The Nasdaq’s Resilient Rally
The Nasdaq Composite has sprung back to life, rebounding from a remarkable 2023 rally. Soaring by an impressive 43.4%, it marked its most outstanding performance since 2020. Despite a slight hiccup in January, the index closed the initial month of 2024 on a positive note with a modest 1% increase. Nonetheless, the tech-heavy index regained its footing in February, concluding the month with a robust 6.1% rally. Year to date, the Nasdaq Composite boasts a 9% gain, surpassing the S&P 500’s 7.5% rise and the Dow’s increase of 3.4%. Notably, all three major stock indexes have now witnessed four consecutive months of positive closure.
The Emergence of Generative AI
The tech surge in 2023 was spearheaded by a monumental push towards AI, particularly generative AI. While some pundits caution against AI hype and the looming possibility of a bubble, there is a compelling belief that the AI landscape is poised to unfurl both in the U.S. and international markets. This unfolding scenario presents vast business prospects for technology firms striving to develop cutting-edge products.
The solid fundamentals of the U.S. economy serve to allay fears of an imminent recession. Furthermore, the stellar earnings performance in the recent quarter by NVIDIA Corp., the foremost global producer of generative AI chipsets, along with optimistic guidance from its management, have heightened investor expectations regarding robust AI market growth in the forthcoming decade.
Meanwhile, Taiwanese chipmaker Taiwan Semiconductor Manufacturing Co Ltd. (TSM), the world’s largest contract chipmaker, has forecasted over 20% revenue growth in 2024, driven by soaring demand for high-end chips essential for AI applications, amidst a backdrop of weakened smartphone and electric vehicle sales across the broader industry.
The Role of Smart Devices in Catalyzing Computing Demand
Smart devices rely on computing and learning capabilities for tasks such as face detection, image recognition, and video analytics. These functions necessitate high processing power, speed, memory, low power usage, and advanced graphic processors and solutions, all of which augur well for the semiconductor sector.
The World Semiconductor Trade Statistics (“WSTS”) anticipates robust growth in 2024, with a projected annual surge of 13.1%. Globally, semiconductor sales are estimated to hit $588.4 billion in 2024. Moreover, the technology research and advisory firm IDC foresees a 20.2% year-over-year increase in semiconductor sales in 2024, fueled by demand from AI servers and end-point device manufacturers. Additionally, Grand View Research forecasts an astounding 820% growth in annual spending across AI hardware, software, and services from $197 billion in 2023 to $1.8 trillion in 2030, translating to a 37% yearly growth rate over the period.
Premium Picks for Investors
We have meticulously curated a list of five Nasdaq Composite-listed technology juggernauts – NVIDIA, Amazon.com Inc., Meta Platforms Inc., Microsoft Corp., and Super Micro Computer Inc. – all carrying substantial AI exposure. These stocks exhibit promising growth prospects for 2024 and have witnessed positive earnings estimate revisions in the past month.
Furthermore, each of these picks boasts a long-term (3-5 years) earnings growth rate well above the S&P 500’s current long-term growth rate of 11.6%. Notably, each of our selections holds either a Zacks Rank #1 (Strong Buy) or 2 (Buy).
The chart below illustrates the year-to-date performance of our top five selections:
Image Source: Zacks Investment Research
NVIDIA reported a stellar fourth-quarter fiscal 2024 performance. The company’s robust outcomes in the latest quarter corroborate this trend. With quarterly adjusted earnings of $5.16 per share exceeding the Zacks Consensus Estimate of $4.55 and the year-ago earnings of $0.88, NVIDIA recorded revenues of $22.1 billion for the quarter, surpassing the Zacks Consensus Estimate by 3%.
Zacks Rank #1 NVIDIA is anticipated to achieve a revenue and earnings growth rate of 68.1% and 79.2%, respectively, for the current year (ending January 2025). It boasts a long-term earnings growth rate of 29.7% with the Zacks Consensus Estimate for current-year earnings having improved by 4.1% over the past seven days.
Amazon.com has reaped the benefits of Prime and AWS momentum. The company’s strengthening AWS services portfolio, growing adoption rate, ultrafast delivery services, and expanding content offerings have all contributed to its resilience. AMZN’s solid advertising business, robust global presence, and focus on generative AI bode well for its future growth.
Zacks Rank #1 Amazon anticipates a revenue and earnings growth rate of 11.5% and 40%, respectively, for the current year. It has a long-term earnings growth rate of 28.1% with the Zacks Consensus Estimate for current-year earnings having improved by 0.7% over the past seven days.
Meta Platforms is riding high on steady user growth across all regions, notably in Asia Pacific. Increased engagement for its flagship offerings like Instagram, WhatsApp, Messenger, and Facebook, alongside leveraging AI to enhance user experience, positions META robustly in the market.
Unveiling Growth Stories: META Platforms, Microsoft, and Super Micro Computer
Meta Platforms Soars with Innovative Portfolio
Meta Platforms, with its array of cutting-edge assets like Threads, Reels, Llama 2, Ray-Ban Meta smart glass, and Quest 3, is dominating the tech landscape. The viral success of Reels on Instagram and Facebook is reminiscent of a wildfire, spreading rapidly with 3.5 billion daily reshared Reels during the fourth quarter.
The fourth-quarter 2023 earnings report for Meta Platforms exceeded expectations, with a remarkable $5.33 per share. This impressive performance marked a significant jump from the year-ago quarter’s $1.76 per share. The company’s revenues also displayed strength, amounting to $40.11 billion, beating estimates and soaring 24.7% year over year. Looking ahead, META anticipates total revenues to range between $34.5 billion and $37 billion for the first quarter of 2024.
Microsoft’s Meteoric Rise
The giants of tech landscape, Microsoft, have seen a surge in Intelligent Cloud and Productivity and Business Processes revenues. Microsoft 365 Consumer subscribers have reached a whopping 78.4 million, signalling a robust growth trajectory. The enterprise’s Intelligent Cloud revenues have been bolstered by the success of Azure and other cloud services, with Azure AI catering to a vast client base of over 53,000 customers.
Super Micro Computer’s Remarkable Journey
Super Micro Computer, the mastermind behind energy-efficient server solutions, has made waves in the industry. With a focus on superior product design and uncompromising quality control, Super Micro Computer’s Server Building Block Solutions have revolutionized various sectors including data centers, high-performance computing, and storage networks.
Forecasting tremendous growth for the current year, Super Micro Computer boasts an expected revenue and earnings growth rate of over 100% and 83.8%, respectively. The company’s commitment to excellence is underscored by its long-term earnings growth rate of 55.8%.
