of Nasdaq 100 The index is up 10% so far in 2024, which is not surprising as it has benefited from the robust growth reported by its major constituents, which are benefiting from increased demand for artificial intelligence (AI) and cloud computing.
The positive is that the Nasdaq 100 Index is likely to continue to rise as the year progresses. Deutsche Bank The firm predicts that the index could rise 19% in 2024, based on subsiding inflation and solid economic growth in the U.S. Meanwhile, the spread of AI is likely to remain the biggest driver for tech stocks in 2024 and could play a central role in driving the Nasdaq 100 Index higher.
Let's take a closer look at two stocks that make up the Nasdaq 100 Index. NVIDIA (NASDAQ: NVDA) and Qualcomm (NASDAQ: QCOM) — companies that are doing great in AI adoption. Let's take a look at why it makes sense to buy these two AI stocks before the Nasdaq records another rally.
1. NVIDIA
NVIDIA's astounding 121% gain in 2024 played a central role in driving the Nasdaq 100 Index higher, and the company's stock price's impressive gains look set to continue: Analysts are raising their earnings forecasts following the company's latest quarterly report.
In the last 30 days, 47 analysts have raised their earnings per share (EPS) estimates for fiscal year 2025, and 44 have done the same for fiscal year 2026. Nvidia's EPS estimate improvements are shown in the following chart.
Analysts expect NVIDIA's revenue to grow for two reasons. First, the company has been able to maintain its dominance in the AI chip market. It finished 2023 with a 94% share of the AI server market. As a result, the company's data center chip sales are expected to grow a staggering 427% year-over-year in the first quarter of fiscal 2025 (ended April 28), reaching a record high of $22.6 billion.
Nvidia's competitors Am and Intel The companies are reporting data center revenues of $2.3 billion and $3 billion, respectively, in the first quarter of 2024. More importantly, the arrival of the new generation of chips will enable Nvidia to widen the technological gap with its competitors and maintain its dominance in the AI chip market. The company's upcoming chips, based on the Blackwell architecture, are touted to be four times faster than the current chips based on the Hopper architecture.
Nvidia notes that demand for Blackwell chips is so high that it will be hard to meet it by 2025. As such, the company's AI dominance is likely to continue, which should lead to increased shipments of AI graphics cards.
The second reason analysts are optimistic about Nvidia's revenue growth is the company's strong pricing power in AI chips. Raymond JamesIt could cost Nvidia $6,000 to manufacture each Blackwell B200 accelerator, and with an expected selling price of $30,000 to $40,000 per processor, the company stands to make a handsome profit on the new chips.
Overall, the long-term growth of the AI chip market will be a big tailwind for Nvidia for the reasons mentioned above, which is why this AI stock is likely to surge even more in 2024 following the impressive gains it's already recorded.
2. Qualcomm
Qualcomm is showing impressive momentum, up 41% so far in 2024, and AI-related tailwinds in the smartphone and personal computer (PC) markets are expected to turn around the company's fortunes, poised to propel the Nasdaq-100 stock even higher.
Qualcomm's revenue for fiscal 2023, which ended last September, fell 19% to $35.8 billion. Adjusted earnings also fell 33% to $8.43 per share.
However, revenue for the first half of fiscal 2024 increased 3% year over year to $19.3 billion. The company also reported second-quarter fiscal 2024 adjusted earnings of $2.44 per share, up 13% year over year.
Analysts expect Qualcomm's revenue to grow 7% to $38.3 billion this fiscal year, and earnings to rise 18% to $9.91 per share. More importantly, Qualcomm is expected to continue growing in the coming years, as the following chart shows:
However, Qualcomm's growth is likely to exceed expectations as demand for AI-enabled smartphones is expected to surge and Qualcomm is expected to be a major beneficiary of this market.
Counterpoint Research predicts that a total of 1 billion AI-enabled smartphones could ship between 2024 and 2027. Researchers expect Qualcomm's chips to power more than 80% of the AI-enabled smartphones produced in the next few years, which isn't surprising given how many smartphones the company's chips already power. Samsung's flagship AI-enabled Galaxy smartphone.
Moreover, Qualcomm's strategy to incorporate AI into mid-range smartphones could help it maintain its leading position in this market in the long term, while at the same time, the company is also beginning to make headway in the AI-enabled PC market. Microsoft It recently unveiled a new AI personal computer powered by Qualcomm chips.
The company said all major PC OEMs plan to soon launch AI PCs powered by its Snapdragon chips, which represents a big new opportunity for Qualcomm, with shipments forecast to grow 44% annually through 2028, according to Canalys.
All of this suggests that Qualcomm's growth may eventually accelerate, and why it's a good idea to buy the company's shares while they're trading at just 20 times forward earnings, a discount to the Nasdaq 100's 27 times forward earnings.
Should I invest $1,000 in Nvidia right now?
Before you buy Nvidia stock, consider the following:
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Things to consider NVIDIA This list was created on April 15, 2005…If you invested $1,000 at the time of recommendation, That comes to $740,688.!*
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Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Advanced Micro Devices, Microsoft, Nvidia, and Qualcomm. The Motley Fool recommends Intel and recommends the following options: buy January 2025 Intel $45 calls, buy Microsoft January 2026 $395 calls, sell Intel August 2024 $35 calls, and sell Microsoft January 2026 $405 calls. The Motley Fool has a disclosure policy.
The post 2 Top Artificial Intelligence (AI) Stocks to Buy Before the Nasdaq Soars was originally published by The Motley Fool
