Two megacap stocks that could rise in 2024

The stock market appears to be ending the year on a good note, with the S&P 500 up 8.9% in November and up more than 3% in December as of December 13.

Historically, the last two months of the year have generally been pretty good for stocks, but the outlook for 2024 is somewhat bleak. Many believe that after a few unstable years, things will settle back down to average historical growth levels. Only time will tell whether that will happen.

But if you’re looking for a couple of gems that could show strong growth in 2024, consider these two megacap stocks.

1. Nvidia

semiconductor company nvidia (NASDAQ:NVDA) has been one of the market’s biggest winners this year, up about 230% as of December 14th. In fact, it’s been one of the best stocks on the planet over the past decade. The average annual growth rate over the past 10 years is approximately 62%. And for good reason, as it has been one of the most dominant companies in a growing industry.

Nvidia specializes in manufacturing graphics processing units (GPUs) for computers, game consoles, and automobiles, as well as high-performance computing in large-scale data centers. The company’s growth this year has been fueled by strong demand for its AI chips in supercomputer data centers, where tech giants including Amazon (NASDAQ:AMZN), Alphabet (NASDAQ:GOOG) and Tesla (NASDAQ:TSLA) are its biggest customers. , Microsoft (NASDAQ:MSFT) and Meta (NASDAQ:META).

NVIDIA is coming off a record-breaking quarter with $18.1 billion in revenue, up 34% from the previous quarter and 206% from the previous year. The majority of that, about $14.5 billion, came from data centers. Data center revenue increased 41% in the quarter and 279% year over year. In addition, the gross profit margin was 74%, an increase from 70% in the same period last year and 53.6% in the same period last year.

Given Nvidia’s dominant position, growth is not expected to slow down anytime soon, especially as demand for AI chips remains high. Forecasts for fiscal fourth-quarter sales are up 10% to $20 billion, and analysts expect sales for next fiscal year to be $88 billion, up 97% from the previous fiscal year.

What’s surprising about Nvidia is that despite its massive share price gains this year, it’s not overvalued, with a forward price-to-earnings ratio of 24 and a 5-year P/E-to-growth (PEG) ratio of 0.48. Investors should expect something like a 230% increase in 2024, but Nvidia is on track for another strong year of stellar returns.

2. Amazon

Amazon (NASDAQ:AMZN) stock is up about 74% YTD, and like Nvidia, it still has more room to run in 2024. One of the most important things Amazon did last year was to cut costs. Operating cost growth in the third quarter declined to 5.8% and 7.8% year-over-year for the 12 months ended Sept. 30, respectively. Over the previous three years, costs increased by 12.8%, 22.5%, and 36.5%. %no see. At the same time, Amazon saw its sales grow 12.8% year-over-year in its most recent quarter and 10.3% over the past 12 months. This is an increase from the 9.4% increase in 2022.

As a result, the company has become more efficient, with net income up nearly 244% year-over-year in the third quarter and up 77% over the past 12 months.

With interest rates expected to decline in 2024, Amazon stands to benefit from its two market-leading businesses. AWS, a leading cloud computing business, should get a boost from low inflation and interest rates to free up enterprise IT budgets. And e-commerce businesses will also benefit from lower consumer inflation. The first half of the year may be more sluggish, but Amazon’s stock price will soar in the second half once rate cuts take effect.

Piper Sandler this week raised her price target on Amazon from $170 to $185 per share. The $185 price target represents a 26% increase from the current price of $147 per share. And like Nvidia, Amazon seems to be fairly highly valued, with a forward P/E of 39.

Look for these two mega-cap monsters to continue growing in 2024.