The Nasdaq Composite(NASDAQINDEX: ^IXIC) achieved an average annual return of 17% in the past decade, driven by the proliferation of cloud computing, digital advertising, and artificial intelligence (AI). The index is down 4% year to date, meaning it would need to add 21% between now and December to match its 10-year average.
That may sound like a long shot, but Wall Street’s consensus forecast says the technology and consumer discretionary sectors will advance 33% and 22%, respectively, during the next year. And those sectors account for 80% of the Nasdaq’s performance, which means the index could conceivably climb 21% by December.
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Investors can lean into that possibility by purchasing two monster growth stocks: Nvidia(NASDAQ: NVDA) and MercadoLibre(NASDAQ: MELI). Here’s why they are worth owning.
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Nvidia reported strong fourth-quarter financial results. Revenue increased 73% to $68 billion, the second straight acceleration, and non-GAAP (generally accepted accounting principles) net income rose 82% to $1.62 per diluted share. CEO Jensen Huang said the AI boom is still in full swing, adding, “Compute demand is growing exponentially — the agentic AI inflection point has arrived.”
Nevertheless, some investors are worried about the sustainability of AI spending, and others are concerned about competitive pressure. Regarding sustainability, investors can take solace in knowing that Wall Street has underestimated AI capital expenditures (capex) in every quarter for the last two years, and analysts probably made the same mistake this year.
Last October, the consensus estimate said the top five hyperscalers (Alphabet, Amazon, Meta Platforms, Microsoft, and Oracle) would increase capex spending 19% in 2026. However, guidance from those five companies implies capex spending will actually increase 60% this year. And that comes on the heels of AI spending increasing at 70% annually over the last two years.
Joseph Moore at Morgan Stanley recently wrote, “We are seeing hyperscalers place three-year orders on memory suppliers, in some cases with full prepayment.” He also said, “That’s just one of dozens of indications that spending will continue to increase for multiple years.” In the same note, Moore made Nvidia his top pick in the semiconductor industry.
What about competition? Custom chips (e.g., Google’s TPUs) may take some market share from Nvidia GPUs in the years ahead, but Nvidia is unlikely to lose its leadership position because it’s the only company that brings together GPUs, CPUs, networking, and a robust ecosystem of software development tools. That full-stack strategy affords the company a durable competitive moat.
Here’s the big picture: Wall Street expects Nvidia’s earnings to increase by 38% annually during the next three years. That certainly qualifies as monster growth, and it makes the current valuation of 37 times earnings look cheap. Not surprisingly, most analysts think Nvidia is deeply undervalued. The median target price of $265 per share implies 45% upside from its current share price of $183, according to The Wall Street Journal.
MercadoLibre runs the largest online marketplace in Latin America as measured by gross merchandise volume and web traffic, and Latin America is home to the fastest-growing e-commerce market in the world. The company accounted for 29% of online retail sales in the region last year, and eMarketer expects that figure to reach 30% this year.
However, MercadoLibre is truly formidable because it offers adjacent merchant services for logistics, digital advertising, financing, and payment processing, which makes its online marketplace an even more compelling option. Consequently, the company’s e-commerce sales in Latin America exceed the combined total of the next 15 competitors, according to eMarketer
MercadoLibre is also doing well in those adjacent markets. The company has the fastest and most extensive delivery network in the region. It is the largest retail advertiser. And its subsidiary Mercado Pago is the largest fintech acquirer (an institution that lets merchants accept credit cards) in terms of payment volume. Mercado Pago also ranks among the top two digital wallets in Argentina, Brazil, Chile, and Mexico.
Here’s the big picture: MercadoLibre sits at the center of three quickly growing markets: e-commerce, digital advertising, and digital payments. Wall Street expects the company’s earnings to increase at 39% annually through 2027, which makes the current valuation of 43 times earnings look cheap. Most analysts agree. The median target price of $2,650 per share implies 59% upside from the current share price of $1,669.
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Trevor Jennewine has positions in Amazon, MercadoLibre, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, MercadoLibre, Meta Platforms, Microsoft, Nvidia, and Oracle. The Motley Fool has a disclosure policy.
