Amid the stock market tumult of 2022 and the lingering economic difficulties, investing with foresight is pivotal to secure your assets against short-lived downturns. By adopting a long-term mindset, your investments can weather the storm and emerge unscathed when economic conditions bounce back.
The upheaval of 2022 dragged numerous stocks down, largely due to the unprecedented levels of inflation not seen in over 40 years. However, investors with a steadfast belief in reliable growth stocks and a commitment to holding onto their investments for several years rode out the waves of falling stock prices with confidence in their long-term strategy.
In 2023, these investors were handsomely rewarded as the market rebounded. A myriad of stocks soared alongside resurgent interest in burgeoning industries such as artificial intelligence (AI).
Three stalwart growth stocks, Alphabet (NASDAQ: GOOGL, GOOG), Amazon (NASDAQ: AMZN), and Nvidia (NASDAQ: NVDA), experienced price declines in 2022 but surged ahead in the following year. These companies hold dominant positions in the tech sector, poised to continue delivering substantial gains to patient investors in the coming year.
Here’s the lowdown on why these three growth stocks are set to soar in 2024.
The Unstoppable Rise of Alphabet
Alphabet has witnessed formidable growth over the years, with its stock value soaring by 164% since 2019 and annual revenue spiking by 75%. The parent company of Google has established a commanding grip on the search engine market, affording it the capital and brand recognition to expand into multiple sectors, in turn fueling Alphabet’s continued growth throughout 2024 and beyond.
Properties such as Google, Android, and YouTube have amassed billions of users, presenting almost limitless advertising opportunities. Consequently, Alphabet has emerged as an advertising colossus, reaping substantial benefits from the $740 billion digital advertising industry.
In the third quarter of 2023, Alphabet’s revenue skyrocketed by 11% year-on-year, surpassing Wall Street predictions by a staggering $980 million. The company profited from a revival in the digital advertising market, with Google Search sales climbing by 11% and YouTube ads by 12%.
Moreover, Alphabet is a tantalizing prospect for investors eyeing AI in 2024. The tech juggernaut is set to roll out its highly anticipated large language model, Gemini, poised to compete with OpenAI’s top-tier AI engine, GPT-4. The potential far-reaching impacts of this model across Alphabet’s business verticals could cement its formidable position in the industry.
Furthermore, Alphabet’s lower price-to-earnings ratios (P/E) and price-to-free cash flows signify that its stock offers exceptional value, potentially making it one of the most compelling bargains in the tech industry.
Amazon’s Phoenix-like Rise
Amazon’s stock has surged by 60% in the past twelve months following a stellar year of growth. Strategic cost-cutting measures and investments in lucrative realms like AI have catapulted the company onto a trajectory primed for substantial long-term gains.
Following successive setbacks in 2022, Amazon embarked on an extensive restructuring of its operations focused on bolstering profitability. Initiatives such as shuttering dozens of warehouses, substantial layoffs, and discontinuation of unprofitable ventures have been instrumental in Amazon’s resurgence, leading to a staggering 427% surge in its free cash flow over the past year.
The company is reaping substantial rewards from the resurgence of its e-commerce business and the highly profitable cloud platform, Amazon Web Services (AWS).
Owning a commanding 32% market share in the cloud sector, AWS is strategically positioned to reap immense benefits from AI. The cloud platform is consistently broadening its AI offerings and has recently delved into chip development, potentially propelling Amazon to the forefront of the nascent industry.
The projections indicate that Amazon’s earnings could approach nearly $5 per share by fiscal 2024. Multiplying this figure by the company’s forward P/E of 44 yields a stock price projection of $211, promising a 36% growth over the next fiscal year.
When you combine this robust growth with recent cost-cutting measures and a burgeoning presence in AI, Amazon emerges as an unequivocal must-buy for investors in 2024.
The Astronomic Trajectory of Nvidia
Nvidia’s business has experienced a meteoric surge in recent years, with its stock value skyrocketing over 1,400% since 2019. The lion’s share of this monumental growth occurred in the past year as the company’s graphics processing units (GPUs) established themselves as the gold standard for AI developers worldwide.
As interest in AI hit stratospheric levels in 2023, demand for GPUs soared in tandem, and Nvidia was ideally positioned to meet the needs of the entire market. With an estimated 90% market share in AI chips alongside soaring earnings, the company has been propelled to unprecedented heights.
The Rise and Rise of Nvidia: A Growth Stock to Watch
Record-Breaking Revenue and Growth
Nvidia’s third-quarter fiscal 2024 results were nothing short of staggering. Revenue soared an exceptional 206% on a year-over-year basis, reflecting the company’s impressive expansion and performance. Notably, operating income skyrocketed by 1,600%, showcasing Nvidia’s astoundingly profitable business model.
AI GPU Sales on the Rise
The significant leap in revenue was chiefly propelled by a remarkable 279% surge in data center sales, emblematic of the soaring demand for AI GPUs. Nvidia has firmly cemented its position as a leader in this lucrative market, demonstrating its prowess in forward-looking technology.
Expansion Across Tech Verticals
Aside from its dominance in AI GPUs, Nvidia has also capitalized on the burgeoning tech sectors of cloud computing, PCs, video game consoles, and more. With a robust presence in multiple high-growth areas, Nvidia has positioned itself as an attractive long-term investment, attracting the attention of investors seeking sustained growth opportunities.
Bullish Projections and Investment Potential
An analysis of Nvidia’s earnings projections paints an encouraging picture. A forward price-to-earnings ratio of 49 suggests the potential for the stock to reach an impressive $980 per share—marking a substantial 65% increase from its current valuation. While these projections are ambitious, they are firmly rooted in sound financial forecasts, bolstering the case for Nvidia as an enticing investment prospect.
A Compelling Investment Opportunity
Given the remarkable performance and promising outlook, it is evident that Nvidia’s stock presents an incredibly attractive investment proposition at the outset of 2024. With a track record of delivering robust returns and poised for continued growth, Nvidia is a compelling choice for investors seeking a stake in a flourishing and forward-thinking company.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, and Nvidia. The Motley Fool has a disclosure policy.