When 2022’s financial storm hit, the Nasdaq Composite plunged 33%, leaving companies grappling with dwindling revenues. Yet, amidst financial adversity, standouts emerged. In 2023, the Nasdaq Composite rallied over 40%, propelled by the growth of key stocks and in particular, tech giants.
The tech industry’s resilience notably shined through. Motivated by fervor for breakthroughs in artificial intelligence (AI) and cloud computing, Wall Street preached exuberance for tech stocks. History whispers that tech is akin to a phoenix, never lingering in the ashes for long. It’s precisely in these turbulent times that the astute investor might find the most tempting opportunities to delve into this lucrative sector.
1. Nvidia: On a Steep Ascent
Nothing quite captures the yo-yo narrative of the market like Nvidia (NASDAQ: NVDA). Its shares plummeted by half during 2022’s turmoil as inflation bit into consumer spending. But behold, a stunning turnaround saw the stock ascend by a staggering 240% in 2023.
As a premier chipmaker, Nvidia’s technology powers an array of devices, from cloud platforms to AI models, video game consoles, and customized PCs. The demand for these indispensable products rarely ebbs, making a market downturn a golden opportunity to snap up Nvidia at bargain rates and harvest long-term gains.
Nvidia’s most potent growth propellant right now is AI. Projections suggest the AI market is slated to balloon at a yearly growth rate of 37%, surpassing the trillion-dollar mark by 2030. Nvidia’s GPUs are the crown jewels in this domain, emerging as the go-to chips for AI developers worldwide. The third quarter of 2024 witnessed a staggering 206% surge in revenue and a whopping 1,600% spike in operating income, fueled by rampant chip sales.
This upward trajectory portends that Nvidia’s earnings could scale to $24 per share by fiscal 2026. With a forward price-to-earnings ratio of 45, this implies a potential stock price tag of $1,080 – a 95% surge over the next two fiscal years. In the wake of the market tumult, Nvidia has rebounded resolutely, etching an indelible mark as a praiseworthy long-term investment.
2. Amazon: Navigating Troubled Waters
Amazon (NASDAQ: AMZN), superior fortress of e-commerce, felt the brunt of 2022’s economic headwinds, sparking retail losses and a welter of diminished profits. Yet, as the economic tempest abated, Amazon’s strategic orchestration of a resurgence propelled it to gratifying growth.
Cost-saving stratagems, including warehouse closures, layoffs, and disposing of unprofitable branches such as Amazon Care, buoyed Amazon with a 427% surge in free cash flow over the past year. This adept fiscal maneuvering stamps Amazon as a formidable contender post-market downturn.
Amazon’s judicious leverage of its robust cash reserves to invest in AI and the immensely profitable Amazon Web Services (AWS) augurs well for those considering an investment. The massively attractive price-to-sales ratio standing at 2.8 is an unequivocal signal for investors; Amazon’s stock is a steal at this juncture.
3. Microsoft: A Beacon Amidst the Storm
Microsoft (NASDAQ: MSFT) is not only a beacon post-market downturn, but a steadfast contender during one too.
In 2022, the market’s harsh bite lanced the tech landscape, yet Microsoft weathered the turbulence more robustly than many peers. Its pronounced emphasis on commercial and digital markets, exemplified by productivity software and cloud computing, endowed Microsoft with a sturdier shield against economic downturns.
With a 57% stock surge in 2023, Microsoft emerged as a powerhouse in AI. A strategic investment of 49% in ChatGPT developer OpenAI bestowed exclusive access to top-tier AI models. This infuses Microsoft’s product portfolio, including Bing, Azure, and its flagship Office programs, with cutting-edge AI advancements. Endowed with $63 billion in free cash flow, Microsoft’s stock, though carrying a premium price tag, is a robust contender for the discerning long-term investor.