History says the Nasdaq will rise even higher in 2024: 2 innovative AI stocks to buy before it happens

The past isn’t exactly a crystal ball. But sometimes looking back can provide clues. maybe What will happen in the future. You can apply this to your investments by looking back at the past performance of an index and noticing patterns that may be repeated now or in the future.And if we do this now, history will change. Nasdaq Composite Let’s roar even more in 2024.

Since the index was established in the early 1970s, it has risen at least two years in a row as part of a recovery from annual declines. And for every year the Nasdaq fell more than 10%, it rose an average of 56% over those two years. Given that the Nasdaq index rose 43% last year, it could be headed for another double-digit gain in 2024 if the index follows past examples.

As an investor, how can you benefit from the Nasdaq’s meteoric rise? Invest in the companies that contribute the most to the index’s movement (such as the top 10 most weighted companies in the index) and currently offer exciting growth prospects Narrow your search to companies that do. We would like to introduce two companies that are leading the way in the artificial intelligence (AI) field, which is predicted to reach more than $1.3 trillion by 2030. Check out two innovative AI stocks to buy before the Nasdaq soars.

Image source: Getty Images.

1. Nvidia

Nvidia (NVDA 4.17%) The company started by conquering the gaming and graphics market thanks to its graphics processing units (GPUs), which led to increased profits over time. But in recent years, the world has discovered the power of his GPUs, and Nvidia’s sales and stock price have skyrocketed.

These powerful chips handle multiple tasks simultaneously by dividing the work among many processors, resulting in significantly faster processing speeds. This makes Nvidia’s GPUs an essential AI tool, serving as the engine for the “deep learning” involved in generative AI. As a result, industries ranging from healthcare to automotive are turning to his Nvidia chips to power their AI programs.

In the most recent quarter, Nvidia’s revenue soared to a record $18 billion, driven by record revenue in data centers, a business that benefits from the burgeoning AI market. Data center revenue increased 279% to more than $14 billion. Operating income of $10 billion significantly exceeds operating expenses, which is another positive. At the same time, the increase in R&D spending shows that Nvidia is investing to stay ahead of the competition.

The key metrics of free cash flow and return on invested capital have risen over the past year, proving that NVIDIA is using its cash wisely and reaping returns from those investments.

NVDA Return on Invested Capital Data by YCharts

Currently, Nvidia has over 80% of the GPU market, and although competitors are increasing, I am confident that this leader will continue to dominate. That’s because the company has a first-to-market advantage and the best product, and loyal fans of Nvidia’s GPU performance may not be tempted to switch.

Trends in the central processing unit (CPU) market demonstrate this. Advanced Micro Devices According to Statista, (AMD) increased its share of the laptop CPU market to 22% in 10 years, but was unable to take over the leadership position during that time. intel, accounting for 69% of the market. All this means that AMD, which is also present in the GPU market, may increase its share over time, but it will not necessarily interfere with Nvidia’s dominance.

Admittedly, NVIDIA’s stock price has soared recently, but given the company’s revenue growth, market leadership, and important role in AI, there’s plenty of room for upside. A growth-friendly stock market environment should also favor Nvidia, making it a top stock to buy before the Nasdaq soars.

2. Alphabet

alphabet (GOOG 2.06%) (Google 2.02%) Thanks to the popular search engine Google, it has become central to our daily lives. The company makes most of its revenue by selling ads to people who want our attention as we search for different types of information online. As you can imagine, Google dominates the search market, so advertisers flock to his Alphabet. The company has consistently held over 90% of his share, and we don’t expect that to change for two big reasons.

First, it’s hard to change your routine. That means most of us are likely to continue “Google” our questions rather than trying rival search engines. So the alphabet here has a moat, a competitive advantage.

Second, Alphabet is investing heavily in AI to increasingly improve its search capabilities. This should satisfy our users and as a result we will come back. That means advertisers will continue to come back to Alphabet.

The company recently unveiled Gemini, its largest and most capable AI model to date, announcing a major step forward along the AI ​​path. Gemini works with all kinds of information, from text to code, images, and videos. And three different sized Gemini models tackle a variety of tasks, including answering questions about complex topics and generating code in popular programming languages.

It’s clear that Gemini can improve the Google search experience and search results in the future, giving Alphabet an edge. Alphabet is also adding Gemini to other products, such as Pixel smartphones, and making Gemini available to cloud customers. Therefore, this AI tool could be transformative for Alphabet as it will improve the performance of the company’s products and services and allow cloud customers to benefit from the technology.

In addition to this, Alphabet already has a strong track record of long-term revenue growth. And the company managed to maintain quarterly revenue growth last year even as advertisers cut back on spending. In the latest quarter, Alphabet reported an 11% increase in sales and an increase in operating profit and earnings per share.

All of this means that if the Nasdaq soars in 2024, AI giant Alphabet could be one of the stocks leading the charge.