The Nasdaq Composite index has had a great year so far, and we’re only a few months into 2024. Technology stocks, which dominate the index, are roaring higher as investors favor growth and innovation such as artificial intelligence (AI) stocks, chip designers, and cloud computing players. This has pushed the index to a record high, confirming that it’s reached bull territory.
And if history is a guide, the Nasdaq’s winning streak may not be over. Over the past six periods of stock market gains dating back to 1990, the Nasdaq has climbed an average of 64% in the first two years of positive performance. The index advanced about 43% last year and so far has climbed 8% this year — so if it follows historical patterns, the Nasdaq could soar this year. Here are my top AI growth stocks to buy before it does…
Amazon
Amazon (NASDAQ: AMZN) shares have advanced 20% so far this year, and this top stock could just be getting started. That’s because Amazon is an ideal AI stock to buy: The company is using the technology to improve its e-commerce operations, and it’s also selling AI products and services to cloud computing services customers through its Amazon Web Services (AWS) unit. So, it’s benefiting from AI in two ways.
For example, Amazon uses AI to help it streamline fulfillment center operations and select the shortest delivery routes. This is key because it could reduce the company’s cost to serve.
And AWS has made addressing every level of AI needs a priority, so it offers customers the basics like chips for their training and inference programs as well as a fully managed service that allows them to customize top large language models (LLMs) for their own use. Considering AWS is the world’s leading cloud services player, it already has an enormous audience present — and ready to launch AI projects.
So, it’s clear AI could have a significant impact on Amazon’s earnings growth over time through streamlining e-commerce processes and reducing costs there, and by boosting AWS revenue.
Today, Amazon shares trade for 43 times forward earnings estimates, which looks like a reasonable price for a growth stock — especially one with a solid profitability picture and a compelling AI strategy.
Intel
Intel (NASDAQ: INTC) has struggled to keep up in the AI race, but the tide recently may have turned. The chip company late last year introduced a portfolio of AI products that could up its game and drive a new era of growth. An example is the Intel Core Ultra mobile processor family, a key step to kick off the age of the AI personal computer — these are high-power computers that can carry out many AI tasks.
Intel also announced its latest Intel Xeon processor family with AI acceleration and its Gaudi 3 AI accelerator. I wouldn’t expect these innovations to threaten chip market giant Nvidia‘s leadership, but that’s OK. Considering the opportunity — with the AI market forecast to top $1 trillion by the end of the decade — there’s room for more than one company to carve out market share and benefit. Intel could be one of them thanks to its new and upcoming innovations.
On top of this, Intel’s move to open its manufacturing network up to others, with the goal to become the world’s second-biggest foundry by 2030, could supercharge growth. It’s a big bet, but one that could bring major rewards down the road. Intel already has won commitments from four customers for its 18A process and signed five advanced packaging deals.
Intel shares trade for 29 times forward earnings estimates, a bargain considering the company’s AI and foundry prospects as well as analyst estimates for double-digit annual growth over the next five years. So Intel could be ripe for a rebound, making now an ideal time to get in on this technology giant.
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*.
*Stock Advisor returns as of April 4, 2024
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 recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short May 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
History Says the Nasdaq Will Soar This Year: My Top Artificial Intelligence (AI) Growth Stocks to Buy Before It Does was originally published by The Motley Fool