After enduring its worst performance since 2008, Nasdaq Composite has improved, rising 50% since the beginning of last year. After such a sharp rally, some investors are wondering if there's still room for upside.
However, a closer look at the data suggests there is still room for the current market rally. Every year since this prestigious index began trading in 1972, rear Once the market recovery began, tech stock indexes rose an average of 19%. The ongoing fight against inflation remains a wild card that could make things worse. That being said, history suggests that 2024 should be a profitable year for investors.
It is generally agreed that recent advances in artificial intelligence (AI) have fueled the market's rise and are likely to deliver further gains in 2024. Although estimates vary, generated AI is expected to add between $2.6 trillion and $4.4 trillion annually to the global economy. That will happen in the next few years, according to data compiled by the McKinsey Global Institute. Companies on the cutting edge of AI could truly reap a windfall.
Here are the top 5 AI stocks to buy before the Nasdaq soars to new heights.
1. Nvidia
No discussion of the potential of AI is complete without agreeing to the following: Nvidia (NASDAQ:NVDA). The graphics processing unit (GPU) maker is the gold standard for several AI use cases, including machine learning, cloud computing, and data centers, and its processors have quickly become the go-to for generative AI.The demand is far Competition is fierce, but NVIDIA's decades of experience and heavy spending on research and development keep rivals at bay.
For fiscal year 2024 (ending January 28), Nvidia's revenue and earnings per share (EPS) grew 126% and 586%, respectively. While no one expects triple-digit profits to last forever, demand is expected to remain strong. Additionally, while 34 times forward earnings may seem expensive, its growth shows why his Nvida is worth a premium.
2.Microsoft
microsoft (NASDAQ: MSFT) was also an early adopter of the generative AI opportunity. After years of toiling behind the scenes, he acquired a $13 billion stake in OpenAI, the creator of ChatGPT, and rolled out his Copilot suite of AI assistants. Copilot is deeply integrated into Microsoft's core products to streamline time-consuming tasks and increase employee productivity. According to a survey of early users, 77% of them said they didn't want to quit once they tried Copilot.
New versions are still being introduced. Although forecasts vary, some analysts believe Copilot could generate up to $100 billion in additional revenue annually, which would be a boon for the company. Additionally, Microsoft's Azure cloud is gaining market share, and its accelerated growth is driven by AI. At 35 times forward earnings, Microsoft sells at a premium compared to his 27 times earnings. S&P500But considering Microsoft's potential, this is quite reasonable.
3. Palantir Technologies
Palantir Technologies (NYSE:PLTR) has been in this space for over 20 years, providing AI-powered data analytics to governments and businesses alike. As AI exploded last year, the company tackled the challenge head-on, introducing its Artificial Intelligence Platform (AIP) to layer generative AI onto its already robust offering.
Palantir offers a “bootcamp” to help identify mission-critical problems that can be solved with AIP, but the demand was unexpected. The company planned for him to hold his 500 sessions in one year, but he achieved his goal in just four months. As a result, Palantir's U.S. commercial revenue increased 70% year-over-year and 12% quarter-over-quarter, making it the company's fastest-growing business, but it's just getting started. is.
Palantir's forward price-to-earnings (PEG) ratio is below 1x, the standard for undervalued stocks.
4. Super microcomputer
It's not just chips and software that are driving the AI revolution. Most AI processing occurs on servers in the cloud or data centers. super microcomputer (NASDAQ:SMCI)Enter Supermicro, also known as Supermicro. The company works closely with his Nvidia, Advanced Micro Devices, intel, and other companies develop cutting-edge servers that can withstand the rigors of AI processing. These tight collaborations make Supermicro servers optimized to be AI workhorses, with a focus on energy efficiency.
Demand is strong and the company is taking market share from competitors. In the second quarter of fiscal 2024 (ending December 31), sales increased 103% year-over-year and adjusted EPS increased 71%. However, despite impressive growth, Supermicro's selling price is less than three times his expected sales, making it a bargain given the opportunity.
5. Alphabet
alphabet (NASDAQ:Google) (NASDAQ:GOOG) has a long history of deploying AI to power its search and digital advertising businesses. The company quickly introduced generative AI capabilities into its core Google and Android products. Additionally, the company is well-positioned to offer generative AI models to its cloud customers through Google Cloud, the world's third-largest cloud infrastructure provider.
One of the company's biggest opportunities is Gemini, which the company describes as its “largest and most capable AI model.” Additionally, Google's Vertex AI platform provides 130 base models that allow users to build and deploy generative AI apps without reinventing the wheel.
Recent advances in AI are likely to help Google's digital advertising business recover, and with a P/E ratio of less than 27 times, Alphabet stock is a steal.
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Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. Danny Vena has worked at Alphabet, Microsoft, Nvidia, Palantir Technologies, and Super Micro Computer. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Microsoft, Nvidia, and Palantir Technologies. The Motley Fool recommends Intel and recommends the following options: Long January 2025 $45 Calls on Intel, Long January 2026 $395 Calls on Microsoft, Short January 2026 $405 Calls on Microsoft, and $47 May 2024 Calls on Intel. It's a short call. The Motley Fool has a disclosure policy.
“History says the Nasdaq will continue to soar in 2024: My Top 5 Artificial Intelligence (AI) Growth Stocks to Buy Before the Rise Continues” was originally published by The Motley Fool.
