The US stock market posted a stellar performance in 2024, with the benchmark index S&P 500 The index reached an all-time high closing value of 6,090.27 on December 6.
But things could get even better in 2025. According to Charles Schwab, based on 14 interest rate cycles since 1929, the S&P 500 index has posted positive returns 12 months after the cycle’s first rate cut 86% of the time. The benchmark recorded negative returns after rate cuts in 2001 and 2007, mainly attributed to the recessionary environment.
In September 2024, the Federal Reserve began the current rate cut cycle by reducing benchmark interest rates by 50 basis points. Subsequently, given that the current economic environment does not appear recessionary, it may be prudent to expect the index to continue growing until September 2025. Many analysts seem to agree with this projection. UBS expects the S&P 500 to reach 6,400, while Oppenheimer Asset Management chief investment strategist John Stoltzfus expects the index to reach 7,100 in 2025.
In this context, it makes sense for retail investors to take small positions in high-quality stocks taking advantage of secular tailwinds. Here’s why the picks from these two companies fit together perfectly.
Oracle’s cloud services and licensing support revenue accounts for nearly 77% of the company’s total revenue. The cloud business is expected to generate $25 billion in revenue in fiscal 2025. Oracle’s prominence in providing data center infrastructure optimized for artificial intelligence (AI) is the main factor driving growth of your cloud business. The company’s Oracle cloud infrastructure is used by major AI companies such as NVIDIA, MetaplatformsxAI, OpenAI and Cohere to train your most important generative AI models.
Oracle is also focused on further improving the performance of its cloud infrastructure and recently launched the world’s largest and fastest supercomputer, which uses up to 65,000 Nvidia H200 GPUs. This performance advantage has made Oracle’s cloud infrastructure faster and cheaper than many competing cloud infrastructures, helping it win large AI training workloads. The company’s GPU usage also increased a whopping 336% year over year in the second quarter.
Oracle differentiates itself from many other cloud infrastructure players with its unique cloud architecture. The company has opted for a modular design approach in which only six standardized data racks are needed to build a cloud region that provides all services to customers. The company can easily scale data center infrastructure from 50 kilowatts to 1.6 gigawatts based on demand, economically and efficiently. Standardization of racks and services has also helped Oracle effectively deploy automation tools across its cloud infrastructure.
Oracle has also established a broad geographic presence with 98 cloud regions. The company has signed multi-cloud agreements with microsoftit’s blue, Alphabet‘s Google Cloud, and Amazon‘s AWS, which also allows customers high flexibility to deploy their systems in the cloud.
It’s true that Oracle doesn’t seem to be the most popular stock on Wall Street. However, the company was recently trading at just 8.43 times its trailing-12-month average. sales — better than the software industry’s median price-to-sales (P/S) ratio of 10.4. As multiples expand in line with solid growth, Oracle may see significant share price gains in the coming months.
The second database specialist worth investing in is MongoDB (NASDAQ: MDB). Although the company managed to handily beat consensus revenue and earnings estimates in the third quarter of fiscal 2025, the stock has plunged on long-overdue unexpected news. Chief Financial Officer and Chief Operating Officer Michael Gordon will be leaving at the end of January 2025. The subsequent price correction has presented an excellent entry opportunity for retail investors.
MongoDB added nearly 1,900 new customers sequentially and ended the third quarter (ended October 31) with a total customer count of more than 52,600. Additionally, the company served 2,314 high-value customers (those generating at least $100,000 in annual recurring revenue) in the third quarter, up from 1,972 customers in the same quarter a year ago.
Atlas, an integrated, cloud-native set of database tools and services, accounts for nearly 68% of MongoDB’s total revenue. Cloud platform revenue grew 26% year over year in the third quarter, driven by strong adoption by enterprises to execute mission-critical projects. Atlas served more than 51,100 customers at the end of the third quarter, up from more than 44,900 in the same quarter a year earlier.
MongoDB is focusing on reallocating some of its marketing resources from mid-market channels to large enterprise channels. While the reallocation of funds from the mid-market segment to the enterprise channel is expected to slow the pace of direct sales customer growth in the near term, it should drive higher revenue growth in the long term.
MongoDB uses artificial intelligence tools and professional services to modernize customers’ legacy applications. Since many of these applications are based on relational databases, the company also implements a relational migrator to migrate them to the MongoDB platform (suitable for documents and other complex data structures). This modernization reduces cost, time, and the risk of data loss or corruption. Therefore, MongoDB sees a strong long-term growth opportunity in the legacy application modernization market.
Finally, MongoDB is also set to benefit from businesses increasingly focusing on AI-powered applications, which mostly require querying complex and rich data sets. The company says its unified platform approach (combining source data, metadata, operational data and vector data) is superior to using multiple complex databases.
Considering its various growth drivers and strong financials, MongoDB looks like a compelling buy now.
Have you ever felt like you missed the boat when buying the hottest stocks? Then you’ll want to hear this.
On rare occasions, our expert team of analysts issues a “Double bet” actions recommendation for companies that believe they are about to explode. If you’re worried you’ve missed an opportunity to invest, now is the best time to buy before it’s too late. And the numbers speak for themselves:
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netflix: If you invested $1,000 when we doubled down in 2004, you would have $495,539!*
Right now, we are issuing “double bet” alerts for three incredible companies and there may not be another opportunity like this anytime soon.
See 3 “double bet” actions »
*Stock Advisor returns from December 9, 2024
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Alphabet executive Suzanne Frey is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool ranks and recommends Alphabet, Amazon, Meta Platforms, Microsoft, MongoDB, Nvidia, and Oracle. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
History says the S&P 500 will rise in 2025. Top 2 Stocks to Buy Before It Does. was originally published by The Motley Fool
