The technology-heavy Nasdaq Composite gained some 43% in 2023. And investors are hopeful it will rally further as excitement continues to increase around generative artificial intelligence (AI) technologies. Expectations about interest rate cuts should also push up the Nasdaq in 2024.

Against this backdrop, it makes sense for retail investors to consider picking up small stakes in high-quality blue chip stocks that are already riding robust secular tailwinds ahead of this potential rally. Here's why Microsoft (MSFT 1.82%) and Advanced Micro Devices (AMD 2.37%) fit the bill.

Microsoft

For a long time, Microsoft has been widely famous for its Windows operating system and its Microsoft Office productivity suite. But lately, the company has also become famous for its Azure cloud computing platform and $13 billion investment in OpenAI (developer of the famous chatbot ChatGPT).

Microsoft Azure's cloud computing business has been rapidly expanding its market share. Azure accounted for a 25% share of global spending on cloud infrastructure services in the third quarter (ended Sept. 30), up from 22% in the same quarter of the prior year.

With a global cloud footprint of nearly 60 data center regions and a robust AI infrastructure capable of training and running large language models in real time, Azure has become a major growth catalyst for Microsoft.

Its office productivity business is also showing improvement. While the licensing portion of the business is struggling, enterprises are increasingly opting for cloud-based Microsoft 365 subscriptions.

Besides popular applications such as Office, PowerPoint, and Excel, companies are also using premium offerings in cybersecurity, analytics, voice, and compliance through Microsoft 365 subscriptions. The Office 365 business saw robust expansion and a rise in average revenue per user (ARPU).

The company also expects Microsoft 365 Copilot, an AI assistant integrated into several of the company's offerings such as Office, Outlook, and GitHub, to attract new paid customers and contribute significant revenue in the coming years.

Considering these tailwinds, Microsoft seems to be a compelling pick for 2024.

Advanced Micro Devices

After rallying nearly 120% in 2023, shares of semiconductor company Advanced Micro Devices have declined by around 6% in 2024. This was based on news of the Dutch government partly revoking ASML Holdings' export license for shipping some lithography machines to China.

It seems that the semiconductor companies fear the possibility of the Chinese government retaliating by restricting the export of certain metals. While this worry cannot be ignored, there are several reasons to like the stock.

First, AMD's EPYC server processors have been a major beneficiary of the rising demand for high-performance computing at data centers. With organizations increasingly migrating to the cloud, there has been growing demand for high-performance and cost-effective third-generation and fourth-generation EPYC processors.

Subsequently, AMD's server chips have captured over a 50% share in the North American hyperscaler market.

Second, AMD's server chips currently have a mid-teens share in the enterprise market. But with partners such as Hewlett Packard Enterprise, Dell Technologies, and Super Micro Computer expanding their portfolio of AMD products, the company expects more from the enterprise segment in the coming years.

Third, AMD expects the data-center AI accelerator market to reach over $400 billion by 2027. To capitalize on this opportunity, the company has launched the MI300 family of chips optimized for AI workloads.

The MI300 is competitive with Nvidia's H100 chip in training large language models, but it could prove even better with large language models (running them in a real-time environment) due to its high memory bandwidth. Hence, AMD expects MI300 revenue to surpass $2 billion in fiscal 2024 and is working to ensure a sufficient supply of these chips.

Lastly, AMD's investments in developing its software and ecosystem have also helped drive the adoption of its hardware. The company has made strategic acquisitions such as Mipsology and Nod.ai to further enhance its AI software.

So even though AMD's current valuation of 9.5 times sales is higher than its three-year average of 8, investors can consider paying this premium to get a piece of the action in this solid growth stock.