The Nasdaq-100 technology index plunged into bear territory in 2022, ending the year with a 33% loss. However, historical data going back to its inception in 1986 suggests consecutive losing years are very rare, with just one occurrence during the dot-com tech bust from 2000 to 2002. In fact, down years are usually followed immediately by monster gains.
True to form, the Nasdaq-100 bounced back in 2023 and is currently sitting on a whopping 46% return. Investors might be pleased to know that also bodes very well for 2024.
According to historical data, bounce-back years are always followed by another positive year for the Nasdaq-100. There have been four such occurrences dating back to 1986, with an average gain of 21.5%.
If history does repeat, here are five stocks investors will want in their portfolios in 2024.
Image source: Getty Images.
1. Microsoft
Microsoft (MSFT 1.82%) stock is on track to end 2023 near an all-time high. The company is having one of the most transformative years in its history, as it continues to weave artificial intelligence (AI) into its entire product portfolio.
Microsoft kicked off 2023 with a $10 billion investment in ChatGPT developer OpenAI, and that technology is now embedded in the Windows operating system, the 365 document suite, the Edge internet browser, the Bing search engine, and the Azure cloud platform. It's one of very few companies already monetizing AI, with over 18,000 business customers now accessing OpenAI's latest GPT-4 model on Azure to develop their own AI applications.
But this is just the beginning. Next year, Microsoft will make its brand-new AI data center chips available to Azure customers, adding yet another point of differentiation from its cloud competitors. Plus, investors should expect more AI-powered software products from the company as it discovers new ways to apply the technology. Overall, 2024 could be one of Microsoft's biggest years ever.
2. Uber Technologies
Investors in Uber Technologies (UBER -0.38%) stock are sitting pretty this year, because it has more than doubled. The company's mobility (ride hailing) business has roared back to life following a long recovery from pandemic-related restrictions, and it has become the growth engine behind the entire organization once again.
Uber is coming off a number of records in its recent third quarter of 2023. Its gross bookings hit an all-time high of $35.3 billion, as did its revenue, which came in at $9.3 billion. The company also had 142 million monthly active customers, which was another record. Mobility led the charge with bookings growing by 30% year over year, compared to just 16% growth in its food delivery segment.
But Uber is on the cusp of a significant long-term opportunity, and 2024 could mark an inflection point. The company has signed a series of agreements with leading developers of autonomous self-driving vehicles. Customers can already book an autonomous ride on Uber in Phoenix, Arizona, thanks to its partnership with Alphabet's self-driving vehicle subsidiary, Waymo.
Considering drivers are Uber's largest cost by a wide margin, autonomous vehicles could transform the company's economics. Investors should pay close attention to its progress on this front in 2024, because it could send Uber stock soaring.
3. Palo Alto Networks
Cybersecurity plays an integral role in modern organizations, especially those relying on cloud computing to run their operations online. Palo Alto Networks (PANW 0.91%) is an industry leader, and unlike most of its peers, its stock is set to end 2023 at a record level.
Palo Alto is using advanced technologies like AI to automate threat detection and incident response. The company says 93% of security operations centers within organizations still rely on manual, human-led processes, which means 23% of security alerts are left uninvestigated. That creates unacceptable vulnerabilities.
Palo Alto's new Cortex XSIAM security operations platform uses AI to mitigate those risks, by delivering an automation-first approach. One customer said XSIAM reduced its mean time to repair (MTTR) to just 16 minutes (from three days) following an incident. That's an increase in efficiency of 270 times. The platform only launched a year ago, yet it has already amassed over $1 billion in bookings.
But that's just one product among more than 35 Palo Alto has embedded with AI, across its cloud security, network security, and security operations segments. As the frequency of cybersecurity incidents continues to increase, Palo Alto is a great stock for investors to own.
4. Axcelis Technologies
Semiconductor companies outside of the AI space have struggled this year, as consumers cut back on big-ticket purchases of computers and devices. But Axcelis Technologies (ACLS 3.06%) has bucked that industry trend. The semiconductor service company produces ion implantation equipment which is a crucial component of the chip fabrication process.
Through the first nine months of 2023, Axcelis grew its revenue by 25% year over year, to $820.3 million. Its profitability also surged, with its earnings per share growing by 41% to $5.28 over the same period. The company said it's experiencing strong demand for its Purion line of equipment, which is popular among electric vehicle manufacturers for its ability to produce silicon carbide power devices. That chemistry is far more efficient than silicon-based hardware, which leads to longer battery life and faster charging times.
As a semiconductor service company, Axcelis is insulated from short-term shifts in the chip industry because its customers often plan their capital expenditures years in advance. If they want to expand their production capacity in the future, they often begin ordering equipment ahead of time. As a result, Axcelis will carry a whopping $1.2 billion order backlog into 2024, which should support another year of strong growth.
Moreover, Axcelis stock trades at a bargain price to earnings (P/E) ratio of just 17.7 right now. That's 38% cheaper than the Nasdaq-100, which trades at a P/E ratio of 28.9, so there's no time like the present to buy in.
5. Nvidia
Finally, can a technology investor's portfolio really be complete without Nvidia (NVDA 6.18%)? Its stock has soared 226% this year as the company ascended to the top of the AI industry thanks to its powerful data center graphics chips (GPUs). That hardware remains in high demand from leading tech giants like Microsoft, Amazon, and Alphabet, who are racing to offer their cloud customers sufficient computing power to develop their own AI applications.
Nvidia just reported its financial results for the fiscal 2024 third quarter (ended Oct. 29). Through the first three quarters of the year, the company generated $29.1 billion in data center revenue, which was a whopping 155% increase compared to the same period in fiscal 2023. But Nvidia is just getting warmed up, because its CEO, Jensen Huang, says there is $1 trillion worth of existing data center infrastructure that needs upgrading to support accelerated computing and AI.
Nvidia is the undisputed leader in this space right now. The company will be very hard to unseat because it has built an entire ecosystem around its chips, including the CUDA software platform developers use to build applications on top of its GPUs. CUDA can't be used with chips from any other manufacturer, so if a customer wants to move away from Nvidia's hardware, they also have to abandon the software -- which is unlikely given developers have grown so comfortable using it.
Nvidia's leading H100 data center GPU remains in high demand. But the company just launched the new H200, which can double the inference speed of the H100. It means developers can train large language models far more quickly. Plus, it consumes 50% less power so it's a huge cost saver for data center operators. The new chip should buoy Nvidia's growth in the new year, but over the longer term, this could become the largest company in the world.
