The Nasdaq recently hit a new record high, and the good times can’t end. History tells us that in the past 10 years of annual market declines — dating back to the early 1970s — the index has always climbed for at least two consecutive years afterward. And on just one occasion, the index posted double-digit gains during its second year of gains. If this trend continues, the Nasdaq, which is on track for a 7.4% year-to-date gain, is set to climb even higher in 2024.
And stocks that have benefited and may continue to lead the movement are artificial intelligence (AI) players. Investors are excited about this high-growth, high-potential technology. AI can make game-changing moves — like getting life-saving drugs to patients more quickly — and save companies and individuals money and time as it completes tasks and solves problems.
This is why now is the best time to join potential AI powerhouses. Let’s look at two AI stocks to buy Handover Fist before the Nasdaq goes higher.
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1. Amazon
Amazon (AMZN -2.42%) Taking advantage of AI in two ways. The company uses AI to streamline operations and improve customer experience in its e-commerce business. And Amazon sells AI solutions to customers through its cloud computing business, Amazon Web Services (AWS).
In e-commerce, Amazon’s AI will help you choose products based on your purchase history, and AI is helping the company choose the best delivery routes for packages. These and other AI efforts should keep customers coming back and boost Amazon’s profits.
As for AWS, the service offers everything from chips for customers to train their AI models to a fully managed service that tailors the most popular large language models (LLMs) to customers according to their needs. ) allows customization. AWS customers can access the company’s own low-cost chips as well as the fastest, highest-performing chips and services from the AI chip market leader. Nvidia (NVDA -0.12%).
All of this could make Amazon one of the potential winners of the AI revolution. And Amazon already has a solid revenue track record — so the company has the resources to continue to invest and grow in this hot area. In the most recent quarter, Amazon’s net sales grew by double digits, and operating income more than quadrupled to exceed $13 billion.
Today, the stock trades for 42 times forward earnings estimates, a fair value for an already solid business with high AI potential.
2. Nvidia
Nvidia has 80% of the AI chip market, and although it faces competitors in the space, it’s unlikely to lose its lead anytime soon for two reasons. First, a company’s first-to-market advantage and brand strength should keep at least some customers loyal. Second, Nvidia is investing in research and development to stay ahead.
Investors expect Nvidia’s H200 chip to launch in the second quarter and then the Blackwell architecture to likely debut later in the year with the B100 chip. These new products are improvements to the company’s already fastest on-the-market chip.
But Nvidia doesn’t just design chips. The company also offers a complete portfolio of products and services for AI clients, including a software platform that serves as the “operating system” for AI. Nvidia products are offered on AWS, as mentioned, but also by all the other major cloud providers. So it’s easy for customers to access Nvidia’s offerings directly through their cloud service.
Nvidia’s revenue is up, but growth may be a long way off considering the company’s market leadership — and potential to stay at the top. Today, Nvidia trades for 35 times forward earnings estimates, which seems reasonable for such a solid growth stock. This is why Nvidia doesn’t add any brains to any AI portfolio.
John Mackey, former CEO of Whole Foods Market, is a member of the board of directors of The Motley Fool, an Amazon subsidiary. Adria Cimino has positions at Amazon. The Motley Fool has positions and recommends Amazon and Nvidia. The Motley Fool has a Disclosure Policy.