After a disappointing 2022 during which the U.S. stock market posted its worst performance of the last decade, Wall Street breathed a sigh of relief in 2023. Currently, the benchmark S&P 500 index has recovered nearly 28% from its lowest point of the bear market in October 2022. It is also only 5% below the all-time high it set in January 2022. When the benchmark index establishes a new all-time high, that will be a clear signal that a new bull market has begun.
When the stock market is gearing up for a bull surge, it makes sense for retail investors to pick up stocks of high-quality companies with robust tailwinds. These four could prove attractive picks now.
Accelerated computing specialist Nvidia (NASDAQ: NVDA) has made a splash on Wall Street lately thanks to its cutting-edge artificial intelligence (AI) chips and software ecosystem. Ever since OpenAI's ChatGPT chatbot made its public debut, cloud service providers, consumer internet companies, and enterprises across the world have been racing against each other to solidify their positions in the generative AI space. Subsequently, demand for Nvidia's AI-optimized A100 and H100 chips has gone through the roof. In fact, Nvidia's leading AI chips are already sold out until 2024, which suggests that any short-term change in the market environment won't have a drastic impact on the company's near-term financial performance.
Nvidia's strategy to combine multiple GPUs in a single HGX platform has also pushed up demand for its networking solutions. Furthermore, the company's Compute Unified Device Architecture (CUDA) software stack is currently being used by 4 million developers to program AI chips. Thanks to CUDA's first-mover advantage, developers have become very comfortable with Nvidia's software ecosystem -- and that makes them resistant to switching to chips from alternate players.
According to a forecast by Fortune Business Insights, the AI market will grow from $515 billion in 2023 to over $2 trillion in 2030. With a tailwind of that magnitude behind it, Nvidia seems to be an obvious pick for long-term retail investors.
Meta Platforms' (NASDAQ: META) social media platforms (Facebook, Instagram, and WhatsApp) make it a force to be reckoned with in the digital advertising world. Their user base accounts for nearly 40% of the global population, so advertisers cannot afford to ignore these platforms. Besides, Meta is also leveraging its AI capabilities to improve content discovery for users and ad targeting for merchants.
Meta is also gearing up to add new revenue streams. Once a major headwind, the company's short-video format Reels is expected to become a modest tailwind in 2024. The company is capitalizing on its WhatsApp user base of 200 million people through Click-to-WhatsApp advertising and paid messaging. So although the company's metaverse investments have been loss-making to date, there is still much to like about this company.
Microsoft(NASDAQ: MSFT), led by CEO Satya Nadella, has become a prominent AI player, in part thanks to its nearly $13 billion investment in ChatGPT developer OpenAI. The company has integrated AI technologies into several of its core offerings to improve their productivity and make them more cost-efficient. Prominent among them are Azure cloud computing platform, Bing search engine, and Microsoft 365 productivity suite. According to Evercore ISI analyst Kirk Materne, these AI offerings could add $100 billion in incremental revenues to Microsoft's top line by 2027.
Also, the Azure cloud computing business is now stabilizing thanks to the normalization of cloud spending optimization trends. Furthermore, while the personal computing business has been under stress for the past few quarters, the global PC market is now showing signs of recovery -- which bodes well for Microsoft. Coupled with gradually improving financials and a solid balance sheet ($144 billion in cash equivalents and short-term investments versus $71 billion total debt), Microsoft seems an attractive buy now.
Taiwan Semiconductor Manufacturing
Leading third-party chip manufacturer Taiwan Semiconductor Manufacturing(NYSE: TSM) is a major beneficiary of technological trends such as cloud computing, the Internet of Things, edge computing, and autonomous driving. With the PC and smartphone markets (which provide the bulk of the current demand for TSMC's chips) witnessing gradual recoveries in the third quarter, and enterprises increasingly adopting data analytics and AI technologies, demand for semiconductor chips is set to rise at a dramatic pace.
Elevated demand for 5nm chips and a strong ramp up of production of 3nm chips drove TSMC's revenue growth in the third quarter. This is not surprising considering that Nvidia's extremely sought-after H100 GPUs are manufactured using TSMC's 5nm process node. Apple (NASDAQ: AAPL), widely thought to be TSMC's largest customer, has released iPhone 15 Pro and Pro Max models powered by 3nm chips. Nvidia is also gearing up to adopt 3nm chips in its next-generation Blackwell B100 GPU, which is scheduled for launch in 2024. TSMC expects the market for its 3nm chips to be nearly $1.5 trillion. These near-term tailwinds make TSMC a prominent pick now.
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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. Manali Bhade has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Apple, Meta Platforms, Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. The Motley Fool has a disclosure policy.