The Nasdaq-100 index rose nearly 54% in 2023. Even better, it started the first quarter of 2024 with additional gains of more than 8% so far. The index currently sits at 18,226, and history suggests that it will end at a higher level by the end of the year. According to data collected by brokerage firm Capex.com, the Nasdaq-100 has clocked average gains of 24.1% in the year following one in which it recorded gains of more than 40%. The only exception to this is the year 2000 when stocks fell over multiple years during the dot-com bubble.
Assuming history does repeat in 2024, the Nasdaq-100 could end the year at a level of 20,880 (which is 24.1% higher than last year's close). Based on the index's current reading, the Nasdaq-100 could jump another 14.6% this year if it follows the average.
That level of growth is why now could be a good time for investors to buy shares of Confluent (CFLT -2.05%) and Nvidia (NVDA -0.03%), two Nasdaq stocks that have been in fine form on the market this year. Let me explain.
1. Confluent
Shares of Confluent have jumped more than 26% so far in 2024, driven mainly by the company's impressive results for the fourth quarter of 2023, which were released in February. Wall Street appreciated the company's better-than-expected numbers, as its revenue increased 26% year over year to $213 million. Even better, Confluent swung to an adjusted profit of $0.09 per share as compared to a loss of $0.09 per share in the same period last year.
What's even more impressive was Confluent's guidance. The company -- which provides a data streaming platform with which customers can process and use their data in real-time instead of storing it in silos for processing later -- also provided solid guidance. Confluent is forecasting $950 million in revenue for 2024, which points toward an increase of 22% and is higher than the Wall Street estimate of $940 million.
It is also worth noting that Confluent expects adjusted earnings to increase to $0.17 per share this year from $0.04 per share in 2023. A closer look at the company's business will tell us just why its bottom line is set to increase at a much faster pace than its revenue.
Confluent's customers have increased their spending on the company's products, which means that it is getting more money from each customer. This is evident from the 24% year-over-year growth in the number of customers with $100,000 or more in annual recurring revenue (ARR) to 1,229 in the fourth quarter of 2023. Meanwhile, the number of customers with $5 million or more in ARR jumped to 19 from nine in the same period last year.
Confluent ended fiscal year 2023 with a customer count of almost 5,000. This bodes well for the company's revenue pipeline, as customers who use its solutions for longer periods tend to spend more money on its offerings. For instance, a telecom company that gave Confluent $400,000 worth of business in the fourth quarter of 2019 increased its ARR to $5.9 million in Q4 2023. Similarly, a Fortune 50 bank increased its spending by 12 times from the second quarter of 2018 to the fourth quarter of 2023.
Confluent predicts that its addressable market could increase to $100 billion in 2025 from $60 billion in 2022. As such, it won't be surprising to see Confluent sustaining its solid growth over the next few years, which explains why analysts expect its earnings to increase at a nice pace.
CFLT EPS Estimates for Current Fiscal Year data by YCharts
What's more, consensus estimates are projecting Confluent's earnings to increase at an annual rate of almost 124% for the next five years. All this indicates that Confluent could turn out to be a solid pick for investors looking to buy a growth stock and, given the solid form that it is in right now, it would be a good idea to buy it before it soars higher.
2. Nvidia
With Nvidia's shares up 81% so far this year thanks to artificial intelligence (AI)-powered growth in revenue and earnings, investors may think it's too late to buy Nvidia right now. However, the stock is trading at 35 times forward earnings. That's lower than Nvidia's five-year average forward earnings multiple of 39.
Buying Nvidia at these multiples could turn out to be a smart move considering its terrific pricing power in AI chips, which is expected to result in outstanding growth in its earnings. The following chart indicates that Nvidia is expected to clock impressive bottom-line growth in the current and the next couple of fiscal years as compared to its adjusted earnings of $12.96 per share in the previous fiscal year.
NVDA EPS Estimates for Current Fiscal Year data by YCharts
It reportedly enjoys a market share of 92% in AI GPUs (graphics processing units), and its current flagship H100 processor sells for $25,000 to $30,000. Investment banking company Raymond James estimates that it costs $3,320 for Nvidia to make a single H100 chip. So, it was not surprising to see Nvidia's adjusted earnings increasing 288% in fiscal 2024 to $12.96 per share.
Nvidia's upcoming Blackwell B200 processors are expected to cost $6,000 to build, according to Raymond James. With Nvidia expected to sell each B200 for $30,000 to $40,000, the company's earnings power should improve further once these chips hit the market.
As a result, analysts raised their earnings expectations for Nvidia. In the past 30 days, 10 analysts covering Nvidia increased their earnings target for fiscal 2025, while 13 raised their expectations for fiscal 2026. TechNavio estimates that the data center GPU market which Nvidia dominates could clock an annual growth rate of over 32% through 2028, setting the stage for Nvidia to maintain its robust earnings growth.
Throw in the possibility of Nvidia making big money from other AI hardware-related markets such as personal computers, and the possibility of the company consistently outperforming consensus expectations cannot be ruled out. So, buying this AI stock before it jumps further could turn out to be a smart move -- it may not only benefit from the growing demand for AI chips, but the Nasdaq index's rally could rub off on it as well.
