We're only two months into the new year, and the market has already seen significant growth. The Nasdaq Composite is up 6% year to date, with much of that rise owed to excitement over tech.
Budding industries like artificial intelligence (AI) are rapidly expanding, boosting multiple areas of the market, from cloud computing to consumer tech, autonomous vehicles, machine learning, and more. As a result, it could be a smart move to dedicate a portion of your holdings to the industry and potentially benefit from its tailwinds for years.
The tech market has a long reputation for delivering consistent gains over the long term and has massive potential in the coming years, thanks to AI.
So, here are two hypergrowth tech stocks to buy in 2024 and beyond.
1. Nvidia
As a leading chipmaker, Nvidia (NVDA 6.18%) has a powerful position in tech. The company supplies its chips to firms across the industry, with its hardware powering products such as laptops, custom-built PCs, cloud platforms, video game consoles, and AI models.
In fact, Nvidia is the exclusive supplier of chips to Nintendo's Switch, the third-best-selling video game console of all time, with 139 million units sold to date. Nvidia formed lucrative partnerships with companies across tech, allowing it to benefit from the growth of multiple industries.
Shares in Nvidia have skyrocketed 57% since Jan. 1 and have shown no signs of slowing. The tech firm rallied investors by achieving a majority market share in AI chips, which has led to soaring earnings.
Nvidia reported its fourth quarter of fiscal 2024 earnings on Feb. 21. During the period, revenue rose 265% year over year, beating Wall Street estimates by $1.6 billion. Skyrocketing demand for AI led to a spike in graphics processing unit (GPU) sales, which saw revenue in Nvidia's data center segment increase by 409%.
Despite stellar growth over the last year, Nvidia is still trading at a value compared to its potential. The company's price/earnings-to-growth ratio has dropped 96% in the last six months to an attractive 0.1, making it a no-brainer buy in 2024.
2. Microsoft
As the home of potent brands like Windows, Office, Xbox, and LinkedIn, Microsoft (MSFT 1.82%) is a tech behemoth and one of the biggest threats in the industry. The company's shares are up 65% in the last 12 months, which saw it recently surpass Apple as the world's most valuable company, with its market cap currently at just over $3 trillion.
Microsoft won over investors with an expanding role in AI. Heavy investment in ChatGPT developer OpenAI has led to a lucrative partnership and access to some of the most advanced AI models in the industry.
The Windows company has used OpenAI's technology to introduce AI features across its product lineup. In 2023, Microsoft added new AI tools to its Azure cloud platform, integrated aspects of ChatGPT into its Bing search engine, and boosted productivity in its Office software suite by adding AI features.
Moreover, the company is taking early steps to monetize its new offerings, launching an AI assistant called Copilot through its Microsoft 365 subscription service. The company describes the assistant as "your everyday AI companion." Some of its generative capabilities include creating a first draft in Word, generating a full PowerPoint presentation based on a simple prompt, and producing data visualizations in seconds in Excel.
Copilot has debuted as a $30 monthly add-on to a 365 membership, which could lead to significant earnings boosts for Microsoft.
The company is a king in software, attracting billions of consumers and businesses to its various productivity offerings. Its products and OpenAI's AI models could prove to be a powerful combination over the long term and lead to consistent boosts to earnings.
Additionally, Microsoft achieved more than $67 billion in free cash flow last year, highlighting the reliability of its business and its value as a long-term investment. The company's stock is slightly overvalued, with its forward price-to-earnings ratio at about 35. However, its long history of growth, dominant role in tech, and expanding venture into AI means it is likely worth its high valuation.
The Windows company is profiting from tailwinds across the industry and has excellent prospects in AI, suggesting this hypergrowth stock is one you can count on in 2024 and long into the future.
