Tech Stocks Surge in 2024 as AI Demand Soars

Technology stocks are thriving in 2024, driven by a significant demand for Artificial Intelligence (AI) services that facilitate ongoing digital transformation. The advancements in Generative AI (GenAI) technology are remarkable, capturing substantial investments from major tech firms such as Alphabet, Meta Platforms, and Microsoft MSFT.

Strong interest in data center chips for powering large Language Models (LLMs) indicates a positive outlook for semiconductor sales. According to the World Semiconductor Trade Statistics (WSTS), global sales are forecasted to hit $611.2 billion in 2024, which is a 16% increase from 2023, up from earlier estimates of 13.1%. Looking ahead to 2025, WSTS projects continued growth of 12.5%, bringing sales to $687.4 billion.

These developments have helped the tech-heavy Nasdaq Composite index gain over 26% year-to-date (YTD). This upward trend is likely to persist, as stable economic growth and easing inflation are expected to enhance consumer confidence through the rest of the year and into 2025.

American Superconductor AMSC, Vertiv VRT, Toast TOST, and Impinj PI are four tech stocks positioned to benefit from this momentum. Year-to-date, shares of AMSC, VRT, TOST, and PI have risen 210.7%, 176.9%, 135.5%, and 115.1% respectively. Meanwhile, the Zacks Computer & Technology sector has yielded a return of 27.4% during the same period.

Year-to-Date Performance Overview

Image Source: Zacks Investment Research

AI Spending Fuels Tech Sector Growth

The technology sector is seeing massive investments in AI-related services. Gartner anticipates that spending on AI software will grow at a compound annual growth rate (CAGR) of 19.1% from 2023 to 2027, reaching $297 billion by the end of that period. Particularly, spending on GenAI software is predicted to climb from 8% in 2023 to 35% by 2027.

According to CNBC, citing Menlo Ventures, business investments in GenAI have surged 500% in 2024, rising from $2.3 billion in 2023 to $13.8 billion. Popular foundation LLMs such as ChatGPT, Gemini, and Claude have attracted $6.5 billion in enterprise funding.

Additionally, IDC forecasts that global spending to support AI strategies will reach $337 billion in 2025 and more than double to $749 billion by 2028. It is expected that over 67% of this spending will be from businesses integrating AI into their core operations by 2025.

Deloitte predicts that by 2027, 50% of enterprises utilizing GenAI will implement AI Agents—technology requiring minimal human involvement for task completion.

Four Stocks Benefiting from Positive Trends in Tech

The four mentioned stocks—American Superconductor, Vertiv, Toast, and Impinj—hold a favorable status with Growth Scores of A or B alongside a Zacks Rank of #1 (Strong Buy). This combination is considered a solid indicator of investment potential.

Let’s explore why these stocks are viewed as promising investment opportunities.

American Superconductor

AMSC possesses a Growth Score of A.

In Q2 fiscal 2025, American Superconductor secured approximately $60 million in new orders from Energy Power Systems, with strong demand arising from industries such as renewables and mining. The company has a backlog exceeding $200 million for the next 12 months and a total backlog surpassing $300 million.

The acquisition of NWL, a private firm supplying power systems to industrial and military clients, has greatly broadened AMSC’s customer base. The rising power needs of AI data centers serve as a crucial growth driver.

The Zacks Consensus Estimate for 2024 earnings stands at 50 cents per share, a significant 61.3% increase in the last two months. In comparison, AMSC reported earnings of 2 cents per share in 2023.

American Superconductor Corporation Price and Consensus

American Superconductor Corporation price-consensus-chart | American Superconductor Corporation Quote

Vertiv

Vertiv, which focuses on cooling and power management for data centers, is benefitting from boosted order growth driven by AI. The company’s expertise aligns with the increasing emphasis on effective thermal management among data center operators.

As of Q3 2024, Vertiv’s backlog surged to $7.4 billion, marking a 47% increase year-over-year and a 5% rise sequentially. The company’s quarterly performance reflected robust order growth, with organic orders climbing 19.2% year-over-year.

For 2024, Vertiv anticipates revenues between $7.78 billion and $7.83 billion, which reflects an organic growth rate of 13-15% year-over-year. Non-GAAP earnings for the year are expected to range from $2.66 to $2.70 per share.

The Zacks Consensus Estimate for Vertiv’s 2024 earnings is set at $2.69 per share, representing a 4.3% increase in the last 60 days and a year-over-year growth rate of 51.98%.

Vertiv has a Growth Score of B.

Vertiv Holdings Co. Price and Consensus

Vertiv Holdings Co. price-consensus-chart | Vertiv Holdings Co. Quote

Toast

TOST holds a Growth Score of A.

Toast is making significant strides among small and medium-sized businesses in the U.S. and has plans for international expansion, targeting enterprise restaurants and retail sectors. In the third quarter of 2024, the company added 7,000 locations.

With its growing number of locations, international prospects, and an increasing number of repeat customers, Toast’s Annual Recurring Revenue is on the rise. The adoption of its comprehensive solution suite by customers has streamlined the sales process, encouraging users to integrate more of the platform over time, which enhances Average Revenue Per User.

The Zacks Consensus Estimate for Toast’s 2024 earnings is set at 2 cents per share, compared to a loss of 10 cents projected two months ago. Toast reported a loss of 47 cents per share in 2023.

Toast, Inc. Price and Consensus

Toast, Inc. price-consensus-chart | Toast, Inc. Quote

Impinj

Impinj is also benefiting from the increased demand for its products and services, alongside an expanding customer base and the high growth potential in the tech sector.