Neha Gupta
Both conservative and risk-tolerant investors favor blue chip stocks due to their solid business models, impressive track records, and attractive risk-reward profiles. These stocks are backed by companies with strong brand names and reputations that generate dependable earnings and consistent dividends, which provide stability and passive income during turbulent market conditions.
In recent years, Wall Street has become reliant on the best blue chip stocks. While the S&P 500 was up by about 24% in 2024, most of the gains were driven by gains in seven of the biggest blue chip stocks. The “Magnificent 7” stocks, which include seven of the biggest companies by market cap, accounted for a 13.7% point gain in the S&P 500. Therefore, investors who focused on these stocks ended up generating significant gains.
The trend is not expected to change in 2025. Blue chip companies should be the biggest beneficiary as the Federal Reserve cuts interest rates and the new administration under Donald Trump pushes for fewer regulations. The easing of regulatory pressure that has taken a significant toll on tech giants should be a boon to see blue chip stocks edge even higher. David Miller, co-founder at Catalyst Funds, expects blue chip stocks to continue leading the way in 2025.
“The Mag 7 stocks are generating significant growth in terms of revenue and earnings power,” he said earlier this month. “These companies are massive monopoly businesses with strong fundamental tail winds. I have no reason to believe that the Mag 7 names won’t continue to dominate the S&P in 2025.”
Valuations among the blue-chip stocks have gotten out of hand after two years of blockbuster gains amid the artificial intelligence frenzy. Blue chip companies boast significant profits and a competitive edge to back their valuations up, however.
“The Magnificent Seven are not pie-in-the-sky companies: They’re generating “tremendous” revenue for investors”, said Fitzgerald, principal and founding member of Moisand Fitzgerald Tamayo. “How much more gain can be made is the question,” he added.
Therefore, any well-diversified investment portfolio should include some of the best blue chip stocks. It’s the only way investors can take advantage of the market rally that’s driven by various factors, including the artificial intelligence frenzy, robust economic growth and friendly monetary policy.
Amazon.com, Inc. (NASDAQ:AMZN)
Market Cap as of January 8: $2.34 Trillion
Past Year Gain (2024): 47%
Number of Hedge Fund Holders: 286
Amazon.com, Inc. (NASDAQ:AMZN) is arguably one of the best blue chip stocks to buy, as it is a market leader in e-commerce and cloud computing. While the stock was up by about 47% in 2024, there is room for additional gains owing to the investments the company is making to strengthen its growth metrics and long-term prospects. While the company dominates e-commerce with over 200 million prime members, it’s also pursuing growth in other promising markets, including advertising and cloud computing.
The cloud services business has emerged as a key growth driver, following the 19% revenue increase in the third quarter. Amid the artificial intelligence revolution, companies are accelerating their migration to the cloud, much to the benefit of Amazon.com, Inc. (NASDAQ:AMZN) as the leading cloud solutions provider. Additionally, advertising is another frontier that affirms the company’s long-term prospects.
Merchants increasingly pay Amazon.com, Inc. (NASDAQ:AMZN) to buy sponsored ads and get their products to the over 200 million Prime members. Consequently, advertising has emerged as the fastest-growing revenue stream, having brought in $53 billion in revenues last year. Additionally, the company should continue generating robust sales as a leader in e-commerce, as the market is valued at over $4.1 trillion.
Overall, AMZN ranks 5th on our list of best blue chip stocks to buy for 2025. While we acknowledge the potential of AMZN as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame.
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