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Tech Set to Roar in 2024 After an Astounding 2023: 5 Top Picks
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Buoyed by steadily deceasing inflation and a simultaneous reduction in the magnitude and number of interest rate hike by the Fed, the technology sector has witnessed an astonishing rally in 2023. The impressive northbound journey of Wall Street this year after a highly disappointing 2022, has been predominantly driven by tech rally.
Year to date, out of the 11 broad sectors of the market’s benchmark — the S&P 500 Index — the technology Select Sector SPDR (XLK) is the clear winner surging 48.2%. The Communication Select Sector SPDR (XLC) — a close resemblance to the XLK — has also advanced 43.6% in the same period.
Investors' growing belief that the Federal Reserve will halt rate hikes amid cooling inflation is turning attention to potential rate cuts in the upcoming year. According to CME’s FedWatch tool, traders are currently associating nearly 100% probability that the central bank will keep the benchmark lending rate unchanged at the range of 5.25-5.5% in the December FOMC meeting. Moreover, 62% respondents are expecting the first rate cut to be initiated in March 2024 FOMC meeting.
A low market rate of interest always boosts growth stocks like technology. At this stage, it will be prudent to invest in large-cap technology stocks with a favorable Zacks Rank.
Our Top Picks
We have narrowed our search to five technology behemoth (market capital > $50 billion) that have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
NVIDIA Corp. (NVDA - Free Report) is gaining from the strong growth of artificial intelligence, high-performance computing and accelerated computing, which is boosting its Compute & Networking revenues. The datacenter end-market business is likely to benefit from the growing demand for generative AI and large language models using GPUs based on NVIDIA Hopper and Ampere architectures.
A surge in Hyperscale demand and a solid uptake of AI-based smart cockpit infotainment solutions are acting as tailwinds for NVDA. Collaboration with Mercedes-Benz and Audi is likely to advance NVDA’s presence in the autonomous vehicles and other automotive electronics space.
NVIDIA has an expected revenue and earnings growth rate of 51.7% and 52.6%, respectively, for next year (ending January 2025). The Zacks Consensus Estimate for next-year earnings has improved 3.8% over the last 30 days.
Intel Corp. (INTC - Free Report) designs, develops, manufactures, markets, and sells computing and related products worldwide. INTC operates through the Client Computing Group, Data Center and AI, Network and Edge, Mobileye, Accelerated Computing Systems and Graphics, Intel Foundry Services, and Other segments.
INTC mainly offers platform products, such as central processing units and chipsets, system-on-chip and multichip packages, accelerators, boards and systems, connectivity products, and memory and storage products.
Intel has an expected revenue and earnings growth rate of 13.7% and 98.5%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 1.6% over the last 30 days.
Broadcom Inc. (AVGO - Free Report) has been benefiting from the strong deployment of generative AI by hyperscalers, service providers and enterprises. AVGO expects generative AI to contribute more than 25% of semiconductor revenues in fiscal 2024 compared with an estimated 15% in fiscal 2023 and roughly 10% in fiscal 2022.
Strong demand for Tomahawk 5, Jericho, 10-gigabit PON and DOCSIS 3.1 with embedded Wi-Fi 6 and 6E aids AVGO’s prospects. An expanding portfolio with the launch of the second-gen Wi-Fi 7 wireless connectivity chip is a catalyst. AVGO expects networking revenues to grow nearly 20% year over year in the fiscal third quarter.
Broadcom has an expected revenue and earnings growth rate of 7.2% and 8.6%, respectively, for next year (ending October 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.2% over the last 30 days.
ServiceNow Inc. (NOW - Free Report) has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. NOW’s expanding global presence, solid partner base and strategic buyouts are positives. New solutions — Automated Service Suggestions, Service Request Playbook and Workplace Scenario Planning — are helping NOW win new customers. An expanding portfolio with new generative AI solutions is expected to drive top-line growth for NOW.
ServiceNow has an expected revenue and earnings growth rate of 20.7% and 22.5%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.3% over the last 30 days.
Synopsys Inc. (SNPS - Free Report) is benefiting from strong design wins owing to a robust product portfolio. Growth in the hybrid working trend is driving demand for bandwidth. Strong traction for SNPS’ Fusion Compiler product boosted the top line. Growing demand for advanced technology, design, IP and security solutions is also creating solid prospects for SNPS.
Synopsys has an expected revenue and earnings growth rate of 13% and 14%, respectively, for the current year (ending October 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the last seven days.
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Tech Set to Roar in 2024 After an Astounding 2023: 5 Top Picks
Buoyed by steadily deceasing inflation and a simultaneous reduction in the magnitude and number of interest rate hike by the Fed, the technology sector has witnessed an astonishing rally in 2023. The impressive northbound journey of Wall Street this year after a highly disappointing 2022, has been predominantly driven by tech rally.
Year to date, out of the 11 broad sectors of the market’s benchmark — the S&P 500 Index — the technology Select Sector SPDR (XLK) is the clear winner surging 48.2%. The Communication Select Sector SPDR (XLC) — a close resemblance to the XLK — has also advanced 43.6% in the same period.
Investors' growing belief that the Federal Reserve will halt rate hikes amid cooling inflation is turning attention to potential rate cuts in the upcoming year. According to CME’s FedWatch tool, traders are currently associating nearly 100% probability that the central bank will keep the benchmark lending rate unchanged at the range of 5.25-5.5% in the December FOMC meeting. Moreover, 62% respondents are expecting the first rate cut to be initiated in March 2024 FOMC meeting.
A low market rate of interest always boosts growth stocks like technology. At this stage, it will be prudent to invest in large-cap technology stocks with a favorable Zacks Rank.
Our Top Picks
We have narrowed our search to five technology behemoth (market capital > $50 billion) that have strong potential for 2024. These stocks have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
NVIDIA Corp. (NVDA - Free Report) is gaining from the strong growth of artificial intelligence, high-performance computing and accelerated computing, which is boosting its Compute & Networking revenues. The datacenter end-market business is likely to benefit from the growing demand for generative AI and large language models using GPUs based on NVIDIA Hopper and Ampere architectures.
A surge in Hyperscale demand and a solid uptake of AI-based smart cockpit infotainment solutions are acting as tailwinds for NVDA. Collaboration with Mercedes-Benz and Audi is likely to advance NVDA’s presence in the autonomous vehicles and other automotive electronics space.
NVIDIA has an expected revenue and earnings growth rate of 51.7% and 52.6%, respectively, for next year (ending January 2025). The Zacks Consensus Estimate for next-year earnings has improved 3.8% over the last 30 days.
Intel Corp. (INTC - Free Report) designs, develops, manufactures, markets, and sells computing and related products worldwide. INTC operates through the Client Computing Group, Data Center and AI, Network and Edge, Mobileye, Accelerated Computing Systems and Graphics, Intel Foundry Services, and Other segments.
INTC mainly offers platform products, such as central processing units and chipsets, system-on-chip and multichip packages, accelerators, boards and systems, connectivity products, and memory and storage products.
Intel has an expected revenue and earnings growth rate of 13.7% and 98.5%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 1.6% over the last 30 days.
Broadcom Inc. (AVGO - Free Report) has been benefiting from the strong deployment of generative AI by hyperscalers, service providers and enterprises. AVGO expects generative AI to contribute more than 25% of semiconductor revenues in fiscal 2024 compared with an estimated 15% in fiscal 2023 and roughly 10% in fiscal 2022.
Strong demand for Tomahawk 5, Jericho, 10-gigabit PON and DOCSIS 3.1 with embedded Wi-Fi 6 and 6E aids AVGO’s prospects. An expanding portfolio with the launch of the second-gen Wi-Fi 7 wireless connectivity chip is a catalyst. AVGO expects networking revenues to grow nearly 20% year over year in the fiscal third quarter.
Broadcom has an expected revenue and earnings growth rate of 7.2% and 8.6%, respectively, for next year (ending October 2025). The Zacks Consensus Estimate for next-year earnings has improved 0.2% over the last 30 days.
ServiceNow Inc. (NOW - Free Report) has been benefiting from the rising adoption of its workflows by enterprises undergoing digital transformation. NOW’s expanding global presence, solid partner base and strategic buyouts are positives. New solutions — Automated Service Suggestions, Service Request Playbook and Workplace Scenario Planning — are helping NOW win new customers. An expanding portfolio with new generative AI solutions is expected to drive top-line growth for NOW.
ServiceNow has an expected revenue and earnings growth rate of 20.7% and 22.5%, respectively, for next year. The Zacks Consensus Estimate for next-year earnings has improved 0.3% over the last 30 days.
Synopsys Inc. (SNPS - Free Report) is benefiting from strong design wins owing to a robust product portfolio. Growth in the hybrid working trend is driving demand for bandwidth. Strong traction for SNPS’ Fusion Compiler product boosted the top line. Growing demand for advanced technology, design, IP and security solutions is also creating solid prospects for SNPS.
Synopsys has an expected revenue and earnings growth rate of 13% and 14%, respectively, for the current year (ending October 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.4% over the last seven days.