2023 started out on a gloomy note, as many investors expected the then-raging inflation crisis to result in a full-blown recession. Those fears never materialized, though. Instead, higher federal interest rates slowed down price increases, lifting a heavy yoke from the proverbial shoulders of growth stocks and other risk-laden investments. As a result, the stock market staged a solid rebound as the inflationary fears melted away, and the S&P 500 (^GSPC 0.11%) index now stands just 4% below the all-time highs of January 2022.
By some definitions, the stock market has entered a technical bull market, following the proper bear market of 2022. Based on the results of the last 12 bull markets, there should be plenty of sunshine to follow the recent rain. The five-year returns of the recorded bull markets worked out to an average gain of 169%, or an average of 28.7% per year.
With the idea of buying low and selling high (if you ever sell them at all), this could be the perfect time for putting your investable cash to good use. Even if you only have $1,000 to invest right now, you can start meaningful stock positions now. You can always add more money later, or simply sit back and watch your investment grow over the long haul.
For example, you should consider Nvidia (NVDA +2.59%) and CrowdStrike (CRWD 3.86%) -- two high-octane growth stocks with tremendously bright futures and very large market footprints. They are trading at high valuation ratios already, but for good reasons. Pouncing on these opportunities today should serve you well as the bull market gains momentum.
NASDAQ: CRWD
Key Data Points
CrowdStrike: A calculated bet on AI and margin expansion
In the ever-evolving realm of cybersecurity, CrowdStrike (CRWD 3.86%) stands out not just as a player but an innovative leader. The company has been analyzing and solving data security threats with artificial intelligence (AI) since 2012.
New technology always ups the intensity of the cybersecurity arms race. Right now, both the heroes and the villains are gaining new insights from AI tools. Hackers use machine learning to overcome existing data safeguards, while security experts run deep learning analyses to put up effective shields against the new threats.
And with a substantial head start under its belt, CrowdStrike offers some of the fastest and most effective security responses on the market. Moreover, the company already built generative AI functions into its Falcon security system. The interactive AI chatbot, named Charlotte, helps CrowdStrike customers find holes in their data security. Soon, they will be able to build a custom tool to plug those holes.
"The first thing you could do is ask Charlotte, OK, what should we build?" CrowdStrike CFO Burt Podbere said at a recent industry conference. "Charlotte will give you an answer. And the next step would be, OK, Charlotte, build it for us. That's huge, right? That's going to save time, money, effort. That's not here today, asking Charlotte to build you the apps, but you can see where we're going."
So CrowdStrike is an AI-based security leader today, with ambitions for even greater cybersecurity solutions in the years ahead. The stock is not exactly cheap today, having gained 116% over the last year and trading at 21 times trailing sales, but you're paying that premium for a top-notch innovator with the rocket engines running at full blast. CrowdStrike's revenue and free cash flows are soaring:
CRWD Revenue (TTM) data by YCharts
Nvidia: An early leader in AI hardware
Graphics processing unit (GPU) specialist Nvidia looms large in the tech industry, and I mean really huge. The days of a small-cap company producing gaming-oriented graphics cards like the TNT and Riva 128 are long gone. Now, Nvidia sports a trillion-dollar market cap (and change) thanks to an early lead in the hardware portion of the current AI boom.
This transformation is rooted in strategic innovation and market-defining product releases. The latest feather in Nvidia's cap is in the field of semiconductors used for training the latest and greatest AI engines, including the software behind OpenAI's ChatGPT. Now, the company is enjoying an influx of orders for that hardware and its future iterations. Lots of large businesses are planning to match or outshine OpenAI's best AI efforts. That takes a boatload of high-priced AI accelerator cards, and Nvidia is the largest name in the game so far.
Nvidia thinks of these AI-training megasystems as AI factories. At another investor conference, Ian Buck from Nvidia's accelerated computing division explained that the leading cloud computing platforms are building massive AI factories right now. They will resell access to some of these systems and reserve other AI factories for their own use.
"We will see the enterprise become a significant portion in terms of consuming the factories," Buck said. "It's early days now, but that is definitely a trend that's catching on."
NASDAQ: NVDA
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Smaller enterprises may build their own AI factories down the line, but this is how the AI industry is shaping up so far. And yes, Nvidia faces competition from Advanced Micro Devices and Intel, but these challengers can't match Nvidia's established AI market heft yet. Until AMD-powered or Intel-based supercomputers deliver the first market-beating AI factories with their own hardware, Nvidia has an iron grip on that crucial first-mover advantage.
So Nvidia's stock price has more than tripled in 2023 and its shares trade at a lofty 26 times sales -- a valuation typically reserved for hungry upstarts and not trillion-dollar giants. However, given its pivotal role in the AI revolution, its first-mover advantage, and the ever-increasing demand for its technology, Nvidia presents a compelling case for those willing to invest in a company that's shaping the future of technology.
The price of entry is high, but the potential rewards could be monumental for patient investors who understand the transformative power of AI and Nvidia's central role in it. You shouldn't go all-in on Nvidia, in case the company fumbles a future product launch or its rivals catch up too quickly. But this stock belongs in any serious AI investor's portfolio nowadays.
