Nasdaq Rises 32% in 2023: What It Means for Investors in 2025

The Nasdaq Composite (NASDAQINDEX: ^IXIC) has gained 32% year-to-date, fueled in part by excitement surrounding artificial intelligence (AI). This trend is promising for 2025, as historical data suggests that a strong Nasdaq often leads to continued growth.

Since the Nasdaq’s inception in 1971, it has recorded at least a 20% return in 20 different years and can boast returns of at least 30% in 12 of those years. Typically, such strong performance in one year is often followed by additional growth in subsequent years, as highlighted below:

• Following a gain of over 20% in a year: The Nasdaq has historically averaged a return of 17% the following year.
• Following a gain of over 30% in a year: The index has averaged a return of 19% in the next year.

In summary, if the Nasdaq achieves a return of at least 30% this year, historical patterns indicate it could rise another 19% next year. While past performance does not guarantee future outcomes, aligning with successful trends can be wise for long-term investors.

Among Nasdaq stocks, Amazon (NASDAQ: AMZN) has garnered particular attention from Wall Street analysts. With 70 analysts monitoring the company’s performance, an impressive 94% have rated it a buy, while the remaining analysts suggest holding. Not a single analyst recommends selling at this time.

Amazon’s Competitive Edge Across Multiple Markets

Amazon leads as the largest e-commerce marketplace in North America by sales. Current projections indicate that the company is likely to increase its market share in 2025. Notably, online sales currently comprise less than 17% of total retail sales in the U.S. This leaves significant room for growth, particularly in the high-margin areas of digital advertising and cloud computing.

As the third-largest advertising technology company globally, Amazon ranks just behind Alphabet‘s Google and Meta Platforms. The company is rapidly capturing a larger share of the market. eMarketer forecasts that advertising revenue growth will accelerate for the third consecutive year in 2025. This growth is partially driven by the recent integration of ads on Prime Video, as well as Amazon’s adoption of AI to enhance its advertising capabilities, including generative AI tools for brands to create images and videos.

When it comes to cloud computing, Amazon Web Services (AWS) holds the title as the largest public cloud in terms of infrastructure and platform spending. With a 31% market share, it is competitive with the combined 33% market share of Microsoft and Google. Brent Thill from Jefferies emphasizes that AWS’s stronghold gives it a “huge advantage in AI” as businesses tend to remain loyal to their established providers when implementing new AI services.

AWS’s commitment to expanding its AI capabilities is noteworthy. Recent investments include custom AI chips for both training and inference, Bedrock for developing generative AI applications, and Amazon Q, a natural language assistant. According to CEO Andy Jassy, AWS has introduced nearly double the number of machine learning and generative AI features compared to all other leading public clouds over the past 18 months.

Image source: Getty Images.

Strong Revenue Growth and Fair Valuation for Amazon

In the third quarter, Amazon reported financial results that exceeded Wall Street estimates on both revenue and earnings. The company’s revenue rose 11% to reach $159 billion, driven by strong performance in advertising and cloud computing. Furthermore, operating margins enhanced by more than three percentage points, contributing to a 52% increase in its net income to $1.43 per diluted share.

During the earnings call, CEO Andy Jassy highlighted that AWS not only generates a multibillion-dollar AI business but is experiencing triple-digit sales growth in AI. This upward momentum is expected to continue. According to the International Data Corp., cloud spending is anticipated to grow by 19% annually through 2028, with the AI platform services market becoming the fastest-growing segment during that period.

With a robust presence in e-commerce, digital advertising, and cloud computing, Amazon strategically uses AI to expand its market share in these sectors. Consequently, Wall Street forecasts that Amazon’s earnings will grow by 25% in the next year, which suggests a current valuation of 49 times earnings is relatively reasonable.

Currently valued at nearly $2.5 trillion, Amazon still has significant potential for growth. Investors willing to hold their positions long-term may find this trillion-dollar AI stock an appealing opportunity.

A Unique Opportunity You Might Not Want to Miss

Do you feel you’ve missed the chance to invest in successful stocks? You’ll want to take note of this.

Occasionally, our expert analysts issue a “Double Down” stock recommendation for companies poised for growth. If you’re concerned about having missed your window to invest, now could be the best moment to act. Here’s how some past recommendations have performed:

• Nvidia: If you invested $1,000 when we doubled down in 2009, you’d have $359,936!*
• Apple: If you invested $1,000 when we doubled down in 2008, you’d have $46,730!*
• Netflix: If you invested $1,000 when we doubled down in 2004, you’d have $492,745!*

Currently, we’re issuing “Double Down” alerts for three remarkable companies, and opportunities like this do not come often.

See 3 “Double Down” stocks »

*Stock Advisor returns as of December 9, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Trevor Jennewine has positions in Amazon. The Motley Fool has positions in and recommends Alphabet, Amazon, Jefferies Financial Group, Meta Platforms, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. 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.