History Says These 3 Stocks Could Be Big Winners in the Second Half

Key Points

• Nvidia, Advanced Micro Devices, and Tesla have all been phenomenal growth stocks to own over the years.

• They have averaged second-half returns of more than 30% over the past 10 years.

• 10 stocks we like better than Nvidia ›

The S&P 500 is trading at around record levels, and so too are many stocks. But that doesn't mean that valuations can't continue to go higher. Companies are continuing to post strong results. As long as that's the case, there may still be plenty of bullishness in the markets for the foreseeable future.

There are, however, some stocks that may be more likely to rise in the second half than others. Three stocks that have historically done well in the latter part of the year are Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), and Tesla (NASDAQ: TSLA). Here's a rundown of how they've done over the past 10 years, and whether they are good buys today.

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Nvidia

Chipmaker Nvidia has been an astounding investment to own over the years. Its chips are in high demand as companies invest in artificial intelligence (AI) and seek out strong compute power. Nvidia recently hit a $4 trillion valuation, and as of last week's close, it was up 23% since the start of the year.

In eight of the past 10 years, Nvidia has generated positive returns in the second half (the only exceptions being 2022 and 2018). And it has averaged a second-half return of 33%. If it rallies that much, its market cap will hit more than $5 trillion.

The second half will indeed be a big test for Nvidia, to see whether its growth will remain robust despite tariffs and global trade wars potentially affecting its operations. If it can still deliver strong results, it may not be unreasonable to expect it to do well in the second half. But it won't be easy. Export restrictions in China, for example, have cut Nvidia's market share in that market nearly in half.

The AI stock is trading at 38 times its estimated future earnings (based on analyst expectations). That's a bit expensive, but if trade worries ease, then it may not be a surprise to see Nvidia deliver strong second-half results and for its share price to rally higher. But regardless of how it performs in the second half, this can still make for a phenomenal stock to own for the long term.

Advanced Micro Devices

Nvidia rival Advanced Micro Devices, also known as AMD, is another stock that's traditionally done well in the second half of the year. It has generated a positive return in the latter part of the year in seven of the past 10 years. And its average second-half return over that stretch has been 31%.

AMD is up a similar amount to Nvidia this year (21%). For it to continue to do well in the months ahead, it'll need to show that its chips are indeed up to par with Nvidia's. OpenAI CEO Sam Altman has been excited about the company's new MI400 chips and will be a buyer of them, but they won't ship until next year. The big test is how strong the demand will be for AMD's existing lineup of products. The company's growth rate has been encouraging in its most recent quarter (which ended on March 29), where sales rose by 36% to $7.4 billion.

Continued strong results such as that could make AMD a hot buy in the near future. Like Nvidia, it also isn't a terribly cheap stock as it trades at a forward price-to-earnings (P/E) multiple of 39. However, with AI potentially driving significant growth in the foreseeable future, it may not be too late to invest in this excisitng growth stock.

Tesla

Tesla has been a polarizing stock to own, and it's not just this year. The second half has been a bit of a hit or miss as over the past 10 years, five times it has produced positive returns in the latter part of the year, and five times, it has experienced a decline. But with an average gain of around 40%, when Tesla does well, it typically does very well. In the second half of last year, its shares more than doubled in value. In 2020, they soared by over 226%.

And a case could be made that Tesla may be due for a bounce back in the second half. Shares of the electric vehicle maker are down more than 20% this year as CEO Elon Musk's political involvement with the Department of Government Efficiency proved to be controversial and weighed on the stock. If Musk can stay on task and avoid ruffling feathers in the second half, Tesla may be poised for a rally.

It will, however, still need to show some signs that its business is moving in the right direction. Its vehicle deliveries in the second quarter were down by 14% year over year. And through the first three months of the year, sales were down by 9% and net income cratered by 71%, to just $409 million.

Tesla is a bit of a riskier stock to buy these days, and I'd hold off until its latest round of earnings before making a decision on it. And that's because at a forward P/E of more than 160, the stock is priced at a hard-to-swallow valuation right now.

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inappropriateDavid Jagielski has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Nvidia, and Tesla. The Motley Fool has a disclosure policy.