Nasdaq-100 Leaders: Nvidia and Meta Platforms Shine Amid AI Boom

The Nasdaq-100 tracks the performance of 100 of the largest non-financial companies on the Nasdaq Stock Exchange, rebalancing its component weighting quarterly in March, June, and September, with a complete annual reconstitution in December.

Tech Sector Dominance Driven by AI Innovations

Heavily influenced by the technology sector, the Nasdaq-100 has seen significant movement because of advancements in artificial intelligence (AI). Since the launch of ChatGPT in late 2022, both Nvidia (NASDAQ: NVDA) and Meta Platforms (NASDAQ: META) have propelled the index upward, achieving remarkable two-year returns of 910% and 510%, respectively, as of this writing.

Investor sentiment remains positive regarding these stocks, as indicated by the reports from CNN Business:

• Out of 65 analysts monitoring Nvidia, 92% recommend it as a buy. The median price target is set at $150 per share, suggesting a 2% increase from the current price of $147.
• For Meta Platforms, 84% of 70 analysts advise a buy. The median price target stands at $655 per share, which implies an 11% upside from its current price of $589.

Nvidia’s Impressive AI-Driven Performance

Nvidia’s graphics processing units (GPUs) have become essential for speeding up data center operations, especially in AI development. Their GPUs outperform central processing units (CPUs) in speed and efficiency, consistently breaking performance records in independent AI benchmarks.

David Harold from Jon Peddie Research highlights Nvidia’s success as stemming from its integration of both hardware and software. The company offers a comprehensive solution by pairing its GPUs with CPUs, networking hardware, and its custom CUDA software, which supports the development of applications across myriad use cases.

In the second quarter of fiscal 2025, Nvidia reported a dramatic 122% revenue increase to $30 billion, driven by high demand for its AI technologies. Non-GAAP earnings surged by 152% to $0.68 per diluted share. Projections suggest spending on AI hardware and software will grow at an annual rate of 29% through 2030, according to Grand View Research.

Wall Street analysts forecast Nvidia’s earnings to grow by 35% each year over the next three years. This growth makes the current valuation of 69 times earnings seem manageable, though possibly not a bargain. Given the upcoming third-quarter earnings report on Nov. 20, shares may experience volatility. Investors prepared for such fluctuations might consider purchasing shares now.

Meta Platforms: Social Media Powerhouse

Meta Platforms manages four of the world’s largest social media platforms: Facebook, Instagram, WhatsApp, and Messenger, each boasting over a billion active monthly users. These platforms together attract over 3.2 billion unique daily visitors, solidifying Meta’s position as the second-largest ad tech company globally, following Alphabet‘s Google.

The company is harnessing AI to enhance user engagement and cut advertising costs. CEO Mark Zuckerberg reported that AI recommendations have increased user time on Facebook and Instagram by 8% and 6%, respectively. Additionally, the new Meta AI assistant reached over 500 million monthly users shortly after its beta release, with expectations for it to become the most utilized AI assistant by year’s end.

Meta Platforms announced solid financials for the third quarter, surpassing market expectations. Revenue climbed 19% to $40.6 billion, while GAAP earnings grew 37% to $6.03 per diluted share. Zuckerberg noted, “AI is positively impacting everything from our core business to new service development.”

Despite a staggering operating loss exceeding $58 billion in its Reality Labs division since 2020, which focuses on augmented reality (AR), some analysts are optimistic about future profitability. Rosenblatt analyst Barton Crockett mentioned that Meta’s Ray-Ban smart glasses could see strong holiday sales.

Moreover, Meta recently unveiled Orion, its first fully holographic AR glasses. During a recent earnings call, Zuckerberg implied that they are close to offering attractive glasses that will meld the physical and digital realms seamlessly.

Looking ahead, analysts expect Meta Platforms’ earnings to rise by 21% annually over the next three years. At a current valuation of 28 times earnings, this presents a potentially attractive opportunity for investors considering a stake in the company.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, holds a seat on The Motley Fool’s board of directors. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.