falling short of its guidance in Q3. Jones adds that AMZN is yet to explore a multitude of opportunities to expand globally, and while he acknowledges that AMZN is massive, he states it is still in growth mode.
The company has been achieving milestone after milestone. Amazon.com, Inc. (NASDAQ:AMZN) has not only been actively involved in the development of AI hardware and software but has also signed partnerships with the government and AI startups. To stay on track with innovation, on October 11, the company launched its first autonomous robot, Proteus, that can complete miscellaneous tasks in the Amazon fulfillment centers independently and safely.
Similarly, in a recent development, on October 16, Amazon.com, Inc. (NASDAQ:AMZN) announced its plans to invest in nuclear energy to meet the power demand from AI data centers. Amazon Web Services, AWS, signed a partnership with Dominion Energy and X-Energy to develop small modular reactors in Virginia. The deal was closed shortly after MSFT and GOOGL announced similar plans to invest in nuclear energy projects. The total investment in nuclear energy amounts to nearly $500 million.
Amazon.com, Inc. (NASDAQ:AMZN) has significant growth potential and to achieve such the company is working tirelessly. Over the next few years, the company is not only poised to become a fully functional AI company but it is also on track to become carbon-free.
Diamond Hill Select Strategy stated the following regarding Amazon.com, Inc. (NASDAQ:AMZN) in its Q2 2024 investor letter:
“Among our top individual contributors in Q2 were Amazon.com, Inc. (NASDAQ:AMZN), Texas Instruments and Mr. Cooper Group. Internet retail and cloud infrastructure company Amazon is benefiting from strong profitability, particularly in its Amazon Web Services (AWS) business. Shares also received a boost amid growing optimism around the demand for AWS as Amazon customers’ investments in generative AI projects continue growing.”
2. Microsoft Corporation (NASDAQ:MSFT)
Analyst Upside as of October 22, 2024: 16.5%
Number of Hedge Fund Holders: 279
Microsoft Corporation (NASDAQ:MSFT) is a technology giant that was originally not part of the FAANG stocks due to its mature business model. However, as the company ventured into new technologies and AI, it does represent a breakthrough stock that can influence the future.
Microsoft Corporation (NASDAQ:MSFT) is part of the list because of its strategic investments, positioning it as a leader in AI. On September 23, Gil Luria, D.A. Davidson’s managing director, appeared on Yahoo Finance where he talked about MSFT’s lead in the tech and AI business. He suggests that the company was involved with OpenAI for a long time, giving them a headstart. Additionally, the company knew ChatGPT was coming before anyone else. Similarly, a year and a half ago, the company launched commercial products related to artificial intelligence. However, he does acknowledge that Amazon and Google have been catching up to MSFT, slowly diminishing the lead.
As Luria highlighted, Microsoft Corporation (NASDAQ:MSFT) has usually been the first to jump on crucial trends and identify market shifts. Similarly, Microsoft Corporation (NASDAQ:MSFT) was among the first mega-cap companies to pour capital into nuclear energy. On September 20, the company signed a deal to reopen Three Mile Island, the site of one of the worst nuclear accidents in the US, to power and advance its AI technologies.
On the AI front, the company closed deals with startups and technology companies to run their workloads on Microsoft Azure, its cloud platform. On October 10, the company revealed several breakthrough AI capabilities in healthcare that offer medical imaging, clinical records management, and genomics. Previously on October 3, Microsoft Corporation (NASDAQ:MSFT) closed a partnership with Rezolve AI to develop innovative AI-backed online retail solutions.
Microsoft Corporation (NASDAQ:MSFT) is a long-standing company with immensely strong fundamentals. This coupled with its investments in AI and data make it one of the best FAANG stocks to buy according to analysts.
1. Alphabet Inc. (NASDAQ:GOOGL)
Analyst Upside as of October 22, 2024: 24.3%
Number of Hedge Fund Holders: 216
Alphabet Inc. (NASDAQ:GOOGL) is one of the biggest technology companies in the world that ranks first on our list of the best FAANG stocks to buy according to hedge funds. It owns a range of products, including Google Search, Google Maps, YouTube, Google Cloud, and Wyamo.
On October 14, the company signed an agreement to purchase nuclear energy from small modular reactors to be developed by Kairos Power. The first phase of work is expected to bring small modular reactors online by 2030, followed by consequent developments through 2035. The deal will promise 500 megawatts of carbon-free energy to electricity grids in the United States.
Alphabet’s (NASDAQ:GOOGL) performance in Q2 2024 was largely driven by its growing momentum in search and cloud. The company logged nearly $85 billion in revenue, of which search and cloud exceeded $10 billion for the first time in quarterly revenue. In addition to that, the company’s processing units make up nearly 20% of the market, and market share is likely to expand as advancements continue.
To shed light on Alphabet’s (NASDAQ:GOOGL) position, Angelo Zino, CFRA Research Senior Equity Analyst, appeared in an interview on Yahoo Finance. Zino suggests that the company had been in beta mode for a long time and is now advancing towards AI at full speed. He adds that the company is excelling in every aspect of AI and is the ultimate consumer company, functioning as the internet.
Patient Capital Management mentioned Alphabet Inc. (NASDAQ:GOOG) in its Q2 2024 investor letter“
“Alphabet Inc. (GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
Overall, GOOGL ranks first among the 8 best FAANG stocks to buy according to analysts. While we acknowledge the potential of technology and cloud companies, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than GOOGL but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
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