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5 Tech Giants to Buy for Long-Term Gains as Nasdaq Thrives
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The Nasdaq Composite is back in action after an astonishing rally in 2023. The tech-heavy index soared 43.4%, recording its best year since 2020. The index’s smooth rally suffered a small hurdle in January, although finally, it closed the first month of 2024 on a positive note with a mere 1% gain.
However, the tech-laden index regained momentum in February finishing the month with a 6.1% rally. Year to date, the Nasdaq Composite is up 9% compared with a 7.5% gain of the S&P 500 and 3.4% of the Dow. Notably, all three major stock indexes saw the fourth consecutive month of positive ending.
Meanwhile, on Feb 29, the Nasdaq Composite rose 0.9% to close at 16,091.92, marking its first closing record since November 2021. Its peers the Dow and the S&P 500 posted several all-time highs on both an intraday and a closing basis in the first two months of this year. Now, the tech-heavy index has joined the bandwagon.
Explosion of Generative AI
The tech rally in 2023 was led by a massive thrust toward AI, especially generative AI. Some financial and technology experts believe that AI is much-hyped and may lead to a bubble. We believe that the AI-space is yet to unfold in the U.S. and international markets. Once that happens, it will generate huge business opportunities for technology companies to produce high-end products.
Moreover, the robust fundamentals of the U.S. economy reduce concerns of a near-term recession. Additionally, the blockbuster earnings in the last reported quarter of NVIDIA Corp. (NVDA - Free Report) — the largest global manufacturer of generative AI chipsets — along with a solid outlook provided by management, raised expectations of investors that the market for AI will show strong growth in the coming decade.
Taiwanese chipmaker Taiwan Semiconductor Manufacturing Co Ltd. (TSM) — the world's largest contract chipmaker — has projected more than 20% revenue growth in 2024 on booming demand for high-end chips used in AI applications even as the broader industry faces weak smartphone and electric vehicle sales.
Smart Devices Aiding Computing Demand
Smart devices need computing and learning capabilities to perform face detection, image recognition and video analytics capabilities. These require high processing power, speed and memory, low power consumption, and better graphic processors and solutions, which bode well for the semiconductor industry.
The World Semiconductor Trade Statistics (“WSTS”) projects robust growth in 2024, with an estimated surge of 13.1% annually. As estimated by WSTS, global semiconductor sales will reach $588.4 billion in 2024.
Technology research and advisory firm IDC predicts 20.2% year-over-year growth in semiconductor sales in 2024, driven by demand from AI servers and end-point device manufacturers.
Grand View Research estimates that annual spending across AI hardware, software, and services will see massive growth of 820%, from $197 billion in 2023 to $1.8 trillion in 2030, implying an annual growth rate of 37% over that time period.
Our Top Picks
We have narrowed our search to five Nasdaq Composite-listed technology behemoths namely NVIDIA, Amazon.com Inc. (AMZN - Free Report) , Meta Platforms Inc. (META - Free Report) , Microsoft Corp. (MSFT - Free Report) and Super Micro Computer Inc. (SMCI - Free Report) , with solid exposure to AI. These stocks have strong growth potential for 2024 and have seen positive earnings estimate revisions in the last 30 days.
Moreover, each stock’s long-term (3-5 years) earnings growth rate is well above the market’s benchmark S&P 500’s current long-term growth rate of 11.6%. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
NVIDIA reported blockbuster fourth-quarter fiscal 2024 earnings. The strong results of NVIDIA in the recently reported quarter confirm this trend. Quarterly adjusted earnings of $5.16 per share, surpassed the Zacks Consensus Estimate of $4.55 and exceeded the year-ago period earnings of $0.88.
NVIDIA posted revenues of $22.1 billion for the quarter, outpacing the Zacks Consensus Estimate by 3%. This compares favorably with the year-ago revenues of $6.1 billion. NVIDIA reported these robust financial numbers despite a stiff decline in its business in the key market of China. The U.S. government has banned exports of high-end AI-based NVIDIA chips in China for security reasons.
What is most important is the guidance issued by management. Even after executing this tremendous success, management provided a rosy revenue guidance of $24 billion for the current quarter, implying an appreciation of 233.8% year over year.
Zacks Rank #1 NVIDIA has an expected revenue and earnings growth rate of 68.1% and 79.2%, respectively, for the current year (ending January 2025). It has a long-term earnings growth rate of 29.7%. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the last seven days.
Amazon.com has benefited from the Prime and AWS’s momentum. The strengthening AWS services portfolio and its growing adoption rate contributed to the performance of AMZN. Ultrafast delivery services and an expanding content portfolio have been beneficial. Strengthening relationships with third-party sellers also favored the company. AMZN’s robust advertising business contributed as well.
Notably, improving Alexa skills along with robust smart home product offerings continue to act as a tailwind. AMZN’s strong global presence and solid momentum among small and medium businesses remain positives. Growing capabilities in grocery, pharmacy, healthcare and autonomous driving are the other catalysts. Also, its deepening focus on generative AI is a major plus.
Zacks Rank #1 Amazon has an expected 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%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last seven days.
Meta Platforms is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its offerings like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. META is leveraging AI to recommend Reels content, which is driving traffic on Instagram and Facebook.
META’s innovative portfolio, which includes Threads, Reels, Llama 2, Ray-Ban Meta smart glass, and mixed reality device Quest 3 is likely to aid its growth. Reels continued to do very well across both Instagram and Facebook driven by growing adoption. People reshared Reels 3.5 billion times every day during the fourth-quarter.
Meta Platforms reported fourth-quarter 2023 earnings of $5.33 per share, beating the Zacks Consensus Estimate by 10.35%. The company reported earnings of $1.76 per share in the year-ago quarter. Revenues of $40.11 billion beat the Zacks Consensus Estimate by 2.87% and jumped 24.7% year over year. META expects total revenues between $34.5 billion and $37 billion for the first quarter of 2024.
Zacks Rank #1 Meta Platforms has an expected revenue and earnings growth rate of 17.7% and 34.1%, respectively, for the current year. It has a long-term earnings growth rate of 19.5%. The Zacks Consensus Estimate for current-year earnings has improved 13% over the last 30 days.
Microsoft has gained from strong Intelligent Cloud and Productivity and Business Processes revenues. Productivity and Business Processes revenues of MSFT were driven by the strong adoption of Office 365 Commercial solutions.
Microsoft 365 Consumer subscribers grew to 78.4 million. Continued momentum in the small and medium businesses, frontline worker offerings and a gain in revenue per user drove the top line. Intelligent Cloud revenues of MSFT were driven by growth in Azure and other cloud services. Solid adoption of Azure AI, which has a clientele of more than 53,000 customers holds promise.
Zacks Rank #2 Microsoft has an expected revenue and earnings growth rate of 15% and 18.6%, respectively, for the current year (ending June 2024). It has a long-term earnings growth rate of 16.2%. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the last 30 days.
Super Micro Computer designs, develops, manufactures and sells energy-efficient, application-optimized server solutions based on the x86 architecture. SMCI’s solutions include a range of rack mount and blade server systems, as well as components. SMCI emphasizes superior product design and uncompromising quality control to produce industry-leading serverboards, chassis and server systems.
These Server Building Block Solutions provide benefits across many environments, including data center deployment, high-performance computing, high-end workstations, storage networks and standalone server installations. SMCI sells its server systems and components primarily through distributors, which include value-added resellers and system integrators, and to a lesser extent, to original equipment manufacturers.
Zacks Rank #1 Super Micro Computer has an expected revenue and earnings growth rate of more than 100% and 83.8%, respectively, for the current year (ending June 2024). It has a long-term earnings growth rate of 55.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days.
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5 Tech Giants to Buy for Long-Term Gains as Nasdaq Thrives
The Nasdaq Composite is back in action after an astonishing rally in 2023. The tech-heavy index soared 43.4%, recording its best year since 2020. The index’s smooth rally suffered a small hurdle in January, although finally, it closed the first month of 2024 on a positive note with a mere 1% gain.
However, the tech-laden index regained momentum in February finishing the month with a 6.1% rally. Year to date, the Nasdaq Composite is up 9% compared with a 7.5% gain of the S&P 500 and 3.4% of the Dow. Notably, all three major stock indexes saw the fourth consecutive month of positive ending.
Meanwhile, on Feb 29, the Nasdaq Composite rose 0.9% to close at 16,091.92, marking its first closing record since November 2021. Its peers the Dow and the S&P 500 posted several all-time highs on both an intraday and a closing basis in the first two months of this year. Now, the tech-heavy index has joined the bandwagon.
Explosion of Generative AI
The tech rally in 2023 was led by a massive thrust toward AI, especially generative AI. Some financial and technology experts believe that AI is much-hyped and may lead to a bubble. We believe that the AI-space is yet to unfold in the U.S. and international markets. Once that happens, it will generate huge business opportunities for technology companies to produce high-end products.
Moreover, the robust fundamentals of the U.S. economy reduce concerns of a near-term recession. Additionally, the blockbuster earnings in the last reported quarter of NVIDIA Corp. (NVDA - Free Report) — the largest global manufacturer of generative AI chipsets — along with a solid outlook provided by management, raised expectations of investors that the market for AI will show strong growth in the coming decade.
Taiwanese chipmaker Taiwan Semiconductor Manufacturing Co Ltd. (TSM) — the world's largest contract chipmaker — has projected more than 20% revenue growth in 2024 on booming demand for high-end chips used in AI applications even as the broader industry faces weak smartphone and electric vehicle sales.
Smart Devices Aiding Computing Demand
Smart devices need computing and learning capabilities to perform face detection, image recognition and video analytics capabilities. These require high processing power, speed and memory, low power consumption, and better graphic processors and solutions, which bode well for the semiconductor industry.
The World Semiconductor Trade Statistics (“WSTS”) projects robust growth in 2024, with an estimated surge of 13.1% annually. As estimated by WSTS, global semiconductor sales will reach $588.4 billion in 2024.
Technology research and advisory firm IDC predicts 20.2% year-over-year growth in semiconductor sales in 2024, driven by demand from AI servers and end-point device manufacturers.
Grand View Research estimates that annual spending across AI hardware, software, and services will see massive growth of 820%, from $197 billion in 2023 to $1.8 trillion in 2030, implying an annual growth rate of 37% over that time period.
Our Top Picks
We have narrowed our search to five Nasdaq Composite-listed technology behemoths namely NVIDIA, Amazon.com Inc. (AMZN - Free Report) , Meta Platforms Inc. (META - Free Report) , Microsoft Corp. (MSFT - Free Report) and Super Micro Computer Inc. (SMCI - Free Report) , with solid exposure to AI. These stocks have strong growth potential for 2024 and have seen positive earnings estimate revisions in the last 30 days.
Moreover, each stock’s long-term (3-5 years) earnings growth rate is well above the market’s benchmark S&P 500’s current long-term growth rate of 11.6%. Finally, each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The chart below shows the price performance of our five picks year to date.
Image Source: Zacks Investment Research
NVIDIA reported blockbuster fourth-quarter fiscal 2024 earnings. The strong results of NVIDIA in the recently reported quarter confirm this trend. Quarterly adjusted earnings of $5.16 per share, surpassed the Zacks Consensus Estimate of $4.55 and exceeded the year-ago period earnings of $0.88.
NVIDIA posted revenues of $22.1 billion for the quarter, outpacing the Zacks Consensus Estimate by 3%. This compares favorably with the year-ago revenues of $6.1 billion. NVIDIA reported these robust financial numbers despite a stiff decline in its business in the key market of China. The U.S. government has banned exports of high-end AI-based NVIDIA chips in China for security reasons.
What is most important is the guidance issued by management. Even after executing this tremendous success, management provided a rosy revenue guidance of $24 billion for the current quarter, implying an appreciation of 233.8% year over year.
Zacks Rank #1 NVIDIA has an expected revenue and earnings growth rate of 68.1% and 79.2%, respectively, for the current year (ending January 2025). It has a long-term earnings growth rate of 29.7%. The Zacks Consensus Estimate for current-year earnings has improved 4.1% over the last seven days.
Amazon.com has benefited from the Prime and AWS’s momentum. The strengthening AWS services portfolio and its growing adoption rate contributed to the performance of AMZN. Ultrafast delivery services and an expanding content portfolio have been beneficial. Strengthening relationships with third-party sellers also favored the company. AMZN’s robust advertising business contributed as well.
Notably, improving Alexa skills along with robust smart home product offerings continue to act as a tailwind. AMZN’s strong global presence and solid momentum among small and medium businesses remain positives. Growing capabilities in grocery, pharmacy, healthcare and autonomous driving are the other catalysts. Also, its deepening focus on generative AI is a major plus.
Zacks Rank #1 Amazon has an expected 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%. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last seven days.
Meta Platforms is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its offerings like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. META is leveraging AI to recommend Reels content, which is driving traffic on Instagram and Facebook.
META’s innovative portfolio, which includes Threads, Reels, Llama 2, Ray-Ban Meta smart glass, and mixed reality device Quest 3 is likely to aid its growth. Reels continued to do very well across both Instagram and Facebook driven by growing adoption. People reshared Reels 3.5 billion times every day during the fourth-quarter.
Meta Platforms reported fourth-quarter 2023 earnings of $5.33 per share, beating the Zacks Consensus Estimate by 10.35%. The company reported earnings of $1.76 per share in the year-ago quarter. Revenues of $40.11 billion beat the Zacks Consensus Estimate by 2.87% and jumped 24.7% year over year. META expects total revenues between $34.5 billion and $37 billion for the first quarter of 2024.
Zacks Rank #1 Meta Platforms has an expected revenue and earnings growth rate of 17.7% and 34.1%, respectively, for the current year. It has a long-term earnings growth rate of 19.5%. The Zacks Consensus Estimate for current-year earnings has improved 13% over the last 30 days.
Microsoft has gained from strong Intelligent Cloud and Productivity and Business Processes revenues. Productivity and Business Processes revenues of MSFT were driven by the strong adoption of Office 365 Commercial solutions.
Microsoft 365 Consumer subscribers grew to 78.4 million. Continued momentum in the small and medium businesses, frontline worker offerings and a gain in revenue per user drove the top line. Intelligent Cloud revenues of MSFT were driven by growth in Azure and other cloud services. Solid adoption of Azure AI, which has a clientele of more than 53,000 customers holds promise.
Zacks Rank #2 Microsoft has an expected revenue and earnings growth rate of 15% and 18.6%, respectively, for the current year (ending June 2024). It has a long-term earnings growth rate of 16.2%. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the last 30 days.
Super Micro Computer designs, develops, manufactures and sells energy-efficient, application-optimized server solutions based on the x86 architecture. SMCI’s solutions include a range of rack mount and blade server systems, as well as components. SMCI emphasizes superior product design and uncompromising quality control to produce industry-leading serverboards, chassis and server systems.
These Server Building Block Solutions provide benefits across many environments, including data center deployment, high-performance computing, high-end workstations, storage networks and standalone server installations. SMCI sells its server systems and components primarily through distributors, which include value-added resellers and system integrators, and to a lesser extent, to original equipment manufacturers.
Zacks Rank #1 Super Micro Computer has an expected revenue and earnings growth rate of more than 100% and 83.8%, respectively, for the current year (ending June 2024). It has a long-term earnings growth rate of 55.8%. The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last seven days.