The Nasdaq Composite recorded its first closing record on Thursday since November 2021. The tech-heavy Nasdaq jumped 0.90% to close at an all-time high at 16,091.92, as tech stocks and chips rallied on Feb 29, 2024.

Notably, the rapid penetration of digitization during the lockdown, ushered in significant adoption of artificial intelligence (AI). The technology sector accounts for more than 55% of the Nasdaq index. Consumer Discretionary comes second with about 18% exposure.

Investors should note that the Nasdaq overcame the downturn of the bear market to climb by 43% last year. And historical data offers a great picture for 2024 as well. Looking back to 1972, the year after a market rebound, the Nasdaq has historically seen an average increase of 19%, indicating that the current market upswing could continue.

The performance varied significantly, from a modest rise of 7% in 1986 to a considerable surge of 38% in 2013. With the economy showing signs of improvement, the conditions seem favorable for continued market growth, per Motley Fool, as quoted on Yahoo Finance.

Inside Nasdaq’s Potential Rally

Fed Rate Cuts Likely in Late 2024

We believe that one of the key reasons behind the Nasdaq’s recent surge was speculation about Fed rate cuts. Cleveland Fed president Loretta Mester said on Thursday that the latest reading on inflation (i.e., a month-over-month jump in the Fed’s preferred inflation gauge) doesn’t change her calculation for three rate cuts later in 2024. She is still predicting three cuts in 2024, an estimate she first made in December.

AI Euphoria

The Nasdaq’s climb to a record arrives with the huge enthusiasm over artificial intelligence. The “Magnificent 7,” which includes Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia and Tesla, have led the Nasdaq’s recovery from a tumultuous 2022 that was marred by rising interest rates and recession fears. Notably, Microsoft has emerged as a leader in the AI landscape. And the likes of Alphabet, Meta and Amazon have joined the spree. Nvidia is another company that is a key beneficiary of AI enthusiasm.

Beyond AI: PC Market Regaining Its Mojo

Even though Artificial Intelligence (AI) grabs most of the headlines, Microsoft has more tricks up its sleeve. The company faced a rough patch when the demand for personal computers (PCs) went down, affecting a big chunk of its income. However, things are looking up now. The PC market is getting back on its feet, with Microsoft's related sales jumping 19% from last year. This is the biggest growth spurt in almost three years. As the PC market continues to recover, it's expected to keep boosting Microsoft's financial health.

Resilient Consumers

Moreover, a resilient consumer base has boosted the consumer stocks too in 2023, helping to send the index to a great height. We expect the index to log gains even in 2024, although the quantum of gains will likely be less than this year.

Biotech Stocks to Rebound in 2024?

The Nasdaq has solid exposure to the biotech space. Biotech stocks have staged a rebound lately and are being lifted by M&A activities. Novel drug launches, likely low rates and easy access to funds should buoy the zone in 2024.

ETFs in Focus

Against this backdrop, below we highlight a few Nasdaq ETFs like Invesco QQQ (QQQ Quick QuoteQQQ - Free Report) , Invesco NASDAQ 100 ETF (QQQM Quick QuoteQQQM - Free Report) , First Trust NASDAQ-100 Equal Weighted Index Fund (QQEW Quick QuoteQQEW - Free Report) , Invesco NASDAQ Next Gen 100 ETF (QQQJ Quick QuoteQQQJ - Free Report) and Direxion NASDAQ-100 Equal Weighted Index Shares (QQQE Quick QuoteQQQE - Free Report) .