The stock markets seem to be ending the year on a high note, as the S&P 500 was up 8.9% in November, and it is up more than 3% so far in December as of Dec. 13.
The last two months of the year are typically pretty good for stocks, historically, but the outlook for 2024 is a bit murky. Many believe things will settle back down, after a few volatile years, to average historical growth levels – only time will tell if that happens.
But if you are looking for a couple of gems that could see strong growth in 2024, consider these two mega cap stocks.
- 1. Nvidia
Semiconductor company Nvidia (NASDAQ:NVDA) has been one of the biggest winners on the market this year, up about 230% as of Dec. 14. In fact, it has been one of the best stocks on the planet over the past decade, with an annualized growth rate of about 62% per year over the past 10 years. And for good reason, as it has been one of the most dominant players in a growing industry.
Nvidia specializes in manufacturing graphics processing units (GPUs) for computers, gaming consoles, and cars, as well as for high-performance computing at large data centers. The company’s growth has been supercharged this year due to the high demand for its AI chips at supercomputer data centers, where its largest customers are tech giants including Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG), Tesla (NASDAQ:TSLA), Microsoft (NASDAQ:MSFT), and Meta (NASDAQ:META).
Nvidia is coming off a quarter where it had record revenue of $18.1 billion, up 34% from the previous quarter and 206% from a year earlier. Most of that, about $14.5 billion, a record, came from data centers. Data center revenue was up 41% in the quarter and 279% year-over-year. Further, its gross margin is a ridiculous 74%, up from 70% the previous year, and 53.6% in the same quarter a year ago.
As dominant as Nvidia has been, its growth is not expected to slow down anytime soon, as demand for its AI chips, in particular, remains sky high. Its revenue outlook for its fiscal fourth quarter is $20 billion – a 10% jump, and analysts project $88 billion in revenue in its next fiscal year, which would be a 97% increase over the previous fiscal year.
The amazing thing about Nvidia is that even with this year’s huge stock price increase, it is not overvalued, with a forward price-to-earnings of 24 and a five-year P/E to growth (PEG) ratio of 0.48. While investors should expect anything like a 230% increase in 2024, Nvidia is positioned for another strong year of excellent returns.
- 2. Amazon
Amazon (NASDAQ:AMZN) stock is up about 74% YTD and, like Nvidia, it still has more room to run in 2024. One of the most important things Amazon did this past year was curtail expenses. In the third quarter, the increase in operating expenses was down to 5.8% year-over-year and 7.8% for the 12 months ended Sept. 30. In the three previous years, expenses had increased by 12.8%, 22.5%, and 36.5%, respectively. At the same time, Amazon boosted its revenue by 12.8% in the latest quarter, year-over-year, and 10.3% for the trailing 12 months. That’s up from a 9.4% increase in 2022.
As a result, the company has gotten more efficient, with net income up some 244% in Q3 year-over-year and up 77% in the trailing 12 months.
With interest rates expected to come down in 2024, Amazon should benefit in its two market-leading businesses. AWS, its leading cloud computing business, should get a boost from lower inflation and interest rates, which should open up corporate IT budgets. And the e-commerce business should also benefit from reduced inflation for consumers. The first half of the year could be more sluggish, but in the second half, when rate cuts start kicking in, Amazon should surge.
Piper Sandler, just this week, raised its price target for Amazon to $185 per share, from $170 per share. The $185 price target would be a 26% increase over its current $147 per share price. And like Nvidia, Amazon seems pretty fairly valued with a forward P/E of 39.
Look for these two mega-cap monsters to keep growing in 2024.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
