Tech stocks staged a dramatic revival in 2023, edging away looming recession fears, while investor enthusiasm for cutting-edge artificial intelligence (AI) technology lent powerful impetus. With the anticipated decline in interest rates and the economy’s sturdy resilience, the robust momentum in tech stocks seems set to persist in 2024.
Amidst this backdrop, two tech stocks, Spotify Technology (SPOT) and Advanced Micro Devices (AMD), emerge as prime investment options, each with their own compelling catalysts.
Optimistic Outlook for Spotify Stock
Spotify, the foremost audio streaming subscription provider, boasts exceptional performance across key indicators. A 26% year-over-year growth in monthly active users, reaching 574 million in Q3, showcases remarkable strength. Premium Subscribers surged 16% year-over-year to 226 million, exceeding guidance. Notably, top-line growth accelerated by 17% in constant currency, with gross margin also surpassing expectations at 26.4%.
On the horizon, the company eyes surpassing 600 million MAUs in 2023 and aims to reach 1 billion global users by 2030. An introduction of audiobook offerings for Premium subscribers and strategic price increases in over 50 markets further bolster the company’s growth trajectory.
However, despite these promising developments, Spotify’s stock has more than doubled in the past year, leading some Wall Street analysts to question its potential. Of 26 analysts covering Spotify stock, 14 advocate a “Strong Buy,” two recommend a “Moderate Buy,” and 10 maintain a “Hold.” The average price target stands at $210.42, implying constrained upside from current levels.
The Case for Advanced Micro Devices Stock
Advanced Micro Devices is strategically positioned to capitalize on the burgeoning adoption of AI technology, armed with a diversified portfolio of energy-efficient GPUs, CPUs, and adaptive computing solutions. The company’s CEO anticipates massive growth opportunities, estimating a CAGR of over 70% through 2027 in the data center accelerator market, reaching $400 billion.
AMD has already launched its highest-performance accelerator, the MI300X, and intensified AI-related research and development investments. Further, burgeoning collaborations with key cloud providers and leading AI startups position AMD optimally for substantial growth in Data Center GPU revenue, expected to surpass $2 billion in 2024.
Analysts echo this optimism, with 24 out of 30 analysts recommending a “Strong Buy” for AMD stock. The company’s stock has also more than doubled in the past year, surpassing the average price target of $148.26.
Outlook on Valuation and Conclusion
Both Spotify and AMD stocks have seen significant valuation upswings over the past year, raising legitimate concerns. Nevertheless, their strong prospects for revenue growth and margin expansion in 2024 justify their premium valuations.