Investors have ridden an incredible recovery from the April 2 “Liberation Day” tariff surprises. Since the April 8 low, the Nasdaq Composite(NASDAQINDEX: ^IXIC) has appreciated an incredible 40%. And of course, that recovery has taken place amid a decade-long bull market in technology growth stocks.
It’s easy to understand why. Society is becoming more digital and automated. The last 10 years have seen the emergence of cloud computing, streaming video, digital advertising, the pandemic-era boom in electronic devices and work-from-home, all topped off by the introduction of generative artificial intelligence (AI) marked by the unveiling of ChatGPT in late 2022.
However, after a long tech bull market, technology growth stocks have reached a worrying valuation level relative to other stocks, and today’s relative overvaluation mirrors an infamous period in stock market history.
In several ways, technology stock performance and valuations are currently mirroring the extremes of the dot-com boom of the late 1990s. Unfortunately, we all know how that period ended, with a terrible “bust” that sent the Nasdaq tumbling three years in a row, eventually culminating in a 78% drawdown from the March 10, 2000, peak.
Technology innovation can be very exciting; however, that excitement often finds itself in the form of high valuations. According to data published on Charlie Bilello’s State of the Markets blog, the technology sector’s recent outperformance has now exceeded that of the height of the dot-com bubble:
Graph showing tech sector performance relative to S&P 500 since 1990.
The relative outperformance isn’t the only mirror to the dot-com era. Back then, tech stocks also became very large, leading to an outperformance of large stocks relative to small stocks. Similarly, tech stocks are often growth stocks with high multiples, reflecting enthusiasm over their future prospects. This is in contrast to value stocks, which trade at low multiples, usually due to their more modest growth prospects.
As you can see below, the outperformance of large stocks to small stocks, as well as growth stocks to value stocks, is at highs last seen during the dot-com boom.
Given that higher-valued tech stocks now make up a larger portion of the index, the Schiller price-to-earnings (P/E) ratio, which adjusts for cyclicality in earnings over 10 years, while not quite at the levels of 1999, has crept up to the highest level since 1999, roughly matching the level from 2021:
As we all know, 2022 was also a terrible year for tech stocks. While it didn’t see a multiyear crash akin to the dot-com bust, 2022 saw the Nasdaq decline 33.1% on the year. Of course, at the end of 2022, ChatGPT came out, somewhat saving the tech sector as the AI revolution kicked off.
Thus, when compared to history, tech stocks are at worrying levels. Given the similarities to the 1999 dot-com bubble and the 2021 pandemic bubble, some may think it’s time to panic and sell; however, there are also a few counter-narratives to consider.
The first is that, unlike in 1999, today’s technology giants are mostly truly diversified, cash-rich behemoths that account for a greater and greater percentage of today’s gross domestic product (GDP). While the late 1990s certainly had its leaders — including Microsoft(NASDAQ: MSFT), the only market leader that is in the same position today as then — they weren’t really anything like today’s tech giants, with robust cloud businesses, global scale, diversified income streams, and tremendous amounts of cash.
While market concentration in the top three weightings tends to occur before market downturns, index weighting concentration appears to be somewhat of a long-term trend now, increasing beyond prior highs in 1999 and 2008 since 2019.
Image source: Charlie Bilello State of the Markets blog.
Thus, it seems a higher weighting of the “Magnificent Seven” stocks could be a feature of today’s economy, rather than an aberration.
While it’s true that some of today’s large companies are overvalued, given their underlying strength and resilience, it’s perhaps not abnormal for them to garner higher-than-normal valuation multiples.
It’s important to know that while taking note of market levels is important, it is extremely difficult to time market downturns. Famed investor Peter Lynch once said, “Far more money has been lost by investors preparing for corrections, or trying to anticipate corrections, than has been lost in corrections themselves.”
So, one shouldn’t abandon one’s long-term investing plan just because overall market levels may be frothy. That being said, if you need a certain amount of cash in the next one to two years, it may be a good idea to keep that money in cash or Treasury bills until then, rather than the stock market.
Furthermore, if you have a regular, methodical investing plan, stick to it. But if you are consistently adding to your portfolio every month or quarter, you may want to look at small caps, non-tech sectors, and value stocks today, rather than adding to large technology companies.
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Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation, you’d have $649,657!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $1,090,993!*
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Billy Duberstein has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
The adoption of artificial intelligence (AI) is continuing at a brisk pace, but some are waiting for the other shoe to drop. A strengthening U.S. economy and robust quarterly results from several AI-related companies helped push the Nasdaq Composite to a new record high last week. Yet these same factors have some investors wondering if the bull market has gone too far, too fast.
Nvidia(NASDAQ: NVDA) has become the de facto standard bearer for the generative AI industry. The company is scheduled to report its fiscal 2025 third-quarter results in less than three weeks, and it’s not an exaggeration to suggest that Wall Street is on pins and needles waiting for the clues that report will offer about the state of AI adoption. Nvidia’s sales have surged since the start of last year, driving the stock up 833% (as of this writing). It’s also less than 5% off the all-time high it touched late last month.
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There’s a lot riding on Nvidia’s upcoming financial report, and many shareholders are wondering whether the stock can possibly continue its breathtaking run. Is it worth picking up shares ahead of its financial report on Nov. 20? Fortunately for investors, data has begun to pile up that could help answer that question.
Image source: Getty Images.
The key to Nvidia’s astounding successes of the past couple of years has been the performance of its graphics processing units (GPUs), which are the best chips for supplying the specific type of computational horsepower necessary for generative AI, as well as other types of cloud computing needs. The necessary resources and the sheer magnitude of data involved limit the top-tier AI models to the world’s largest technology companies and cloud providers — most of which are Nvidia customers. Comments made in conjunction with those tech giants’ recent quarterly results provide some insights about the state of the AI revolution — and the evidence is clear.
For example, Microsoft(NASDAQ: MSFT) said it spent heavily to advance its AI agenda in its fiscal 2025 first quarter (which ended Sept. 30). The company had capital expenditures (capex) of $20 billion, which primarily went to support “cloud and AI-related” demand. CFO Amy Hood expects Microsoft’s spending spree to continue: “We expect capital expenditures to increase on a sequential basis given our cloud and AI demand signals,” she said.
During Alphabet‘s (NASDAQ: GOOGL)(NASDAQ: GOOG) third-quarter earnings call, CEO Sundar Pichai said, “Realizing [the opportunity] of AI requires … meaningful capital investment.” The company revealed capex of $13 billion during the quarter and suggested there would be “substantial increases in capital investment … going into 2025.”
Rounding out the big three cloud providers is Amazon(NASDAQ: AMZN). During its Q3 earnings call, CEO Andy Jassy called generative a “maybe once-in-a-lifetime type of opportunity … we’re aggressively pursuing it.” CFO Brian Olsavsky put that in context, saying Amazon’s capex would amount to roughly $75 billion this year, with much of that going toward cloud computing and AI infrastructure. The company also said it would unveil “100 new cloud infrastructure and AI capabilities” at AWS re:Invent later this month.
Finally, there’s Meta Platforms(NASDAQ: META). While it isn’t a cloud provider, the company’s social media sites attract 3.29 billion people every day, giving Meta vast volumes of user data. The company increased its full-year capex outlook to roughly $39 billion, and CFO Susan Li said, “We continue to expect significant capital expenditures growth in 2025.” She previously noted this was “to support our AI research and product development efforts.”
The trend of accelerating capex to support the growing demand for AI is clear. Additionally, a large fraction of that money will be spent on the data centers and servers needed for cloud computing — where the majority of generative AI software lives. As such, Nvidia will likely be the recipient of a good deal of this spending.
Nvidia has historically kept mum about its biggest customers, but that hasn’t stopped Wall Street from doing some digging. Analysts with Bloomberg and Barclays Research have run the numbers and come to the conclusion that Nvidia’s four biggest customers — generating a total of 40% of its sales — are:
Microsoft: 15%
Meta Platforms: 13%
Amazon: 6.2%
Alphabet: 5.8%
Each of these companies has left no question about their plans to spend heavily on capital expenditures, and in particular to spend heavily on infrastructure to support their cloud computing and AI aspirations. As the leading provider of data center GPUs, Nvidia will likely continue to top the list of beneficiaries of that spending.
Nvidia will deliver its next set of quarterly results on Nov. 20. After achieving triple-digit-percentage year-over-year growth for five consecutive quarters, the company has tried to rein in the market’s expectations, suggesting that its revenue growth this time will only clock in at about 79%. While that would be a deceleration, it would also still be remarkable growth by any stretch of the imagination.
Investors looking to make money over the coming three weeks might be disappointed. No one can say for sure how Nvidia stock will react to the report — even if the company exceeds expectations.
For a reminder of the difficulties involved in short-term prognostication, investors need only look back to this summer, when, starting in mid-June, Nvidia stock lost as much as 27% of its value on fears that its next-generation Blackwell AI processors would be delayed — only to come roaring back. It was an illustration that with this stock, volatility is part of the cost of admission. That said, both the comments made by its big tech customers and their historical spending patterns suggest that Nvidia has further strong growth ahead.
For investors looking for stocks to hold for years and decades rather than weeks and months, Nvidia is a clear choice to benefit from the AI revolution. And trading at roughly 32 times next year’s earnings, it’s still attractively priced. I can’t say for sure what the stock will do between now and Nov. 20. What I can say — with a fair degree of confidence — is that investors who buy Nvidia stock soon and hold it for three to five years or more will be very glad they did.
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $829,746!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
Wall Street soared Friday on news that employers are still hiring in strong numbers, recovering from slumps caused by fears that escalating Middle East tensions could impact global energy supply.
DowJones Industrial Average: 42,352.75 ⬆️ up 0.81%
STOXX Europe 600: 518.56 ⬆️ up 0.44%
Hang Seng Index: 22,736.87 ⬆️ up 2.82%
Nikkei 225: 38,635.62 ⬆️ up 0.22%
Bitcoin: $62,336.70 ⬆️ up 2.62%
US: Wall Street gains on stellar jobs report US employers added 254,000 jobs in September, surpassing estimates and signaling continued economic strength. The S&P 500 closed up 0.90%, and the Dow neared its record, up 0.81%. Meanwhile, the tech-heavy Nasdaq climbed 1.22% with big gains for Nvidia, Broadcom Corp. and Advanced Micro Devices.
The news erased losses from earlier in the week, as S&P 500 finished with a 0.22% weekly gain, while the Dow added 0.09%, and the Nasdaq ticked up 0.1%.
Europe: US jobs report lifts markets abroad Europe markets were mixed in early trading but gained on the U.S. jobs report. The Stoxx Europe 600 closed up 0.44% and the U.K.’s FTSE made up for losses early in the day, hovering near its Thursday close.
China: Hong Kong rally resumes after holiday Hong Kong shares resumed their rally on the back of China’s stimulus measures, jumping 2.82% a day after traders took profits following a three-week rise of some 30%.
Japan: Markets end week near where they started The Nikkei 225 ended a yo-yo week with a slight 0.22% gain after new Prime Minister Shigeru Ishiba outlined his economic agenda, which includes above-inflation pay raises and assistance for low-income households.
EverBank has announced plans to acquire Sterling Bank for $261 million, through a stock purchase agreement. Jacksonville, Fla.-based EverBank is set to acquire Sterling’s 25 branches, $900 million in loans and $2 billion in annual deposits, and aims to expand its operations in San Francisco and other localities in California, an EverBank spokesperson told Bank […]
The stock market took a big slide Monday following a lackluster jobs report and growing fears of a recession in the next year. Jo Ling Kent breaks down what it all means.
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Genting Malaysia, a casino & hospitality giant, is still considering going public in New York. As a result, the company’s shares could potentially appear on the Nasdaq or New York Stock Exchange (NYSE).
The matter was once again discussed at the recent annual meeting where Tan Kong Han, the casino giant’s president and chief operating officer, said that Genting has not given up on listing in New York. The president pointed out that this move could potentially unlock value for the company and its shareholders.
Tan concluded that Genting will continue to consider this matter and evaluate the economic environment in the United States.
In any case, Genting is likely to tread lightly, considering the disastrous listing of its Empire Resorts brand. For context, the group had taken the brand public on the Nasdaq market. However, Empire Resorts failed to achieve the desired success and instead neared bankruptcy, forcing Genting to take it private once again.
Genting’s License Bid in NY Might Affect Its Decision
Genting is the parent company of the Resorts World brand, which has a significant presence in the United States’ land-based sector.
Speaking of Resorts World, the brand is currently a part of the race for the three downstate casino permits in New York. Should it grab one of the licenses, Resorts World would turn its local property, now offering only slots, into a full-fledged Vegas-style venue.
Genting promised that it could boost its taxes to $1 billion or more if allowed to turn its Queens property into a casino-hotel. In addition to this promise, Genting also promised to invest an additional $5 billion in Resorts World New York.
As one of the biggest competitors and a company with an existing presence in New York, Resorts World could well be among the winners, which could potentially affect Genting’s listing plans. The winners of the three licenses are expected to be announced in late 2025 or early 2026.
In the meantime, Genting recently confirmed that it would be interested in opening an integrated resort in the United Arab Emirates, should the country legalize gambling. This followed the creation of a UAE regulatory body that would be in charge of games of chance.
Genting isn’t the only casino giant interested in the prospects of gambling in the UAE, however, as Wynn Resorts is proceeding with its plans for Wynn Al Marjan Island.
NEW YORK — The Nasdaq Stock Market index is using AI to streamline its efforts to investigate suspicious trading and anti-money laundering. The New York-based exchange is using gen AI to identify behaviors like pump-and-dump or spoofing schemes in trading, Tony Sio, head of regulatory strategy and innovation at Nasdaq, said at this week’s AWS […]
The Dow closed above 40,000 points for the first time on Friday in a quiet day on Wall Street, with investors taking cheer in strong corporate profits and signs that inflation is cooling.
The Dow Jones Industrial Average, which was launched in 1896, tracks the stocks of 30 major “blue-chip” companies generally regarded as low-risk investments. The index’s listed companies include Apple, Intel and Microsoft among tech players, while the financial industry is represented by companies such as American Express, Goldman Sachs and JPMorgan Chase. Health care companies in the Dow include Amgen, Johnson & Johnson, Merck and UnitedHealth Group.
The Dow crossed the 30,000 point mark in November of 2020. Yet while the 128-year-old index is still widely followed, institutional investors generally focus on broader stock market barometers, such as the S&P 500 and tech-heavy Nasdaq.
The Dow added 134 points, up 0.3%, to close at a record high of 40,004. The S&P 500 index edged up 0.1% and the Nasdaq ended essentially flat. All three financial markets climbed to new heights this week after the Consumer Price Index rose at an annual rate of 3.4% in April, in line with analyst forecasts.
The Dow has risen nearly 20% over the last 12 months, while the S&P 500 has surged 27.5%.
Soft landing ahead?
Although inflation continues to run considerably hotter than the Federal Reserve’s 2% target, the latest CPI data suggests that prices around the U.S. are moderating after rising much faster than expected earlier this year. That is rekindling hopes the Federal Reserve could soon act to cut its benchmark interest rate, which would give a further lift to financial markets as well as lower borrowing costs for consumers and businesses.
With the U.S. economy seemingly on track for a soft landing, many traders expect the U.S. central bank to trim the federal funds rate — now at its highest level in more than two decades — twice this year. Yet analysts said the Fed will wait for more evidence that inflation is retreating before easing policy.
“Of course, the Fed will not wait for inflation to retreat to 2% to start cutting rates,” Bob Schwartz, senior economist with Oxford Economics, said in a note to investors. “By then it would probably be too late to prevent the economy from descending into a recession. But it is taking longer than usual for the Fed’s rate hikes in 2022 and 2023 to bring inflation under control, and it will take several months of benign inflation reports to instill confidence that the trend towards 2% is firmly in place.”
While major markets have continued levitating, so-called meme stocks are fizzling after soaring earlier in the week. Shares of GameStop, a money-losing video game retailer that has been embraced by retail investors, fell nearly 20% on Friday after the company said it expects to report a loss of $27 million to $37 million for the three months through May 4. It also said it could sell up to 45 million shares of stock in order to raise cash.
The stock had topped $64 on Tuesday after Keith Gill, a popular online trader known on social media as “Roaring Kitty,” resurfaced on X (formerly Twitter) after a three-year hiatus.
As the trading week came to a close, investors were feeling rather downbeat about the semiconductor industry. Many stocks in the sector had been flying high on the great promise of artificial intelligence (AI) boosting their results. However, some sour notes in recent earnings reports from major “chippies” — particularly in the guidance posted by sector king Taiwan Semiconductor Manufacturing(NYSE: TSM) — led to a fairly wide sell-off on Friday.
Taiwan Semi, which fell by over 3%, had plenty of company. Storage chip specialist Micron Technology(NASDAQ: MU) closed the day nearly 5% down, and analog chipmaker Texas Instruments(NASDAQ: TXN) slid by over 2%.
Uncomfortable news from Taiwan
What happens with Taiwan Semi reverberates throughout the chip sector, as the contract manufacturer is the 800-pound gorilla of the industry these days.
On Friday, investors were still digesting the Asian company’s first-quarter earnings release published on Thursday. While revenue rose at double-digit rates and headline net income zoomed almost 9% higher — both topping the consensus analyst estimates, by the way — the company’s guidance was a touch worrying.
Management pointed out that there is weakness in the formerly powerful global smartphone market, a dynamic that threatens to weaken future growth for the industry. Yes, AI is certain to be the rising tide that lifts all boats, but upside is limited if smartphones weigh down those watercraft.
Another not-so-positive development occurred with Super Micro Computer, a semiconductor industry supplier widely expected to be a major beneficiary of the AI revolution. The company has apparently elected not to preannounce its latest quarterly earnings release, which has been something of a habit for it lately. Market players are speculating this is because the figures won’t look so hot.
Given the trailing growth posted by many chip companies and the feverish adoption of AI, more than a few analysts are expecting improvements to Supermicro’s fundamentals when it publishes those fiscal second-quarter numbers.
Smartphones — not a shocker
The world is still in the grip of AI fever, so ultimately the technology will keep the growth engine running for the better semiconductor companies helping to power it.
Also, while smartphones remain go-to items for much of the world, it’s not surprising that they’re no longer sources of hot growth. Improvements to their functionalities tend to be incremental these days, and users are hanging on to models longer before upgrading. It’s not as if that segment is in any kind of free fall, or that this is a shocking development. This is likely one reason why that drop in semiconductor stocks Friday wasn’t more drastic.
Should you invest $1,000 in Taiwan Semiconductor Manufacturing right now?
Before you buy stock in Taiwan Semiconductor Manufacturing, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Taiwan Semiconductor Manufacturing wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you’d have $518,784!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. TheStock Advisorservice has more than quadrupled the return of S&P 500 since 2002*.
Eric Volkman has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Taiwan Semiconductor Manufacturing and Texas Instruments. The Motley Fool has a disclosure policy.
Raymond James Financial Services Advisors Inc. lowered its stake in shares of iShares Global Clean Energy ETF (NASDAQ:ICLN – Free Report) by 17.9% during the fourth quarter, according to its most recent Form 13F filing with the Securities and Exchange Commission (SEC). The institutional investor owned 344,386 shares of the company’s stock after selling 74,844 shares during the quarter. Raymond James Financial Services Advisors Inc. owned about 0.18% of iShares Global Clean Energy ETF worth $5,362,000 at the end of the most recent reporting period.
A number of other large investors have also added to or reduced their stakes in ICLN. Jane Street Group LLC grew its position in iShares Global Clean Energy ETF by 1,288.7% during the fourth quarter. Jane Street Group LLC now owns 7,738,327 shares of the company’s stock worth $153,606,000 after buying an additional 7,181,102 shares in the last quarter. Bank of America Corp DE boosted its holdings in shares of iShares Global Clean Energy ETF by 33.3% in the 1st quarter. Bank of America Corp DE now owns 12,815,450 shares of the company’s stock valued at $253,490,000 after purchasing an additional 3,204,286 shares in the last quarter. Franklin Resources Inc. boosted its holdings in shares of iShares Global Clean Energy ETF by 1,010.6% in the 1st quarter. Franklin Resources Inc. now owns 444,132 shares of the company’s stock valued at $8,785,000 after purchasing an additional 404,141 shares in the last quarter. Wellington Management Group LLP acquired a new stake in shares of iShares Global Clean Energy ETF in the 1st quarter valued at $7,449,000. Finally, Pathstone Family Office LLC acquired a new stake in shares of iShares Global Clean Energy ETF in the 3rd quarter valued at $3,754,000.
iShares Global Clean Energy ETF Stock Performance
Shares of ICLN stock opened at $13.82 on Friday. The stock’s fifty day moving average price is $13.96 and its two-hundred day moving average price is $14.16. The company has a market cap of $2.49 billion, a PE ratio of 35.10 and a beta of 1.09. iShares Global Clean Energy ETF has a fifty-two week low of $12.72 and a fifty-two week high of $19.99.
iShares Global Clean Energy ETF, formerly iShares S&P Global Clean Energy Index Fund (the Fund), is an exchange-traded fund. The Fund seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of the S&P Global Clean Energy Index. The S&P Global Clean Energy Index includes clean energy production companies, clean energy equipment and technology providers.
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The Nasdaq hit a new record high recently, and the good times may be far from over. History shows us that over the past 10 periods of annual market declines — dating back to the early 1970s — the index always has climbed for at least two consecutive years afterward. And on all but one occasion, the index posted a double-digit increase during its second year of gains. If this trend continues, the Nasdaq, heading for a 7.4% increase so far, is set to climb higher in 2024.
And the stocks that have led the gains and could continue leading the movement are artificial intelligence (AI) players. Investors are excited about this high-growth, high-potential technology. AI may make game-changing moves — like bringing lifesaving drugs to patients more quickly — and could save companies and individuals money and time as it completes tasks and solves problems.
That’s why right now is the perfect time to get in on potential AI powerhouses. Let’s check out two AI stocks to buy hand over fist before the Nasdaq soars higher.
Image source: Getty Images.
1. Amazon
Amazon(NASDAQ: AMZN) is benefiting from AI in two ways. The company uses AI across its e-commerce business to streamline operations and improve the customer experience. And Amazon sells AI solutions to customers through Amazon Web Services (AWS), its cloud computing business.
In e-commerce, Amazon’s AI will help you choose a product based on your buying history, and AI is helping the company choose the best delivery routes for packages. These and other AI efforts should keep customers coming back and boost Amazon’s profitability.
As for AWS, the service offers everything from chips for customers to train their own AI models to a fully managed service that allows customers to customize the most popular large language models (LLMs) to suit their needs. AWS customers can access the company’s own lower-cost chips, as well as the fastest, highest-performing chips and services from AI chip market leader Nvidia(NASDAQ: NVDA).
All of this could make Amazon one of the winners of a potential AI revolution. And Amazon already has a solid earnings track record — so the company has the resources to invest in this hot area and continue to grow. In the most recent quarter, Amazon’s net sales rose in the double digits, and operating income more than quadrupled to surpass $13 billion.
Today, the stock trades for 42x times forward earnings estimates, a fair price for an already solid business with top AI prospects.
2. Nvidia
Nvidia holds 80% of the AI chip market, and though it faces competitors in the space, it’s unlikely to lose its lead any time soon for two reasons. First, the company’s first-to-market advantage and brand strength should keep at least some customers loyal. Second, Nvidia is pouring investment into research and development to stay ahead.
Investors expect the launch of Nvidia’s H200 chip in the second quarter and then potentially the launch of the Blackwell architecture along with the B100 chip later in the year. These newer products are improvements on the company’s already fastest-on-the-market chip.
But Nvidia doesn’t only design chips. The company also offers a full portfolio of products and services for the AI client, including a software platform that serves as an “operating system” for AI. Nvidia products are offered on AWS, as mentioned, but also through all other major cloud providers. So it’s easy for customers to access Nvidia’s offerings directly through their cloud service.
Nvidia’s earnings have soared, but growth may be far from over considering the company’s market leadership — and likelihood of remaining on top. Today, Nvidia trades for 35x times forward earnings estimates, which seems reasonable for such a solid growth stock. That’s why Nvidia makes a no-brainer addition to any AI portfolio.
Should you invest $1,000 in Amazon right now?
Before you buy stock in Amazon, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Amazon wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Adria Cimino has positions in Amazon. The Motley Fool has positions in and recommends Amazon and Nvidia. The Motley Fool has a disclosure policy.
The tech-centric Nasdaq is closing at a new high, driven by enthusiasm for artificial intelligence. This milestone marks its first record peak since 2021.
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The macroeconomic challenges of the past couple of years are beginning to fade, and investors are looking to the future. After the Nasdaq Composite plunged in 2022, suffering its worst performance since 2008, the index enjoyed a robust recovery in 2023 and gained 43%.
There could be more to come. Since the Nasdaq Composite began trading in 1972, in every year following a market recovery, the tech-heavy index rose again — and those second-year gains averaged 19%. The economy is the wildcard here, though, and it could yet stumble in 2024. But historical patterns suggest that this could be a good year for investors.
Recent developments in the field of artificial intelligence (AI) helped fuel the market’s rise last year and will likely drive further gains in 2024. While estimates vary wildly, generative AI is expected to add between $2.6 trillion and $4.4 trillion to the global economy annually over the next few years, according to a study by McKinsey Global Institute. This will result in windfalls for many companies in the field.
Here are my top seven AI stocks to buy for 2024 before the Nasdaq reaches new heights.
Image source: Getty Images.
1. Nvidia
Nvidia(NASDAQ: NVDA) is the poster child for AI innovation. Its graphics processing units (GPUs) are already the industry standard chips in a growing number of AI use cases — including data centers, cloud computing, and machine learning — and it quickly adapted its processors for the needs of generative AI. Though it has been ramping up production, the AI chip shortage is expected to last until 2025 as demand keeps growing. The specter of competition looms, but thus far, Nvidia has stayed ahead of the competition by spending heavily on research and development.
The company’s triple-digit percentage year-over-year growth is expected to continue into 2024. Despite its prospects, Nvidia remains remarkably cheap, with a price/earnings-to-growth ratio (PEG ratio) of less than 1 — the standard for an undervalued stock.
2. Microsoft
Microsoft(NASDAQ: MSFT) helped jump-start the AI boom when it invested $13 billion in ChatGPT creator OpenAI, shining a spotlight on generative AI. The company’s tech peers jumped on the bandwagon, and the AI gold rush began. Microsoft seized the advantage, integrating OpenAI’s technology into its Bing search and a broad cross-section of its cloud-based offerings.
Its productivity-enhancing AI assistant, Copilot, could generate as much as $100 billion in incremental revenue by 2027, according to some analysts, though estimates vary. This and other AI tools already caused Azure Cloud’s growth to outpace rivals in Q3, and Microsoft attributed 3 percentage points of that growth to AI.
The stock is selling for 35 times forward earnings, a slight premium to the price-to-earnings ratio of 26 for the S&P 500. Even so, that looks attractive given Microsoft’s growth potential.
3. Alphabet
Alphabet(NASDAQ: GOOGL)(NASDAQ: GOOG) has long used AI to improve its search results and the relevance of its digital advertising. The company was quick to recognize the potential of generative AI, imbuing many of its Google and Android products with increased functionality and announcing plans to add new AI tools to its search product. Furthermore, as the world’s third-largest cloud infrastructure provider, Google Cloud is suited to offer AI systems to its customers.
A collaboration between Google and Alphabet’s AI research lab, DeepMind, gave birth to Gemini, which the company bills as its “largest and most capable AI model.” Google Cloud’s Vertex AI offers 130 foundational models that help users build and deploy generative AI apps quickly.
Add to that the ongoing rebound in its digital advertising business, and Alphabet’s valuation of 27 times earnings seems like a steal.
4. Amazon
There’s a popular narrative that Amazon(NASDAQ: AMZN) was late to recognize the opportunities in AI, but the company’s history tells a different story. Amazon continues to deploy AI to surface relevant products to shoppers, recommend viewing choices on Prime Video, schedule e-commerce deliveries, and predict inventory levels, among other uses. Most recently, Amazon began testing an AI tool designed to answer shoppers’ questions about products.
Amazon Web Services (AWS) stocks all the most popular generative AI models for its cloud customers on Bedrock AI, and is also deploying its Inferentia and Trainium purpose-built AI chips for accelerating AI on its infrastructure.
Now that inflation has slowed markedly, more consumers and businesses are patronizing Amazon, and AI will help boost its fortunes.
Image source: Getty Images.
5. Meta Platforms
Meta Platforms(NASDAQ: META) also has a long and distinguished history of using AI to its advantage. From identifying and tagging people in photos to surfacing relevant content on its social media platforms, Meta has never been shy about deploying AI systems.
Unlike some of its big tech rivals, Meta doesn’t have a cloud infrastructure service to peddle its AI wares, but it quickly developed a workaround. After developing its open-source Llama AI model, Meta made it available on all the major cloud services — for a price. Furthermore, Meta offers a suite of free AI-powered tools to help advertisers succeed.
Improving economic conditions will no doubt boost its digital advertising business. And with the stock trading at just 22 times forward earnings, Meta is inexpensive relative to its opportunity.
6. Palantir Technologies
Palantir Technologies(NYSE: PLTR) has two decades of experience building AI-powered data analytics, and was ready to meet the challenge when AI went mainstream. In just months, the company added generative AI models to its portfolio, layering these atop its data analytics tools. The launch of the Palantir Artificial Intelligence Platform (AIP) has generated a lot of excitement. “Demand for AIP is unlike anything we have seen in the past 20 years,” said management.
When fears of a downturn were higher, businesses scaled back on most nonessential spending, including data analytics and AI services, but now, demand for those services is rebounding, particularly in relation to generative AI.
Looking ahead one year, Palantir sports a PEG ratio of less than 1, which helps illustrate how cheap the stock really is.
7. Tesla
Tesla(NASDAQ: TSLA) made a splash by bringing electric vehicles (EVs) into the mainstream. In 2023, its Model Y topped the list of the world’s best-selling cars by a comfortable margin, the first EV to do so. However, the magnitude of its future prosperity will likely be linked to AI. The company’s “full self-drive” system has yet to live up to its name, but success on that front would be a boon to shareholders.
In Ark Investment Management’s Big Ideas 2023 report, the firm estimates that robotaxis could generate $4 trillion in revenue in 2027. With an estimated 2.7 million vehicles on the road collecting data, Tesla could hold an insurmountable technological edge, if it cracks the code on autonomous driving. Some analysts estimate the software is already worth tens of billions of dollars.
Finally, 6 times forward sales is a pretty reasonable valuation for an industry leader with a treasure trove of data.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
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Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Meta Platforms, Microsoft, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has a disclosure policy.
The S&P 500 notched an all-time record on Friday, closing above its previous high set two years ago.
The Dow and Nasdaq also surged as traders took in strong economic data.
The University of Michigan’s consumer sentiment gauge jumped to its highest since 2021.
Strong economic data fueled the S&P 500 to a record on Friday, with markets getting more optimistic about potential rate cuts from the Federal Reserve.
Soon after trading began, the benchmark index was already on pace to clear its all-time closing high of 4,796.56 set two years ago. And by midday, it cleared its intraday record of 4,818.62.
The Dow Jones Industrial Average had already topped its prior high last month and set a fresh record on Friday. Meanwhile, the Nasdaq Composite outpaced the other indexes as chipmakers led the tech sector higher, but it remains more than 4% below its highs.
The stock market rally came as the University of Michigan’s consumer sentiment survey showed Americans are feeling better about the economy and see prices cooling.
Inflation expectations for the year ahead fell to 2.9%, the lowest since December 2020, giving the Fed more breathing room to loosen monetary policy this year.
“The powerful surge shows Americans are feeling the effects of lower inflation,” said Robert Frick, an economist with Navy Federal Credit Union. “That’s transmitted directly through prices at the pump, which have been falling since September, and less directly given wage increases have risen above the rate of inflation. The strong jobs market also heavily influences American’s view of the economy in general.”
Here’s where US indexes stood as the market closed at 4:00 p.m. on Friday:
Here’s what else is going on:
In commodities, bonds, and crypto:
Oil prices dropped, with West Texas Intermediate down 0.28% to $73.87 a barrel. Brent crude, the international benchmark, moved lower 0.23% to $78.88 a barrel.
The SEC is holding meetings today with major exchanges, including the New York Stock Exchange, Nasdaq, and the Chicago Board Options Exchange (CBOE), regarding spot Bitcoin ETFs.
The information was revealed by a Fox Business journalist earlier today, bringing some sense of relief for the wider crypto community after crypto services firm Matrixport reported that the SEC would likely reject all ETF applications in January. This report triggered a major liquidation in today’s market, as the crypto market lost more than $540 million in just four hours.
🚨SCOOP: The @SECGov is holding meetings today with the exchanges (@Nasdaq, @CBOE, @NYSE) to finalize comments on the 19b-4s submitted by the $BTC Spot ETF issuers.
Despite Matrixport’s report of a possible denial, Bloomberg’s analysts have claimed that no substantial evidence pointing towards a rejection of the ETFs has been reported.
People tagging me like crazy on this “rejection” report. We have heard nothing to indicate anything but approval but I want to give the guy benefit of doubt so I’m asking if he has any sources or if he just speculating. He seems to be bitcoin bull and recently tweeted… https://t.co/KV7k4NXtba
There was a brief debate on X between Bloomberg analyst Eric Balchunas and Matrixport’s Markus Thielen, who published the potential ‘rejection’ report. Thielen clarified that the report wasn’t based on any comments from SEC insiders or the ETF applications. However, he cited consensus among researchers to reach this prediction and has turned bearish on Bitcoin.
My report is not based on issuer, nor on SEC insider comments. Obviously this is massively out of consensus. I do think the SEC will vote it down. And yes, after being the biggest bull all year (predicted 45k by Xmas on Feb 1), I turned bearish today but the arguments were ready
However, today’s meeting suggests a more optimistic outlook, aligning with broader market expectations of a possible approval by the SEC, potentially as soon as the following week. Jan. 10th has been identified as a critical date, marking a deadline for the numerous spot Bitcoin ETF applicants.
The “Magnificent Seven” stocks dominated the market in 2023. The worst performer in the group, Apple (NASDAQ: AAPL), rose 49%, and the best, Nvidia (NASDAQ: NVDA), jumped nearly 240%. But with such strong runs behind them, do any of them have room left to grow in 2024?
The answer: Yes, and some are still worth buying at their current prices.
Apple and Nvidia are both richly valued for their performance
I’m breaking the seven up into buy, sell, and hold groups. Starting with the sell set, I think Apple and Nvidia’s stock prices far outpaced their businesses.
Nvidia’s 2023 success has been spurred on by the artificial intelligence (AI) arms race, and its business has responded in kind. In its fiscal 2024 third quarter (which ended Oct. 29), revenue rose 206% year over year. Furthermore, management guided for $20 billion in fiscal Q4 revenue, up 231%. The stock’s movement was warranted given the company’s sales growth, but I’m concerned that investors are forgetting that Nvidia operates in a cyclical industry.
Nvidia goes through boom and bust cycles, and right now is certainly a boom. However, it’s unknown how many AI data centers will need to be built in the near to medium term. If demand for its high-powered chips is satisfied shortly, the stock may come crashing back down to earth. Plus, it’s trading at 65 times earnings — a quite expensive premium.
From a business standpoint, Apple is the opposite of Nvidia. Its sales declined throughout 2023. Even so, its stock skyrocketed. This makes little sense, and more headwinds are coming up: a U.S. International Trade Commission order this month forced Apple to halt the import and sale of some Apple Watches due to a patent dispute (although a court ruling temporarily allowed sales to resume). With all this in mind, 2024 could be a tough year for the company. And considering that Apple stock has a higher valuation than “Magnificent Seven” members Alphabet (NASDAQ: GOOG)(NASDAQ: GOOGL) and Meta Platforms(NASDAQ: META), it doesn’t make a lot of sense to own it compared to its peers.
Microsoft and Tesla need to show me some results
I view Microsoft(NASDAQ: MSFT) and Tesla(NASDAQ: TSLA) as holds currently. Microsoft had a strong year, as its revenues and earnings per share (EPS) steadily rose. However, Microsoft trades at a steep premium, even on a forward earnings basis.
Microsoft is executing well, but its valuation is a bit too much from a historical perspective to consider buying. Still, it’s far from a sell.
Tesla is one of the hardest companies to value on Wall Street, as its valuation is wrapped up in expectations for future products. It’s also set to face some added headwinds. Starting in 2024, some Tesla models will only qualify for half of the $7,500 federal EV tax credit due to where the automaker sources materials for their batteries and where it produces them.
When judging whether any given moment is a better time to buy or sell Tesla stock, I like to look at its price-to-earnings and price-to-sales ratio compared to historical trends. For Tesla, these are trading roughly near the midpoint of valuations seen since mid-2022.
TSLA PE Ratio Chart
I’m taking a wait-and-see approach to Tesla stock heading into the new year as the stock doesn’t look like a bargain at these prices.
Advertising should bounce back in 2024
That leaves Alphabet, Meta Platforms, and Amazon(NASDAQ: AMZN) in the buy now category. These stocks trade at reasonable levels and are expecting strong tailwinds next year.
Even though Alphabet and Meta have AI investments, they are mostly advertising businesses. In 2022 and 2023, the advertising market was fairly weak as companies pulled back on their marketing spending due to fears that a recession was coming. However, now that we have lapped that pullback, Alphabet and Meta are posting meaningful growth in their advertising businesses. Their ad revenues grew by 9% and 24%, respectively, in Q3.
Next year should be another strong recovery year for advertising, which will boost both companies.
Amazon has also had a strong 2023, with its margins rising.
AMZN Gross Profit Margin Chart
However, this chart doesn’t tell the full story, as this takes into account Amazon’s profits over the past 12 months. If you focus on its latest quarterly results, Amazon’s margins are nearing (or have already set) all-time highs.
AMZN Gross Profit Margin (Quarterly) Chart
The fact that Amazon posted solid results in historically weak quarters bodes well for Q4, which is usually its strongest one. No investor knows what a fully profitable Amazon looks like, but 2024 could give us a glimpse, making it a strong buy now.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than tripled the return of S&P 500 since 2002*.
Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Keithen Drury has positions in Alphabet, Amazon, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has a disclosure policy.
Micromobility.com, formerly Helbiz, was delisted from the Nasdaq on Monday as a result of the company’s noncompliance with the stock exchange’s listing rules, according to a regulatory filing.
Competitor Bird — the only other shared micromobility company to brave the public markets — was also delisted from the stock exchange in September.
The company’s common stock and warrants were suspended from trading at the start of business Wednesday.
Micromobility.com was kicked off the stock market for failing to maintain a share price of at least $1 and for failing to comply with Nasdaq’s minimum stockholders’ equity requirement for continued listing.
The company’s stock has struggled to remain in compliance since going public via special purpose acquisition merger in 2021. In March, the company issued a reverse stock split to bring the price back into compliance, the gains from which didn’t last long. Micromobility.com also recently said it intended to seek approval for another reverse split at a special meeting of the stockholders scheduled for January 2024. That meeting has been postponed, as has the move to do another reverse split.
Micromobility.com said in its filing that it will apply to have its common stock and warrants quoted to be traded over-the-counter. After Bird’s delisting in September, the company also chose to move its stock to OTC markets, as well. Bird recently issued layoffs and its third-quarter earnings show a company that could be close to filing for bankruptcy.
Micromobility.com says its transition to OTC markets will “have no effect on the company’s business or operations.” The startup’s rebrand aimed to encapsulate a push toward retail — Micromobility.com opened its first brick-and-mortar store in SoHo, New York City in September and has an e-commerce site featuring a small selection of e-scooters, e-bikes, helmets and water bottles.
The startup’s earnings show a company that brought in $1.5 million in revenue in the third-quarter at a net loss of $9.5 million. The balance sheet also shows that Micromobility.com’s liabilities, at $61.7 million, vastly outweigh its assets, at $9.4 million.
The company’s stock closed Monday at $0.44.
Micromobility.com’s delisting comes as the shared micromobility industry finds itself in turmoil. Superpedestrian shut down last week and is exploring the sale of its European business. Tier Mobility in November issued its third round of layoffs this year, after selling off Spin to Bird a couple months earlier.
The Dow Jones Industrial Average surged to close at more than 37,000 points for the first time as investors applauded a statement from the Federal Reserve on Wednesday that it could cut its benchmark interest rate next year.
The blue-chip index jumped 512 points, or 1.4%, to end the day at 37,090, topping its prior peak of 36,799 in early 2023. The broader S&P 500 rose 1.4% and is within 1.9% of its own record. The tech-heavy Nasdaq composite added 1.4%.
Fed officials also left their short-term rate unchanged for a third straight meeting amid signs that their aggressive push to subdue inflation is working. With the price spikes that slammed Americans during the pandemic now receding in earnest, Fed Chair Jerome Powell said in a news conference that the federal funds rate is projected to fall to 4.6% by the end of next year, from its current range of 5.25% to 5.5%.
“The Fed decision was more dovish than anticipated on a variety of fronts, including the acknowledgement that growth and inflation have both cooled, the strong signals that rate hikes are finished, and Powell’s admission during the press conference that ‘rates are at or near their peak,’” analyst Adam Crisafulli of Vital Knowledge said in a report.
Lower interest rates curb borrowing costs for consumers and businesses, boosting spending and broader economic growth. Interest rate cuts also tend to buoy riskier assets, including stocks. Markets have steadily pushed higher since October as Wall Street bet that the Fed, which hiked rates 11 times during the latest tightening cycle to their highest level in 22 years — will pivot to cuts in 2024.
While noting that the Fed is not ready to declare victory over inflation, Powell also said Fed officials don’t want to wait too long before cutting the federal funds rate.
“We’re aware of the risk that we would hang on too long” before cutting rates, he said. “We know that’s a risk, and we’re very focused on not making that mistake.”
Headline inflation around the U.S. edged down November as gas prices fell. The Consumer Price Index edged 0.1% higher last month, leaving it 3.1% higher than a year ago, the Labor Department reported on Tuesday. The so-called core CPI, which excludes volatile food and energy costs, climbed 0.3% after a 0.2% increase in October and is up 4% from a year ago. The Fed targets annual inflation of 2%.
Following the release of the Fed’s rate projections, traders on Wall Street upped their bets for cuts in 2024. Most of those bets now expect the federal funds rate to end next year at a range of 3.75% to 4%, according to data from CME Group.
“We see modest upside for U.S. stocks from current levels,” David Lefkowitz, CIO head of equities at UBS, told investors in a research note. “Both sentiment and positioning have improved, posing greater downside risks if there are any negative economic or earnings surprises.”
Stocks ended November with a bang, with the Dow Jones Industrial Average jumping 520 points on Thursday and financial markets posting their biggest monthly gain in more than a year.
The Dow rose 1.5% to close at 35,951, with investors cheered by a new government report showing that inflation is continuing to ease. The Personal Consumption Expenditures index — the Federal Reserve’s preferred inflation gauge — fell to 3.5% in October excluding volatile food and energy prices, down from 3.7% the previous month and nearly 5% as recently as May, new labor data show.
“Progress, in short, has been startlingly rapid compared to policymakers’ expectations,” analysts with Pantheon Macroeconomics said in a report.
The sharp fall in inflation since another closely watched barometer — the Consumer Price Index — peaked at 9.1% in June of 2022 has raised investor hopes that the Fed will shelve its efforts to cool economic growth by pushing up borrowing costs. Some Wall Street analysts now forecast that the central bank could move to trim its benchmark interest rate by the middle of 2024.
Wall Street analysts are also increasingly confident that the U.S. will dodge a recession despite the Fed’s aggressive campaign to quash inflation. Although job growth has slowed — pushing the nation’s unemployment rate to 3.9%, the highest level since January of 2022 — most economists now think the labor market will avoid the kind of steep downturn that historically has followed rapid increases in interest rates.
All three leading stock indexes posted solid gains in November. The Dow rose 8.8%, while the broader S&P 500 added 8.9% — its biggest monthly increase since July of 2022. Driven by strong corporate profits, the tech-heavy Nasdaq jumped nearly 11% in November.
“The rally has been dramatic in its move,” said Quincy Krosby, chief global strategist for LPL Financial.
“What you want to see is that next leg up as we close the year,” she said. “November is a strong month for the market, but so is December.”
