Technology stocks did well in 2023. This is evidenced by the impressive year-to-date increase of around 67%. Nasdaq 100 Technology Sector The good thing is that the sector continues to show positive signs this year.
The Nasdaq 100 Technology Sector Index is up about 7% so far in 2024, and history suggests it could end this year with even bigger gains. With the exception of 1999, the Nasdaq 100 index rose more than 40%, followed by an average gain of 24% in the following year, according to brokerage Capex.com.
Favorable factors such as a strong U.S. economy and falling inflation could see the Nasdaq repeat history in 2024 and move higher. That's why now is a good time for investors to buy these tech stocks. microsoft (MSFT -2.07%) and micron technology (MU 1.99%).
Not only are these two companies trading at attractive valuations, but they are also on track to take advantage of burgeoning opportunities in the cloud computing and semiconductor markets. Let's take a closer look at why Microsoft and Micron are worth buying now.
1.Microsoft
Microsoft stock currently trades at a price-to-earnings ratio of 36 times. This is slightly higher than the average price/earnings ratio of 33 times for the Nasdaq 100 Index, but Microsoft's forward earnings multiple of 31 times is roughly in line with the average for that index.
Acquiring Microsoft at this valuation seems like a smart move, considering the company's growing dominance in the cloud computing market. According to Synergy Research Group, Microsoft's Azure cloud controlled his 24% of the cloud infrastructure market in the fourth quarter of 2023, up 1 percentage point from the same period last year.
It is also worth noting that cloud infrastructure spending in Q4 2023 increased by 20% year-over-year, slightly higher than the 19% growth the market recorded for the entire year. Synergy Research notes that generative artificial intelligence (AI) was the main driver of the market's strong growth last quarter.
However, this is just the beginning of AI adoption in the cloud computing space. Mordor Intelligence estimates that the cloud AI market could be worth $67 billion in 2024, potentially accounting for a large portion of the overall cloud computing market, which was worth $270 billion last year. It shows that there is. However, by 2029, the cloud AI market is expected to generate a whopping $274 billion in annual revenue.
The good news for Microsoft investors is that the company is making good progress in this fast-growing niche. Last quarter, Azure cloud revenue increased 30% year-over-year. In comparison, the market leader company's growth rate was 13%. Amazon web service. AI helped boost Microsoft's cloud business growth by the equivalent of 6 points last quarter, closing the gap with the market leader.
As with other areas where Microsoft has long integrated AI, lucrative opportunities in the cloud computing market mean analysts expect the company's top and bottom line to receive a big boost in the long term. It explains why. Evercore, an independent investment banking firm, estimates that AI could add $82.5 billion to Microsoft's annual revenue and $5.10 per share by 2028.
This represents a major boost considering Microsoft is expected to have revenue of $244.3 billion and earnings per share of $11.66 for the current fiscal year. So investors would do well to buy this tech giant before it soars and becomes expensive, driven by the growing demand for AI applications across multiple industries.
2. Micron Technology
The memory market showed an upturn in 2023 after being in a slump for about two years. Dynamic random access memory (DRAM) chip prices fell from the end of 2021 to the end of 2023, decimating Micron's revenue and earnings in the process.
MU Revenue (Quarterly) Data by YCharts
The good news for Micron is that DRAM prices are expected to rise 10% to 15% in the first quarter of 2024. This is not surprising, as the price increase is driven by growth in multiple areas, from personal computers to smartphones to servers. Considering the growing adoption of AI in these areas.
For example, AI servers require more high-bandwidth memory chips as major chip manufacturers use this type of memory in their AI accelerators. Similarly, the advent of AI-enabled PCs and smartphones should further increase the demand for memory chips.All of this explains why gartner predicts that memory market revenue will increase 88% to $87 billion this year due to pricing and volume enhancements. Meanwhile, storage memory revenue is also expected to grow by almost 50% to $53 billion in 2024.
A recovery in the memory market is the reason Micron's revenue is expected to rise 46% this fiscal year to $22.7 billion, according to consensus forecasts. Analysts expect this momentum to continue in the coming years.
Next year's MU revenue forecast data by YCharts
Micron's stock price is currently 6.6x. This is lower than the Nasdaq 100's price-to-sales ratio of 7.3, suggesting investors are currently making good money on this semiconductor stock. That's because Micron's market capitalization indicates he could reach $212 billion if his sales were even six times his in a few fiscal years. That's nearly double its current market cap of about $107 billion, and why investors should consider buying this Nasdaq stock before it skyrockets.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Harsh Chauhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool endorses his Gartner and recommends the following options: His long January 2026 $395 call on Microsoft and his short January 2026 $405 call on Microsoft. The Motley Fool has a disclosure policy.
