Best stocks for 2023

The stock market has performed better than expected this year. As of December 27, the S&P 500 index was at 4,775, up 24% from the previous year. At this level, it is less than 25 points from its all-time high of 4,796, which could easily be reached by the end of the year.

The Dow Jones Industrial Average has set records this year and is currently at 37,545, up 13% YTD. The Nasdaq Composite Index performed best as of December 27, up 44% to 15,075. This is about 1,000 points lower than the all-time high of 16,057 set on November 19, 2021.

Economists had previously expected the S&P 500 to fall between 3,675 (down 4%) and 4,500 (up 17%), so their forecasts were way off. The index clearly exceeded almost all expectations.

In 2023, Big Tech dominated artificial intelligence and semiconductor stocks. The technology sector accounted for two of the top three best-performing stocks in 2023.

1. NVIDIA, up 237%

Megacap semiconductor company nvidia (NASDAQ:NVDA) has had an absolutely explosive year, up 237% YTD as of December 27th. The company has grown thanks to strong demand for its semiconductors and AI technologies.

NVIDIA is a leading supplier of graphics processing units (GPUs) used in everything from computers to game consoles to automobiles. But what further strengthened its 2023 performance was its strength in chip manufacturing for high-performance computing in data centers.

In particular, NVIDIA’s AI chips for data centers were in high demand as they secured market share and solidified their unrivaled position as chips that enable complex AI functions and tasks.

About 80% of the chipmaker’s record $18.1 billion in fiscal 2024 third-quarter revenue came from data center customers, much of it from AI chips.

“Our strong growth reflects the broader industry platform shift from general-purpose to accelerated computing and generative AI,” Jensen Huang, founder and CEO of NVIDIA, said in the third quarter earnings report.

In the first nine months of its fiscal year, NVIDIA’s revenue rose 140% to $27.5 billion, while net income rose a whopping 483% to $17.5 billion, or $7.07 per share.

The best part for NVIDIA investors is that this growth is not expected to slow. So valuations for these high-growth stocks are reasonable, so 2024 could be another good year.

2. Meta Platform, 195% increase

meta platform (NASDAQ:META), the company that owns Facebook, was the second-best performer in the S&P 500 in 2023, with its stock up about 195% YTD.

While that’s certainly not the only factor, the biggest reason for the 2023 meta’s success was the low valuation at the end of 2022. Last year, the stock price fell 64%, and the price-to-earnings (P/E) ratio fell to 20%. At a shockingly low 11. Investors had little power to pass on the deal.

Social media giant Amazon has also been able to ride the technology and AI wave this year, but that doesn’t mean it hasn’t performed well. In fact, the number of daily active users on Meta has skyrocketed across social media sites and properties, including Facebook, Reels, Instagram, Messenger, and WhatsApp.

AI has helped improve engagement and ad exposure, with the latter increasing 31% in the most recent quarter. Overall, Meta’s advertising revenue increased approximately 12% year over year to $33.6 billion in the first nine months, accounting for approximately 35% of total revenue during that period.

The company also successfully implemented cost-cutting initiatives, reducing costs by 7% in the third quarter. Additionally, price per ad fell 6% year-over-year, which helped Meta’s net profit increase 164% to $11.6 billion. That more than offset losses at Reality Labs, its struggling virtual reality business.

Meta is also relatively cheap, with a P/E ratio of 31 and a P/E-to-growth (PEG) ratio of just 0.93. I think it could be a good purchase in 2024.

3. Royal Caribbean Cruises, up 161%

Third Top Performer for 2023; royal caribbean cruise (NYSE:RCL) is not in the technology sector and does not utilize AI. However, it has benefited from a number of factors affecting its revenue and earnings.

Pent-up demand for cruises post-COVID-19 has resulted in bookings significantly exceeding pre-pandemic levels in 2019. Combined with higher interest rates due to inflation, sales rose 68% to $10.6 billion in the first three quarters of the year. The cruise line’s net income surged to $1.4 billion after posting a net loss of $1.7 billion through the first three quarters of 2022. Although the rates are higher, cruise lines are generally seen as a relative bargain when it comes to land vacations, so that helped. .

Royal Caribbean has also gotten a boost from investors buying low, as it has become extremely cheap after a disastrous 2022. However, the P/E has risen to almost 40 times earnings, so it’s worth watching. Nonetheless, the outlook for 2024 is promising, as 2024 bookings are ahead of 2019 levels, rates remain high, and new ships debuting in 2023 or scheduled to launch in 2024 should provide additional tailwinds.

The three best stocks of 2023 are all worth watching in 2024, and NVIDIA is the best of them all.