The Nasdaq recently set a new record high, indicating a potentially prolonged period of growth. Historical data going back to the early 1970s reveals that following each of the last ten instances of annual market declines, the index has risen for at least two consecutive years.
Furthermore, with the exception of one instance, the index has experienced a double-digit increase during its second year of gains.
Given the Nasdaq's current trajectory toward a 7.4% increase, it seems likely to continue climbing in 2024.
Leading the surge in the market are companies involved in artificial intelligence (AI), a sector that has captured investors' attention due to its high-growth and high-potential nature.
AI technology holds the promise of transformative advancements, such as accelerating the delivery of life-saving drugs to patients and improving efficiency by completing tasks and solving problems more effectively.
This presents a compelling opportunity to invest in potential AI leaders.
Two such companies that stand out are Amazon (NASDAQ: AMZN) and Nvidia (NASDAQ: NVDA).
Amazon benefits from AI in two key areas. Firstly, AI is utilized across its e-commerce operations to enhance efficiency and elevate the customer experience.
Secondly, through its cloud computing division, Amazon Web Services (AWS), the company offers AI solutions to customers. For example, Amazon's AI helps customers choose products based on their purchase history, and it optimizes delivery routes for packages.
These initiatives are expected to drive customer loyalty and bolster Amazon's bottom line.
On the AWS front, the service offers a range of AI-related products and services, including chips for customers to train their own AI models and a fully managed service for customizing large language models.
AWS customers can access both Amazon's cost-effective chips and high-performance chips from AI chip market leader Nvidia.
Nvidia commands a significant 80% share of the AI chip market.
Despite facing competition, Nvidia is well-positioned to maintain its lead thanks to its early market entry, strong brand recognition, and substantial investments in research and development.
The company is gearing up to launch its H200 chip in the second quarter, followed potentially by the Blackwell architecture along with the B100 chip later in the year.
These new offerings build upon Nvidia's already fastest-on-the-market chip, further solidifying its position in the market.
Nvidia's comprehensive suite of products and services for AI clients, including a software platform that serves as an "operating system" for AI, is available not only on AWS but also through other major cloud providers.
This makes it convenient for customers to access Nvidia's offerings directly through their chosen cloud service.
In terms of earnings, Nvidia has experienced substantial growth, with its market leadership and potential for continued expansion suggesting that this trend may persist.
Trading at 35 times forward earnings estimates, Nvidia appears to be attractively priced for a strong growth stock, making it a compelling addition to any AI-focused portfolio.