We are already in the middle of the first quarter, and I can say with confidence that this quarter has been about tech stocks. They ruled the second half of 2023, and they are going to rule this quarter too.
Driven by artificial intelligence (AI), tech companies are set to gain this year, and the explosion in demand for AI will lead to strong revenue numbers and a high growth rate. Tech stocks are worth holding onto for years and they could generate impressive returns. An improvement in the economy, Fed rate cuts and secular growth trends can drive revenue for some of the top tech companies this year.
Let’s take a look at the three tech stocks that will rule 2024.
A hot stock and Wall Street darling of 2023, Nvidia (NASDAQ:NVDA) is making the most of AI. NVDA stock is up 231% in the past year and 49% year to date. I have always been optimistic about the future of the stock and had recommended a buy before the AI boom happened.
Several companies are reworking their business structures to include AI and this has led to a massive demand for Nvidia’s AI chips. Its business exploded in 2023, and this momentum is set to continue this year.
Nvidia has a massive market share, and the financials are proof that the demand for its products is on a meteoric rise. It saw a 206% rise in revenue in the third quarter to hit $18 billion, and the operating income hit $10 billion — up 1,600%.
The company’s head start in the AI space has put it ahead of all the other tech giants, and it will be difficult for any other tech company to achieve the same level of growth. Nvidia can retain the market dominance and is trading at $721 today.
Nvidia holds over 80% of the GPU market share right now, and while other companies have ventured into the segment, it will become difficult to grab Nvidia’s share. It is building a new unit to design custom chips for companies and other cloud computing firms.
The company is set to report results on Feb 21 and it could take the stock to $800. This is one tech stock that is set to rule beyond 2024 and is worth holding on to for the long term. Goldman Sachs has a price target of $800 for the stock.
Palantir Technologies (PLTR)
Palantir Technologies (NYSE:PLTR) has been ignored by Wall Street for a very long time. However, I have always been optimistic about its future, and the past year has proved the company’s potential. In the fourth quarter results, it saw a 20% YoY increase in revenue to hit $608 million, and the company ended the year with a GAAP profit of $210 million.
This is PLTR’s first profitable year since its founding. It also expects an excellent 2024 and is aiming for a full-year revenue of $2.66 billion which will be a 19% rise YOY and an operating income of $842 million.
Once a favorite of the government, Palantir faced a lot of criticism for the lack of commercial clients, and the company has shut its critics down. It now has a strong portfolio of government and commercial clients, driven by AI. The company made 103 deals worth $1 million or more in the final quarter of 2023, of which 21 deals are worth $10 million.
I believe the company’s AI boot camps are the driving force behind the recent success. They help different companies understand Palantir’s AI platform and apply it to their operations. This leads to higher conversions and more wins.
Trading at $24 today, the stock looks highly undervalued to me and is worth a buy. It is up 220% in the past year and 47% year to date. This is not a tech stock you can ignore for long. Cathie Wood’s Ark Investment recently purchased 1.97 million shares of the company, and several analysts have raised their price target for the stock.
AI has helped Microsoft (NASDAQ:MSFT) increase its market share in 2023. The company’s recent results are proof that it is going upwards and this has led to a high enthusiasm in investor sentiment. Trading at ~$420, the stock is right near its 52-week high and is up 13% year to date. The blowout results led to a rally in MSFT stock, and I believe this rally will continue.
It made significant investments in AI, and this has started to pay off. In the recent quarter, we saw an 18% YoY jump in revenue and a 33% jump in net income. As anticipated, its cloud segment played a big role in the last quarter, and Azure revenue was up 30% YoY. Microsoft’s year-over-year revenue has increased consecutively in the past four quarters while cloud remains a core growth driver.
The company believes that the integration of AI in its products has led to a significant rise in could revenue. If the company continues to expand market share with its AI investments, we could see the stock soar to new all-time highs.
We could see an improvement in the PC segment this year and this will help the company revive the segment. Its acquisition of Activision Blizzard will also start paying off this year. MSFT is one of the most resilient and reliable stocks to own today. It also appeals to passive income investors with its dividend yield of 0.71%. While the stock isn’t cheap, it is and will be one of the best tech stocks to ever own.
On the date of publication, Vandita Jadeja did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.