Unleashing the Nasdaq’s Potential

Entering the volatile world of stock investing can feel akin to navigating a maze blindfolded. However, reflecting on past market patterns can often provide a compass for investors, aiding in making strategic moves based on historical trends. As whispers of the future grow louder, one significant note emerges: it seems the Nasdaq Composite is poised for a meteoric surge in 2024.

Predating the invention of the cell phone, the Nasdaq Composite was born in 1971. Throughout its journey, it has displayed resilience, with an average annual surge of 19% post-market recoveries mirroring the scope witnessed in the recent revival of 2023. The silver lining for investors lies in the companies propelling the Nasdaq Composite’s forward charge.

The Magnificent Seven Steer the Ship

The anointed “Magnificent Seven” entered the lexicon last year to describe the tech aristocracy, featuring heavy hitters like Alphabet, Amazon, (NASDAQ: AMZN), Apple, Meta Platforms, Microsoft, Nvidia (NASDAQ: NVDA), and Tesla. These titans dominate the tech sector, fueling the vigorous rebound of the market in recent times.

The rumblings in the market suggest that the Magnificent Seven could be the beacon in the impending Nasdaq surge, making it pivotal for investors to consider hitching a ride on this rocket ship. Here are two stocks from the Magnificent Seven that offer tantalizing prospects for investors.

1. Nvidia’s Meteoric Rise

Whether you’re a seasoned investor or a rookie, the name Nvidia rings bells. The company’s stock ascended to the stars in 2023, leaping by an extraordinary 239%. Renowned for its graphics processing units (GPUs) that have become the gold standard for AI developers worldwide, Nvidia’s rise epitomizes a modern-day success saga. These high-octane parallel-processing chips are indispensable for training and running AI models, driving Nvidia’s earnings to stellar proportions.

Dominating the AI chip realm with an estimated 90% market share, Nvidia raced ahead while competitors like Advanced Micro Devices and Intel struggled to keep pace on the technology frontier.

In the latest financial quarter ending in January 2024, Nvidia’s revenue sky-rocketed by 265% year over year to hit $22 billion. Simultaneously, operating income soared by a staggering 983% to nearly $14 billion. The surge was chiefly powered by a 409% climb in data center revenue, reflecting a boom in AI GPU sales.

The AI chip domain is expected to witness intensified competition this year from AMD and Intel, who are rolling out potent new hardware. Despite the battleground heating up, Nvidia stands tall with its soaring earnings, witnessing a 430% jump in free cash flow over the past year to reach $27 billion—dwarfing AMD’s $1 billion and Intel’s negative $14 billion.

So, despite formidable competition, Nvidia’s pioneering strides in AI have placed it ahead in the race, bolstered by robust cash reserves that underpin further technology investments, ensuring its dominance in the market.

Data by YCharts

Projection models indicate that Nvidia’s earnings could touch nearly $36 per share by fiscal 2026. Crunching the numbers through its forward P/E ratio of 37 suggests a stock price of around $1,300.

In light of this outlook, envisioning a surge of 44% in Nvidia’s stock value over the upcoming two fiscal years paints a compelling picture. Bearing the insignia of AI leadership, Nvidia remains a Magnificent Seven beacon worth seizing.

2. Amazon’s Evolutionary Odyssey

From its humble inception as an online bookstore nearly three decades ago, Amazon has morphed into a colossal tech entity weaving strands across multiple industries. Emerging as a juggernaut in e-commerce and cloudbased services, Amazon’s endeavors span realms from space satellites and grocery ventures to gaming and consumer tech.

Throughout the past year, Amazon’s AI initiatives have been a focal point. As the steward of the world’s largest cloud service—Amazon Web Services (AWS)—the tech titan is primed to harness its vast cloud data centers to revolutionize the generative AI landscape.

In 2023, responding to the surge in AI demand, AWS unveiled an array of new tools to bolster its AI service offerings. Amazon’s foray into using AI to enhance its retail platform was exemplified by the introduction of Rufus, an AI shopping assistant, in preparation for its latest earnings disclosure.

Within fiscal 2023, Amazon witnessed a 12% uptick in revenue year over year, with operating income tripling to scale $37 billion. Riding the waves of a resurgent e-commerce sector, Amazon’s free cash flow ascended by an astonishing 904% to over $32 billion, underlining its financial might as it steers its ship through potential storms.

Data by YCharts

The illustrated projections hint at Amazon’s earnings nearing $7 per share by fiscal 2026. Multiplying this by its forward P/E ratio of 43 unveils a potential stock price of $300.

This forecast paints a vivid picture of Amazon’s stock ascending 68% from its current value over the next two fiscal years, signaling an opportune moment for investors to consider riding the Amazonian wave as it propels to new heights.

Should you invest $1,000 in Nvidia right now?

Before plunging into Nvidia’s stock, take a moment to reflect on this:

The Motley Fool Stock Advisor team has unearthed what they deem as the 10 best stocks for investors to explore… and Nvidia didn’t make the cut. These selected 10 stocks are poised to deliver monumental returns in the years ahead.

Stock Advisor lays out a straightforward roadmap for investors, offering insights on portfolio construction, routine analyst updates, and bi-monthly stock picks. Since 2002, Stock Advisor has outperformed the S&P 500 by a significant margin*.

Explore the 10 stocks

*As of March 21, 2024, Stock Advisor returns.

John Mackey, the former CEO of Whole Foods Market and an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, the former director of market development and spokeswoman for Facebook, and sibling to Meta Platforms CEO Mark Zuckerberg, also sits on The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, rounds off the Motley Fool’s board of directors. Dani Cook holds no positions in the above-mentioned stocks. The Motley Fool holds positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool also recommends Intel and various options for long and short positions. The Motley Fool abides by a strict disclosure policy.

The thoughts and opinions articulated here are those of the author’s and do not necessarily mirror those of Nasdaq, Inc.