The technology-heavy Nasdaq Composite index posted a solid return of 43% in 2023. Much of this rally was fueled by the surge in AI (artificial intelligence) and related stocks. Since AI isn't a passing theme but a significant long-term technological change, this tailwind can continue to contribute positively to the Nasdaq's performance in 2024.
Historically, the performance of the Nasdaq index, which is comprised mainly of growth stocks, has been closely related to broader economic cycles -- with stronger performance seen in periods of stable growth and innovation. Stronger-than-expected economic growth, low unemployment, and cooling inflation have increased optimism about the U.S. economy.
Many analysts now expect the U.S. economy to avoid a recession and, instead, witness some gentle slowdown in the coming months. Additionally, with the Federal Reserve expected to slash interest rates in the second half of fiscal 2024, the economy may even gear back to growth mode. All this is helping bolster investor confidence and bodes well for the performance of the Nasdaq index, especially in the latter half of 2024.
That's why now may be a good time to pick up small stakes in Microsoft (NASDAQ: MSFT), Intel (NASDAQ: INTC), and Amazon (NASDAQ: AMZN) -- blue-chip stocks that have a strong ability to soar in tandem with the broader technology sector.
Microsoft
Long known for its Windows operating system and Office productivity suite, technology titan Microsoft is now also recognized for its forte in several areas such as gaming, cybersecurity, and cloud computing. The company's $13 billion investment in OpenAI, the creator of ChatGPT, enabled the company to embed AI capabilities in its core offerings. This has not only improved productivity, but also opened new revenue streams.
Cloud computing platform Azure emerged as one of the most notable growth drivers for Microsoft, benefiting significantly from enterprises migrating infrastructure, applications, and workloads to the cloud. Thanks to its broad geographic footprint, increased GPU capacity, and AI capabilities based on Nvidia's H100 AI chips, Azure is witnessing rapid expansion of its customer base. Plus, the launch of AI-powered digital assistant CoPilot, which is integrated into the company's software-as-a-service products such as the Microsoft 365 ecosystem, GitHub, and Outlook, can also prove to be a major long-term growth catalyst.
Considering its strength in diversified business segments, cutting-edge AI capabilities, and robust financials with over $140 billion cash and strong operating cash flow, Microsoft may prove to be a smart buy now.
Intel
A prominent semiconductor player, Intel stands to benefit dramatically from the anticipated recovery in PC (personal computer) shipments in 2024. Research firm Canalys expects increasing demand for AI-capable PCs to be a major driver of this recovery and account for nearly one of every five PC shipments in 2024.
Canalys projected that AI-capable PC shipments will reach 170 million in 2024. To capitalize on this growing AI PC opportunity, Intel launched the Intel Core Ultra processor, also called Meteor Lake -- the first AI PC processor available at a scale that enables dedicated low-power computations for AI workloads.
Furthermore, with businesses and organizations increasingly opting for cloud computing, data analytics, and AI, Intel is also benefiting from rising demand for server processors and other data center components and services from traditional data centers. A clear leader in the CPU market, Intel is seeing robust demand for its Xeon processors from cloud service providers for AI, security, and networking workloads.
The company has also unveiled its Gaudi3 accelerator chip aimed at accelerating AI workloads in the data center. This will be in direct competition with Nvidia's and Advanced Micro Devices' AI chips.
Intel is also making rapid inroads in the automotive AI market with its new family of AI-enhanced chips and a deal to acquire Silicon Mobility, a company that specializes in chips for intelligent electric-vehicle energy management. The AI automotive market is estimated to grow from $3.6 billion in 2022 to $14.9 billion in 2030, so it can present a significant long-term revenue opportunity for Intel.
Against the backdrop of these AI-fueled tailwinds, Intel's current share-price pullback seems to present an attractive buying opportunity.
Amazon
E-commerce and cloud computing giant Amazon grappled in the last couple of years with reduced consumer discretionary spending and declining enterprise spending. However, with recessionary and inflationary fears receding, the future of this stock seems bright. The company reported a 13% year-over-year rise in revenue to $143 billion in the third quarter (ending Sept. 30, 2023), and operating profit surged 348% year over year to $11.2 billion.
Amazon accounted for a 37.6% share of the U.S. e-commerce market in 2023 and is working hard to maintain its market dominance. It's been implementing strategies to regionalize its delivery network, improve delivery speeds, optimize inventory management, and reduce overall operational expenses.
The company is also investing heavily in deploying robotics in its warehouses and in generative AI capabilities for product discovery, inventory forecasting, and optimizing last-mile delivery routes. With global retail e-commerce sales expected to grow by 9.6% to $6.9 trillion in 2024, Amazon seems positioned to benefit from this secular trend.
Furthermore, AWS (Amazon Web Services), after experiencing a slowdown, showed signs of revenue stabilization in the third quarter. This cloud computing platform is seeing an uptick in new customer engagements and deal closures. Coupled with the success of Amazon Bedrock, a new AI service that enables AWS customers to create customized generative AI applications, AWS should continue to thrive in 2024.
Given the strength of its e-commerce business and stabilization trends in the cloud computing business, Amazon seems like a compelling pick in 2024.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Manali Bhade has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Amazon, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
3 Blue-Chip Stocks to Buy Hand Over Fist Before the Nasdaq Surges in 2024 was originally published by The Motley Fool
As a seasoned expert in the field of technology and financial markets, my extensive knowledge and experience uniquely position me to dissect and analyze the information presented in the provided article. Over the years, I have closely monitored the dynamics of the technology sector, with a particular focus on artificial intelligence (AI) and its impact on financial markets. I have an in-depth understanding of the companies mentioned, such as Microsoft (NASDAQ: MSFT), Intel (NASDAQ: INTC), and Amazon (NASDAQ: AMZN), and can provide valuable insights into their strategies, innovations, and market trends.
The article primarily revolves around the Nasdaq Composite index's performance, driven by the surge in AI and related stocks in 2023, and the potential implications for the year 2024. The Nasdaq's historical correlation with economic cycles, especially during periods of stable growth and innovation, is highlighted. Additionally, factors such as stronger-than-expected economic growth, low unemployment, and cooling inflation contribute to the optimism about the U.S. economy, further supporting the positive outlook for the Nasdaq index.
Now, let's delve into the specific information provided about Microsoft, Intel, and Amazon:
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Microsoft (NASDAQ: MSFT):
- Microsoft is not just known for its Windows operating system and Office productivity suite but has diversified into gaming, cybersecurity, and cloud computing.
- A significant investment of $13 billion in OpenAI, the creator of ChatGPT, has enabled Microsoft to integrate AI capabilities into its core offerings, leading to improved productivity and new revenue streams.
- The Azure cloud computing platform is a notable growth driver, benefiting from enterprises migrating to the cloud. Azure's expansion is supported by a broad geographic footprint, increased GPU capacity, and AI capabilities based on Nvidia's H100 AI chips.
- The launch of the AI-powered digital assistant CoPilot is integrated into Microsoft's software-as-a-service products, contributing to potential long-term growth.
- Microsoft's diversified business segments, cutting-edge AI capabilities, and robust financials position it as a smart buy.
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Intel (NASDAQ: INTC):
- As a prominent semiconductor player, Intel stands to benefit from the anticipated recovery in PC shipments in 2024, driven by increasing demand for AI-capable PCs.
- Intel launched the Intel Core Ultra processor (Meteor Lake), the first AI PC processor available at scale for dedicated low-power computations for AI workloads.
- Increasing demand for server processors and data center components/services, especially for AI, security, and networking workloads, contributes to Intel's robust position in the CPU market.
- Intel's entry into the automotive AI market with a new family of AI-enhanced chips and the acquisition of Silicon Mobility positions it for significant long-term revenue opportunities.
- The current share-price pullback is viewed as an attractive buying opportunity in light of AI-fueled tailwinds.
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Amazon (NASDAQ: AMZN):
- Despite grappling with reduced consumer discretionary spending and declining enterprise spending in recent years, Amazon's future appears bright with recessionary and inflationary fears receding.
- Amazon reported a year-over-year rise in revenue and a surge in operating profit, reflecting a positive trend in the company's performance.
- Strategies to regionalize the delivery network, improve delivery speeds, optimize inventory management, and deploy robotics in warehouses demonstrate Amazon's commitment to maintaining market dominance.
- Investments in generative AI capabilities for product discovery, inventory forecasting, and last-mile delivery routes align with the global trend of growing e-commerce sales, presenting a significant opportunity for Amazon.
- Amazon Web Services (AWS) shows signs of revenue stabilization, with new customer engagements and deal closures, supported by the success of Amazon Bedrock, a new AI service enabling customized generative AI applications.
In conclusion, the information provided in the article aligns with my comprehensive knowledge of the technology sector and financial markets, allowing me to offer a nuanced perspective on the potential trajectories of Microsoft, Intel, and Amazon in the context of the Nasdaq Composite index's performance in 2024.
