It's time to look to 2025 after a banner year during which the tech-heavy Nasdaq Composite made numerous all-time highs and finished up 29%. Of course, the business cycle doesn't follow calendar years, but it still makes for a terrific time to step back, take stock (no pun intended), and look for secular trends that will yield excellent long-term returns.
It's also the time for holiday bonuses, gifts from relatives, and matching contributions to retirement plans. So, if you want to invest $5,000 or another amount, here are two stocks that will benefit from significant long-term tailwinds.
Marvell Technology
I don't think anyone really knows how massive the market will be for hyperscale data centers (those over 100,000 square feet). So many gigantic new projects are announced frequently that it's hard to keep up.
For instance, Meta Platforms plans a 715,000-square-foot, $800 million project in Wyoming; Amazon is working to establish multiple centers on a campus in Virginia encompassing more than 2 million square feet; and Elon Musk's xAI Colossus in Memphis, Tennessee, will house 100,000 Nvidia GPUs -- and there are hints of significant expansion from there.
Hyperscale data centers surpassed 1,000 in 2024, and some forecast that more than 120 will come on line annually over several years. These centers require extensive infrastructure, such as networking hardware, servers, and storage. As shown below, Statista forecasts the global infrastructure market to grow 50% from 2024 to 2029, reaching over $620 billion.
Statista
Data infrastructure specialist Marvell Technology (MRVL -0.83%) is a major beneficiary of this secular explosion. Marvell is a $100 billion company by market cap that produced $5.4 billion in revenue over the past four quarters. The company's overall growth swooned over the last fiscal year due to declines in sales outside of data centers, such as consumer and automotive uses; however, business is picking back up, as shown below.
MRVL revenue (TTM) data by YCharts; TTM = trailing 12 months.
The reversal directly results from data center sales, which skyrocketed 98% year over year, reaching $1.1 billion in the last fiscal quarter. Marvell expects another jump to over $1.3 billion in data center sales next quarter, its fourth of fiscal 2025.
The company isn't profitable yet on the basis of generally accepted accounting principles (GAAP), but its non-GAAP (adjusted) results hint at a very profitable future. Adjusted results omit many non-cash expenses like stock-based compensation, amortization of intangible assets (such as patents), and others.
Marvell produced non-GAAP earnings per share (EPS) of $0.43 in its third quarter and expects $0.59 in the fourth quarter. Analysts estimate total EPS of $2.76 in the upcoming fiscal 2026, which gives the company a forward price-to-earnings ratio of 43. This isn't cheap; few tech companies are in this market.
With this in mind, investors should be in the market for the long haul, expect some volatility, and use a strategy like dollar-cost averaging to take advantage of near-term dips. Marvell has a tremendous runway in an explosive market; its valuation will decrease over time, and tech investors should be engaged with this stock through ownership or watching closely for a dip.
Amazon
Speaking of being highly engaged with tech stocks, Amazon (AMZN -0.42%) is an industry titan and is the global leader in cloud services running through data centers. Marvell and Amazon have a strategic relationship in which Marvell supplies some of Amazon's artificial intelligence (AI) and data center infrastructure. This is a tremendous positive for Marvell, but let's shift focus to Amazon here.
Although many first think of it as an online retailer, Amazon Web Services (AWS) -- its cloud segment -- is actually the straw that stirs the drink. Over the past 12 months, $36.4 billion, or 60%, of the total of $60.5 billion in operating profits came from AWS, which posted a killer 35% margin, compared to 5.9% and 1.5% for its other two segments, North America and international.
The gigantic data needs of AI will drive AWS growth because the segment operates much like a utility, where companies pay for the data they use or store.
It's hard to imagine data needs slowing anytime soon, so Amazon has a massive tailwind. AWS sales hit $27.5 billion last quarter by 19%, as total sales grew by 11% to $159 billion. While AWS led the way, all of Amazon's segments grew. The company is a juggernaut.
The recent rally in the stock price means it isn't as discounted, but it still trades below its five-year averages based on earnings and operating cash flow (CFO):
AMZN PE ratio; data by YCharts. PE = price to earnings.
The price-to-earnings ratio drops to 36 on a forward basis, which is much cheaper than Amazon's historical valuation. Therefore, the stock is still an excellent one to hold for the long haul. Secular data center tailwinds, propelled by AI, will be a boon for Marvell and Amazon. The stocks could easily follow suit.
