Amazon is trading at one of its lowest-ever valuations.
Alphabet is trading in the bargain bin despite a collection of leading and emerging businesses.
AI has been powering Meta Platforms' revenue growth.
While stocks have staged a nice rally, the major market indexes are still well below their highs, and some stocks are still trading at attractively low prices. Investing $1,000 is a smart way for investors to start dipping their toes into a stock and begin building a position, especially in a volatile market where easing in can help manage risk.
Let's look at three great stocks you can use $1,000 to start accumulating positions in right now.
Image source: Getty Images.
1. Amazon
One leading company that is trading well below its recent highs is Amazon(NASDAQ: AMZN). The tech giant has been under pressure due to rising uncertainty in the economy, threatened and implemented tariffs, and the current U.S.-China trade war.
This pressure was discussed in Amazon's guidance for the second quarter. While it maintained its sales forecast, Amazon's operating income forecast came up well short of analyst expectations, indicating the company was willing to eat some price with tariffs instead of passing the costs along to its customers. While this will hurt results in the near term, it should build goodwill with its customers. Eventually, the tariffs will go away or become the new normal, and consumers will adjust.
At the same time, the company is investing heavily in artificial intelligence (AI). This has been helping it reduce costs and become more efficient with its e-commerce operations. It's also allowing it to offer better recommendations to its customers and help third-party merchants more easily create attractive listings.
That said, Amazon's largest business by profitability and its fastest-growing is its cloud computing unit, Amazon Web Services (AWS). The company continues to have a huge opportunity to help customers build out their own AI models and apps, as well as transition companies from on-premise solutions to the cloud. Having developed its own custom AI chip in-house, Amazon also has a cost advantage.
Trading at a forward price-to-earnings (P/E) ratio of about 30 times 2025 analyst estimates, the stock is at one of the most attractive valuations in its history.
2. Alphabet
Like Amazon, Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG) is also a leading cloud computing provider. Its Google Cloud business has been its fastest-growing segment, with revenue climbing 28% year over year last quarter, while operating income surged 142%. The business is currently capacity-constrained, and Alphabet is investing $75 billion in capital expenditures (capex) to help build out more data center capacity to meet rising demand for its services. Like Amazon, it has also developed a custom AI chip to help provide better performance and reduce costs.
Alphabet is also the world's largest digital advertiser, serving ads through its Google search platform, YouTube video streaming service, and other owned properties, as well as on third-party platforms. While investors have been worried about the impact of AI on search, Google search revenue continues to perform well, rising 10% in the first quarter. Meanwhile, the company continues to increase and improve its AI Overviews, which it says it is monetizing at a similar rate to search.
My strong belief is that AI will become complementary to search. Given its much higher costs to run compared to search, I think AI chat will likely not use a free, ad-based model. Instead, I think it will eventually become a paid subscription service or pay-per-query model, with perhaps ads placed in. This will still leave search to handle simple queries, which often are its most profitable.
From a valuation perspective, Alphabet stock is very cheap, trading at a forward P/E just above 17 times. Meanwhile, it also has some very attractive emerging businesses, led by its robotaxi business, Waymo, that could become big contributors in the future.
3. Meta Platforms
Like Alphabet, Meta Platforms(NASDAQ: META) is a digital marketing juggernaut. Through its social media and messaging platforms, the company is the second-largest digital advertiser in the world.
Like Amazon and Alphabet, Meta has also been investing heavily in AI. The company is using AI to help increase user engagement on its platform, as well as using it to help advertisers better target the users most likely to buy their products. This allows Meta to show more ads on its platform as well as charge more, given their success. This was on full display in Q1, when the company saw a 5% rise in ad impressions and a 10% increase in average price per ad.
Right now, Meta is seeing an increase in both its users as well as time spent on its apps. Last quarter, it saw a 6% year-over-year increase in the number of daily active users who sign into its apps, while it said users spent 7% more time on Facebook and 6% more time on Instagram.
The company also has a nice opportunity with its newest social media platform, Threads. The number of monthly active users on the platform has risen to more than 340 million, and Meta plans to gradually start introducing advertising. This should be a nice growth driver in the coming years.
Meta stock is also attractively valued, trading at a forward P/E of just 23.5 times this year's analyst estimates.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Geoffrey Seiler has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet, Amazon, and Meta Platforms. The Motley Fool has a disclosure policy.
