2 "Magnificent Seven" Stocks to Buy Hand Over Fist in October

The term "Magnificent Seven" was coined by Wall Street last year to describe a powerful group of technology companies with a combined market capitalization of $15.7 trillion. The seven companies are:

1. Microsoft (NASDAQ: MSFT)

2. Meta Platforms (NASDAQ: META)

3. Nvidia

4. Apple

5. Amazon

6. Alphabet

7. Tesla

So far in 2024, these Magnificent Seven stocks delivered an average return of 40%, which is double the 20% gain in the S&P 500 index. That's a key reason investors watch them so closely.

Corporate America is heading into a new earnings season for the quarter ended Sept. 30, which will give investors a fresh look at the financial performance of their favorite companies. Microsoft and Meta Platforms are due to release their results at the end of October, and here's why it might be a good idea to buy shares in these two Magnificent Seven right now.

1. Microsoft

Few companies are better positioned to profit from the artificial intelligence (AI) revolution than Microsoft. The company invested $1 billion in ChatGPT creator OpenAI back in 2019 and followed that up with a new $10 billion partnership with the start-up early last year. Microsoft has used OpenAI's latest AI models to create the Copilot virtual assistant, and it also offers those models to businesses on its Azure cloud platform.

Copilot is capable of answering complex questions and generating text content, images, and even computer code with a simple prompt. It's now embedded in many of Microsoft's flagship software products, such as Windows, Bing, and Edge. For an additional monthly subscription fee, it's also available in 365, which includes Word, Excel, and PowerPoint.

During Microsoft's fiscal 2024 fourth quarter (ended June 30), the number of corporate customers who purchased over 10,000 Copilot add-ons for their 365 subscriptions doubled from just three months earlier. Since there are more than 400 million paid 365 seats in the corporate sector worldwide, Copilot could become a substantial source of revenue if even a fraction of them sign up. Investors should watch for further updates on that front in the upcoming quarterly report.

But the Azure cloud platform will probably headline the report once again because it's consistently the fastest-growing segment of Microsoft's entire organization. Azure's revenue increased by 29% year over year during the last quarter, and eight percentage points of that growth came from its AI services -- that number increased eightfold from one percentage point in the year-ago period. Those services include providing data center computing capacity for AI developers and access to the latest large language models (LLMs), like OpenAI's GPT-4.