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Investing in stocks can be difficult because the past performance of the market is not necessarily indicative of what will happen in the future. However, knowledge is power, and being aware of past trends and patterns helps ensure you are ready to strike if history decides to repeat itself. As a result, it only helps investors see what history suggests. Nasdaq Composite There is a possibility that the number will increase rapidly in 2024.
Since its launch in 1971, the index has risen an average of 19% each year following market recoveries of the magnitude seen in 2023. So it’s not a bad idea to consider investing in companies that support a large portion of their share price. Growth of the Nasdaq Composite.
Last year’s boom in the artificial intelligence (AI) sector helped fuel the market’s recovery and is likely to continue driving strong gains in 2024. Nvidia (NVDA -0.95%) and microsoft (MSFT -0.23%) For investors looking to profit from the rise of the AI industry, these are two attractive options.
1. Nvidia
Even the most casual investor is probably aware of Nvidia’s meteoric rise over the last year. The company’s stock price soared 239% in 2023 as the company’s graphics processing units (GPUs) became the hardware gold standard for AI developers around the world. These high-performance parallel processing chips are essential for training and enriching AI models.
As interest in AI grew, so did the demand for GPUs, and Nvidia was in a position to supply hardware to a market where demand exceeded supply. The company achieved an estimated 90% market share with his AI chips, and despite competitors, revenue soared. Advanced Micro Devices and intel Desperate to keep up with the cutting edge of technology.
In its fiscal third quarter of 2024, which ended Oct. 29, Nvidia’s revenue increased 206% year-over-year, and its operating profit soared 1,600%. Data center revenue increased 279% due to a surge in AI GPU sales.
Competition in the AI chip space is expected to intensify this year with AMD, Intel, and more Amazon Bringing powerful new hardware to market. However, looking at trends in the chip field, it will be difficult to break Nvidia’s dominance.
Intel has long been the king of central processing units (CPUs), with an 82% market share in early 2017. It was then that AMD began making serious inroads into this niche market with the debut of his Ryzen CPU series. Since then, AMD has managed to take a significant share of the market away from Intel. However, Intel still holds more than 60% market share in CPUs, while AMD’s share is 35%. If this pattern is any indication of what’s to come with AI in the future, Nvidia could remain the leader with his GPUs for years.
Nvidia has a forward price-to-earnings ratio (P/E) of 49, making it look like an expensive stock at the moment. However, the company’s future earnings per share (EPS) estimates show why its stock remains a buy.
Data by YCharts.
Nvidia’s earnings could reach $24 per share by fiscal 2026. Multiplying this number by the company’s current forward P/E ratio of 49 yields a stock price of $1,176, with the stock expected to grow 96% over the next two fiscal years.
Certainly, that’s a lofty goal. Nvidia’s impressive business growth could slow in the coming years, and his P/E price target could be lowered in the process. However, this is based on reasonable financial projections. His Nvidia stock will be a great buy in 2024 if it is expected to approach these growth targets.
2.Microsoft
With a market capitalization of $2.9 trillion, Microsoft is the second most valuable company in the world and one of the biggest growth drivers of the Nasdaq Composite Index. Thanks to powerful products like Windows, Office, Azure, Xbox, and LinkedIn, the company has become a technology giant with the brand and financial strength to succeed in almost any field.
Microsoft stepped up its investment in ChatGPT developer OpenAI last year, emerging as one of the biggest companies in the AI space. The partnership between the two companies gives Microsoft exclusive access to some of the most advanced AI models, which the company has used to upgrade its entire product lineup.
Over the past year, elements of ChatGPT have been integrated into Microsoft’s search engine Bing, various new AI tools have been added to the cloud platform Azure, and various Office applications have improved productivity.
Excitement about Microsoft’s prospects in AI has seen the company’s stock rise 65% over the past 12 months and shows no signs of slowing down.
Data by YCharts.
As the chart above shows, Microsoft’s earnings are expected to reach $15 per share over the next two fiscal years. Using a similar calculation as we did for Nvidia and multiplying his EPS number by Microsoft’s current forward P/E ratio of 35, we get a stock price of $525. Again, we’re looking at bullish growth forecasts here, but Microsoft has a very good chance of achieving these lofty goals.
Based on current conditions, Microsoft’s stock price is expected to rise 33% over two years. Like Nvidia, Microsoft is definitely a buy this year and looks like an attractive way to invest in AI.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool’s board of directors. Dani Cook has no position in any stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: Long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
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