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The past few weeks have brought a breath of fresh air for growth stocks. A newfound realization appears to have dawned upon the market that marginal increases in interest rates need not trigger a doomsday scenario for all growth stocks. This renaissance is evident as the interest on the ten-year Treasury Note rose to 4.28% by Feb. 16 from 4% earlier in February, and yet the Russell 2000 Index surged to 2,032 from 1,983 during the same period.
In the era of yore, when investors were captivated by the ludicrous belief that interest rates held near absolute power over the destiny of nearly all growth stocks, such a divergence would have been inconceivable. The Federal Reserve’s potential rate cut later this year further fans the market’s fervor for growth stocks. In light of this, here are three growth stocks poised to benefit from the market’s newfound sensibility.
Schrodinger (SDGR)
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Schrodinger (NASDAQ:SDGR), utilizing artificial intelligence to expedite drug discovery, is starting to rally due to Nvidia’s (NASDAQ:NVDA) decision to augment its investment in a comparable firm.
Specifically, “NVDA raised its stake in Recursion Pharmaceuticals (NASDAQ:RXRX) to $76 million from $50 million,” as I mentioned in a prior article. Just as SDGR, RXRX harnesses AI to streamline the notoriously laborious pharmaceutical development process.
Following the disclosure of Nvidia’s increased RXRX stock holdings on Feb. 14, SDGR stock has surged by 17%. Notably, the forward price-sales ratio of SDGR stands at 8.4, while that of RXRX hovers around 48 times. SDGR boasts collaboration agreements with at least six major drug manufacturers, whereas Recursion is involved with only two major drug makers.
Given these factors, SDGR appears to have considerably more room for growth than RXRX in the long run.
Intel (INTC)
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Intel stock is poised for a lift following Bloomberg’s recent report of negotiations to secure over $10 billion in subsidies from the U.S. for domestic chip factory construction.
Meanwhile, the company is scheduled to “provide updates” on its budding chip-making enterprise on Feb. 21. The event is anticipated to showcase new customer information aimed at bolstering INTC stock.
Furthermore, as previously highlighted, the company’s Gaudi 2 AI chips are matching Nvidia’s (NASDAQ:NVDA) leading AI chip, the H100, across various categories. Intel’s backlog of orders for these chips tallied $2 billion by the end of last year. Additionally, there are plans to introduce an upgraded product version later this year, resulting in a quadruple surge in processing power and a twofold increase in networking bandwidth.
American Express (AXP)
American Express Shows Robust Growth in Q4 Results and Positive Outlook
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American Express (NYSE:AXP) has reported impressive fourth-quarter results, with a remarkable 11% growth in revenue compared to the same period of the previous year, while the bottom line witnessed a soaring 23% to $1.93 billion.
What’s more, the credit card network has forecasted a substantial revenue increase of 9% to 11% this year, alongside a surge in earnings per share to $12.65 to $13.15 from $11.21 in 2023.
The company is reaping the rewards of the significant prosperity enjoyed by the wealthiest 10% of Americans over several years. AXP’s cards are tailored to affluent consumers, and as the bull market persists, upper-income Americans, who largely possess the nation’s stocks, are likely to boost their spending due to the well-known “wealth effect” on expenditures. This phenomenon should undoubtedly provide the company with another significant upswing.
On the date of publication, Larry Ramer held long positions in SDGR and INTC, while his wife held long positions of SDGR, INTC and AXP. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
