The Nasdaq-100 index is up 10% to this point in 2024, and that is not stunning because it has benefited from the stable progress reported by its main constituents, that are benefiting from the growing demand for synthetic intelligence (AI) and cloud computing.
The great half is that the Nasdaq-100 might maintain heading larger because the yr progresses. Deutsche Financial institution estimates that the index might rise 19% in 2024 based mostly on cooling inflation and stable financial progress within the U.S. In the meantime, the proliferation of AI is prone to stay a prime driver for expertise shares in 2024, and it might play a central position in boosting the Nasdaq-100.
Let’s take a better have a look at two Nasdaq-100 elements — Nvidia (NASDAQ: NVDA) and Qualcomm (NASDAQ: QCOM) — which are delivering excellent outcomes from AI adoption. We’ll see why it is sensible to purchase these two AI shares earlier than the Nasdaq clocks extra good points.
1. Nvidia
Nvidia’s beautiful 121% good points in 2024 have performed a central position in sending the Nasdaq-100 larger. And the inventory’s excellent rally appears to be right here to remain. Analysts have been growing their earnings expectations for the chipmaker following its newest quarterly report.
Over the previous 30 days, 47 analysts have bumped up their earnings per share (EPS) estimate for fiscal 2025, whereas 44 have performed the identical for fiscal 2026. The bettering EPS expectations from Nvidia are captured within the following chart.
There are two causes analysts count on Nvidia to ship stronger earnings. First, the corporate has been capable of keep its stranglehold over the AI chip market. It ended 2023 with a 94% share of the AI server market. Consequently, its income from gross sales of knowledge heart chips shot up a outstanding 427% yr over yr within the first quarter of fiscal 2025 (which ended on April 28) to a report $22.6 billion.
Nvidia’s friends comparable to AMD and Intel reported knowledge heart income of $2.3 billion and $3 billion, respectively, within the first quarter of 2024. Extra importantly, Nvidia can maintain its dominance within the AI chip market with the arrival of a brand new era of chips that might widen the expertise hole it enjoys over rivals. Its upcoming chips based mostly on the Blackwell structure are touted to be 4 instances sooner than the present chips based mostly on the Hopper structure.
Nvidia factors out that the demand for its Blackwell chips is so sturdy that it’s going to have problem assembly it going into 2025. So the corporate’s AI lead appears right here to remain, and that ought to enable it to ship extra models of its AI graphics playing cards.
The second cause analysts are upbeat about Nvidia’s bottom-line progress is due to its immense pricing energy in AI chips. In keeping with Raymond James, it may cost Nvidia $6,000 to fabricate one Blackwell B200 accelerator. Since every processor is anticipated to be bought for $30,000 to $40,000, it stands to make a hefty revenue on its new chips.
In all, the secular progress of the marketplace for AI chips goes to be an enormous tailwind for Nvidia due to the explanations mentioned above, which is why there’s a good probability that this AI inventory might soar additional following the excellent good points that it has already clocked in 2024.
2. Qualcomm
Qualcomm has achieved spectacular momentum in 2024 with 41% good points to this point, and this Nasdaq-100 inventory appears constructed for extra upside due to AI-related tailwinds within the smartphone and private pc (PC) markets that appear set to drive a turnaround in its fortunes.
Qualcomm’s income in fiscal 2023 (which resulted in September final yr) fell 19% to $35.8 billion. Its adjusted earnings additionally fell 33% to $8.43 per share.
Nevertheless, income within the first six months of fiscal 2024 has elevated 3% yr over yr to $19.3 billion. It additionally reported a 13% year-over-year hike in adjusted earnings to $2.44 per share within the second quarter of fiscal 2024.
Analysts expect Qualcomm’s income to extend 7% within the present fiscal yr to $38.3 billion, whereas earnings are forecast to leap 18% to $9.91 per share. Extra importantly, as the next chart signifies, Qualcomm is anticipated to ship progress over the following couple of fiscal years as properly.
However there’s a good probability that Qualcomm’s progress may very well be stronger than anticipated as a result of the demand for AI-enabled smartphones is ready to take off, and Qualcomm is anticipated to be a key beneficiary of this market.
Counterpoint Analysis predicts {that a} complete of 1 billion AI-enabled smartphones may very well be shipped between 2024 and 2027. The researcher expects Qualcomm’s chips to energy greater than 80% of generative-AI enabled smartphones over the following couple of years, not stunning as a result of its chips are already powering Samsung‘s flagship AI-enabled Galaxy smartphones.
Furthermore, Qualcomm’s technique of deploying AI in midrange smartphones might assist it stay the highest participant on this market in the long term. On the identical time, the corporate has began making headway available in the market for AI-enabled PCs as properly. Microsoft not too long ago introduced new AI private computer systems powered by Qualcomm chips.
The corporate mentioned that every one main PC unique tools producers are set to launch AI PCs powered by its Snapdragon chips very quickly. That is prone to open one other stable alternative for Qualcomm as shipments are forecast to extend at an annual fee of 44% by means of 2028, in response to Canalys.
All this means that Qualcomm’s progress might ultimately speed up, which is why it will be a good suggestion to purchase the inventory whereas it’s buying and selling at simply 20 instances ahead earnings, a reduction to the Nasdaq-100’s ahead earnings a number of of 27.
Do you have to make investments $1,000 in Nvidia proper now?
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Harsh Chauhan has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Superior Micro Gadgets, Microsoft, Nvidia, and Qualcomm. The Motley Idiot recommends Intel and recommends the next choices: lengthy January 2025 $45 calls on Intel, lengthy January 2026 $395 calls on Microsoft, brief August 2024 $35 calls on Intel, and brief January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure coverage.
2 Prime Synthetic Intelligence (AI) Shares to Purchase Earlier than the Nasdaq Soars Greater was initially revealed by The Motley Idiot
