A Bull Market Is Coming: 2 Super Artificial Intelligence (AI) Stocks to Buy Hand Over Fist Before They Skyrocket in 2024
The stock market has been in fine form in 2023, and the S&P 500 index has gained 28% since hitting its most recent low point on Oct. 12, 2022, which might be why some Wall Street analysts are saying that we are already in a bull market. And the good part is that stocks could jump even higher in 2024, according to analysts.
Equity research firm Fundstrat, for instance, predicts that the S&P 500 could jump 13% next year thanks to falling inflation and potential interest rate cuts by the Federal Reserve. Investment banks such as Deutsche Bank, RBC, and Bank of America are also expecting the S&P 500 to hit the 5,000 mark by the end of 2024.
The Nasdaq-100 Technology Sector index has delivered even larger gains of 62% since October last year. More importantly, the tech-heavy Nasdaq seems set for another strong year in 2024. That's why now is a good time to take a closer look at these two Nasdaq stocks that could deliver solid gains in 2024.
1. Advanced Micro Devices
Shares of Advanced Micro Devices (NASDAQ: AMD) have doubled so far in 2023, and this rally looks likely to continue in 2024 with the resurgence in the personal computer (PC) market and the company's newly launched artificial intelligence (AI) chips.
Market research firm Canalys estimates that PC shipments could jump 8% in 2024, a significant improvement over this year's estimated decline of 12%.
Two factors are expected to drive the PC market's resurgence next year. The first is the Windows refresh cycle. Microsoft will end support for Windows 10 in October 2025, which means consumers and businesses will have to purchase new PCs that cannot be upgraded to newer versions and analysts expect some of that buying to happen next year.
The second factor is the growth in sales of AI-powered PCs, with Canalys estimating that 19% of PCs sold next year will be AI-enabled. All this bodes well for AMD because it already has AI-powered central processing units (CPUs) on the market.
AMD is already benefiting. The company's revenue from the client segment was up 42% year over year in the third quarter to $1.5 billion. Sales of its Ryzen processors that are used in PCs increased substantially last quarter, and the trend should continue in 2024 as PC sales head higher.
AI is the newest catalyst for AMD that investors are looking forward to. The stock surged 10% on Dec. 7 after the company announced that major cloud providers are set to use its AI chips for training large language models. Microsoft, Meta Platforms, Oracle, and other server partners are set to offer AMD's MI300X AI accelerators for powering AI applications in the cloud.
This could allow AMD to capitalize on a huge opportunity. The company estimates that the addressable market for its AI chips could be $45 billion this year, up from its earlier forecast of $30 billion. By 2027, that could increase to $400 billion, up significantly from its earlier estimate of $150 billion.
AMD expects to sell AI chips worth more than $2 billion in 2024, which would be a sizable increase over the $400 million in revenue the company is set to generate from this market this year. But AMD's AI-related revenue could surge next year and run into much larger figures if the company manages to corner enough supply of chips from its foundry partner.
All this is why analysts are anticipating AMD's earnings to jump 40% next year to $3.71 per share, and the market could reward this growth with a jump in the company's stock price as well.
2. SoundHound AI
Analysts are anticipating SoundHound AI (NASDAQ: SOUN) stock could go supersonic in 2024. The median 12-month price target on SoundHound among five analysts covering the stock stands at $5, a 140% jump from current levels.
The company could very well deliver the terrific upside that Wall Street is anticipating. It expects to finish 2023 with a 50% spike in revenue to $46.7 million, and is expected to sustain this growth rate in 2024.
The simplest reason SoundHound could indeed live up to analysts' growth expectations is because of a solid revenue pipeline. The company finished the previous quarter with a bookings backlog of $342 million as customers increase the adoption of its platform, which allows them to create voice-enabled AI solutions such as voice assistants and natural language processing.
The stock has underperformed the tech sector in 2023, rising only 16% so far. As a result, investors can buy it at a slightly lower sales multiple of 12 right now as compared to its 2022 price-to-sales (P/S) ratio of 13. At this valuation, it looks like a no-brainer, especially considering the robust growth in the company's revenue.
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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Bank of America, Meta Platforms, Microsoft, and Oracle. The Motley Fool has a disclosure policy.
A Bull Market Is Coming: 2 Super Artificial Intelligence (AI) Stocks to Buy Hand Over Fist Before They Skyrocket in 2024 was originally published by The Motley Fool
