Savvy investors are starting to look for some of the best stocks for slowing inflation. The latest reports show that inflation slowed dramatically in October.
In fact, inflation between September and October was flat. On a year-over-year basis, the numbers were also good. Consumer prices in October were 3.2% higher than they were a year prior. That rate was lower than anticipated and bolsters the outlook for the stock market as inflation slows.
The Federal Reserve is likely done raising interest rates. It’s an excellent sign for the economy overall. It also means that investors should expect rate cuts in perhaps as early as this year propelling the stock market even higher. As the market heats up, it’s important the best stocks for slowing inflation will outperform.
The thrust of recent inflation data is clear: the Federal Reserve has done its job and the economy appears to have avoided the worst likely outcomes. It also means that rate cuts are a very real possibility. That’s an excellent prospect for Google which is highly dependent upon advertising revenues.
Lower interest rates spur business borrowing which in turn increases ad spend. Google can reasonably expect its advertising revenues, which are already quite strong and grew to nearly $60 billion in the most recent quarter, to grow further.
Google is also doing very well in regard to its cloud business. Revenues during the most recent quarter reached $8.4 Billion, up from $6.8 billion a year before. The worst is over and that means that the tech companies are again in position for another period of rapid growth. Google will absolutely be one of the prime beneficiaries of that pivot.
First of all, investors should consider AMD (NASDAQ:AMD) simply because inflation is slowing and that offers obvious benefits in terms of interest rates and borrowing. Leading semiconductor firms like AMD are absolutely in position to grow as a result of slowing inflation.
At the same time, investors always have to consider AMD in light of Nvidia (NASDAQ:NVDA)and its dominance over the chip space.In 2023 the story has been about AMD’s continued potential juxtaposed against Nvidia’s obvious dominance. The question continues to be whether AMD has a chance to make up ground against Nvidia.
Nvidia’s H100 chips are the best on the market. The company recently unveiled its H200 chips which promise to improve inference, the process of generating answers from AI models, by 60% or more.
That would suggest that Nvidia is simply going to race that much farther ahead of its competition. However, AMD is also going to unveil its MI300 chips. Those chips are also showing a lot of promise for inference applications.
In short, that means that AMD very much remains a competitor in the AI space. Inference is the name of the game right now. So if AMD’s MI300 chips prove to have strong utility for inference applications, its share prices will soar.
The majority of those years occurred during a period during which rates were held near zero. However, the rapid implementation of rate increases over the past year and a half have not slowed MasterCard down.
Higher interest rates translate to higher fees for MasterCard’s customers. Those customers have been undeterred by those higher fees and continue to use credit at historic rates. Credit card debt has risen to historically high levels and recently passed the $1 trillion dollar threshold.
As you can imagine MasterCard’s revenues have risen as a result. During the third quarter, revenues increased by 14% to $6.5 billion. Despite the fact that Americans are taking on record levels of credit card debt the company doesn’t foresee defaults negatively affecting its future forecast. Instead, the company continues to repurchase its shares, Reward shareholders with dividends, and move higher no matter the prevailing macroeconomic environment.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) Was arguably the stock that was most negatively affected by inflation over the past few years.
The company enacted a massive rebrand just as it became clear that the Federal Reserve was going to raise interest rates. The company formerly known as Facebook pivoted heavily into the metaverse with its rebrand.
It was a rebrand heavily predicated on the continued strength of growth stocks and low rates. Simply put, the growth of the metaverse required a continuation of the era of cheap capital. Greater fiscal austerity led by an increase in the FED funds rate crushed the company and that rebrand.
These days, the metaverse rebrand isn’t looking nearly as bad as it once was. In fact, many leading tech firms are leaning heavily into the augmented reality space. Apple and others will release augmented reality headsets before long.
Meta’s Reality Labs business segment continues to lose cash. However it’s hardly the company’s defining trait. Advertising revenues have rebounded in 2023 and are up by nearly 11 billion dollars through Sept. 30. Facebook is still the face of the company and as its ad revenues go so goes the firm.
That said, the potential of its augmented reality investments remains high. The company is in position to rise rapidly as factors that punished it so heavily in 2022 shift in its favor.
Upwork (NASDAQ:UPWK) Is primarily an investment to make for those who believe in the continued growth of the gig economy. Current estimates suggest that should indeed be the case with compound annual growth rates expected in the range of 15% through the early 2030s.
Upwork isn’t a growth stock in the traditional sense. During the most recent quarter, its revenues grew by 11%. While that’s a good rate of growth it certainly isn’t at levels expected of many growth stocks. So, UPWK shares shouldn’t necessarily spike on the expectation of future rate cuts like most growth stocks.
Instead, investors should look at upwork stock because it is maturing and has recently reached profitability. During the third quarter of the company reported a net income of $16.3 million. A year earlier it reported a $24.8 million net loss.
Slowing inflation will signal companies of all sizes that it is now time to invest in growth. Those firms should look to increasingly hire gig workers which in turn should contribute to strengthening top line results for Upwork.
Both firms have risen to become the dominant e-commerce players in their respective markets. While its North American market has matured rapidly and continues to show strong growth, MercadoLibre is just getting started.
The company is bringing e-commerce and fintech to the Latin American Market, which has long been underserved. In doing so, it has produced incredibly rapid growth for the company. In fact, during the most recent period, MercadoLibre reported top line growth of 69.1%. Net revenues reached $3.8 billion As the company moved $11.4 billion worth of merchandise through its network.
Investors who are looking for a strong fintech stock would be hard-pressed to find one better than MercadoLibre. Total payment volume in the most recent period reached 47.3 billion. that translates to an increase of 121.7% on a year-over-year basis.
The company continues to work very hard to increase the availability of payments throughout Latin American countries. Those efforts will serve to transform the region into a more connected area economically. it’s the sort of virtuous cycle that investors seek time and time again.
Microsoft (NASDAQ:MSFT) along with Nvidia, Have arguably been the best AI stocks of 2023. As inflation cools the two stocks will undoubtedly continue to do well. The two firms are highly connected at this point.
Microsoft has done as well as it has in 2023 in large part because of generative AI. Its investment in OpenAI has proven to be very fruitful. The success of chat GPT has relied on the heavy use of the chips that Nvidia produces. it’s H100 chips have been vital to the ability of its AI-powered systems to produce strong inference results.
Naturally, Microsoft would love to be in control of the chips that power its systems. Vertical integration confers incredible benefits to firms in general.
Recent announcements from Microsoft suggest that vertical integration of AI chips may not be far off. The company unveiled its own AI chip called Azure Maia AI Accelerator. Microsoft will soon use the chips in some of its AI applications.
The potential of those chips to undercut Nvidia is just one of many reasons to believe in the continued strength of Microsoft into the future.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.