History Suggests the Nasdaq Could Soar in 2023 -- 2 Super Semiconductor Stocks to Buy if It Does

The Nasdaq-100 is home to 100 of the largest technology companies listed on the Nasdaq stock exchange. The index has a remarkable track record, delivering a positive annual return 78% of the time since its inception in 1985.

The tech sector is known for its high-growth nature, and so bearish periods in the Nasdaq-100 tend to be short-lived. The index has only declined in consecutive years on one occasion, and that was during the dot-com bust from 2000 to 2002. Since 2022 was a losing year, history bodes well for a (potentially strong) gain in 2023. 

How strong? Here's what the rebounds looked like after losing years in 1990, 2008, and 2018:

Data source: Slickcharts. 

That's an average return of 52% in the year following a loss (excluding the 2000-2002 period).

The semiconductor sector could be a big winner

No matter the device you're using to read this article, it's powered by advanced computer chips manufactured by the semiconductor industry. These pieces of hardware are growing increasingly important to everyday life. They're inside smartphones and computers we use, but they also drive the incredibly advanced data centers we normally don't see -- the facilities that host (and deliver) our digital experiences. 

Consumers and businesses alike pulled back on their spending in 2022, which resulted in the chip sector underperforming the broader market. The iShares Semiconductor ETF plunged 35% for the year, faring marginally worse than the Nasdaq-100. But it has already gained 21% so far in 2023, and it could accelerate further as the economy -- and the stock market -- recovers. Longer-term, an estimate by Fortune Business Insights suggests the chip sector could be worth over $1.5 trillion annually by 2030.

Here's why shares of Advanced Micro Devices (AMD -5.44%) and Axcelis Technologies (ACLS -3.52%) are two of the best stocks in the industry to buy now.

Advanced Micro Devices is a dominant force

AMD produces some of the most sought-after semiconductors in the world. It has a diverse portfolio of hardware products serving a range of requirements from personal computing to game consoles to data centers. The company is heavily exposed to consumer spending because its chips power popular offerings from the likes of Sony, Microsoft, and even Tesla.

Naturally, those consumer-centric areas of AMD's business suffered a slowdown in 2022. On the other hand, they could be expected to bounce back this year if the economy picks up steam.

But AMD's data center segment bucked the broader economic environment and put in a stellar performance. For the full 2022 year, its revenue increased by 64% to $6 billion. That was triple the growth rate of its gaming segment, which remains its largest. Some of the most dominant providers of cloud services in the world turn to AMD for their data center hardware, including Amazon Web Services, Microsoft Azure, and Alphabet's Google Cloud.

Nonetheless, AMD's best growth in the data center space might be ahead of it. Last year, it closed a $49 billion acquisition of Xilinx, which is the leader in adaptive computing. Adaptive technologies allow chip hardware to be reconfigured in a live environment -- long after the manufacturing process -- which can drastically shorten the upgrade cycle. This hardware could shape the future of rapidly growing industries like artificial intelligence and machine learning. 

With Xilinx on board, AMD believes it will lead the high-performance computing industry going forward. Since AMD stock is currently down 50% from its all-time high, it could be among the biggest winners if the Nasdaq-100 soars this year -- but more importantly, it could be one of the biggest winners over the long term. 

Axcelis Technologies carried a record-high order backlog into 2023

There weren't many companies that dodged the economic slowdown in 2022, but Axcelis Technologies was one of them. In fact, its stock returned 6% last year while the broader markets were deep in the red, and so far in 2023, it's already sitting on a 56% gain. 

That's because its business is jumping from strength to strength. While Axcelis doesn't produce any semiconductors itself, it makes highly sought-after ion implantation equipment that is critical to the fabrication process. Put simply, when chipmakers expand their production capacity, they need Axcelis' equipment to do so. As a result, its customers are always thinking several years ahead.

That's why the company's revenue grew at a brisk pace of 39% to $920 million in 2022, beating even its own expectations. Its earnings per share soared by 89% to $5.46. But the real story is Axcelis' order backlog, which climbed throughout 2022 and entered 2023 sitting at a record high of more than $1.1 billion. It suggests this year could be just as strong as the one before.

Despite the recent surge in Axcelis stock, it trades at a price-to-earnings (P/E) ratio of just 22.3. That's a 10% discount to the P/E of the Nasdaq-100, which currently stands at 24.9. If anything, Axcelis' recent operating performance warrants a premium instead, so the stock is still relatively cheap. If history does repeat for the Nasdaq-100 index this year, investors who are looking for a winner might want to start with this proven candidate.