The Nasdaq Composite closed 2023 on a high note, gaining over 40% to cap off a banner year for technology stocks. With the index already off to a strong start in 2024, many investors are wondering if the good times will continue rolling this year. History and current trends suggest there’s a good chance they might.
The Last Two Major Nasdaq Declines Were Followed By Multi-Year Rallies
The Nasdaq Composite has only logged annual losses 14 times in its 50+ year history. However, three of those losses exceeded 30% – in 2002, 2008 and 2022.
Both the 2002 and 2008 massive plunges were followed by strong multi-year rebounds. From 2003 to 2007 after the 2002 drop, the Nasdaq averaged a 16% annual gain. Following the 2008 crisis, the index rose 30% on average in 2009 and 2010.
This demonstrates the overall resilience of technology stocks and the stock market in general following major pullbacks. And it sets up an interesting precedent for potential Nasdaq performance in 2023 and 2024 on the heels of its 30% dive in 2022.
Surging Interest in AI Stocks Could Propel Further Nasdaq Gains
A key driver fueling Nasdaq gains in 2023 was surging interest in artificial intelligence (AI) stocks. Companies like Microsoft, Nvidia and others focusing investment on AI saw their stocks soar last year. Microsoft became one of the world’s most valuable companies thanks largely to its early investment in ChatGPT creator OpenAI.
With AI innovation only accelerating in 2023, this momentum could continue providing fuel for Nasdaq gains this year. While many of the largest technology companies are already incorporating AI, there’s still ample room for advancement. Early AI adopters will likely see outsized returns compared to laggards over the next several years.
Most experts see 2023 as just the tip of the iceberg for practical AI applications across industries. As companies roll out new AI-powered products and services, stock prices should follow. But not all AI investment is created equal. Savvy tech investors will focus attention on stocks making smart strategic AI bets.
Amazon’s Quiet Yet Disruptive Moves in AI
Of all the tech titans, Amazon (AMZN) seems to fly curiously under-the-radar when it comes to AI investment. Yet the e-commerce and cloud computing leader is making some potentially game-changing moves that could significantly impact its business.
Take Amazon’s multi-billion dollar investment in Anthropic. This AI startup competes directly with OpenAI, the Microsoft-backed developer behind ChatGPT. Amazon clearly aims to ignite new cloud revenue growth with Anthropic’s help.
Over the past couple years many businesses cut back spending amidst macroeconomic uncertainty. That softened demand for cloud services – which generates nearly 70% of Amazon’s total operating income.
But Anthropic plans to primarily build new AI models using Amazon’s cloud platform and in-house chips. Essentially Amazon secured Anthropic as a high-profile cloud customer. As Anthropic develops new enterprise AI applications, interest in Amazon’s cloud offerings should rise in tandem.
Amazon Can Use Anthropic Partnership to Accelerate AWS Growth
The Anthropic deal seems geared toward jumpstarting decelerating growth for Amazon Web Services (AWS). As Amazon releases more AI-enhanced cloud products thanks to Anthropic, AWS could regain momentum.
Microsoft sets a model for this strategy via its OpenAI partnership. By baking ChatGPT capabilities into Windows and Office products, Microsoft makes those offerings more intelligent, functional and attractive. Amazon seeks similar synergies between Anthropic’s AI models and AWS.
Yet Amazon trades at a sizable discount to peers based on its price-to-sales ratio. Investors potentially interpret slowing AWS growth and lack of obvious AI advancements as causes for concern. But the Anthropic partnership lays groundwork for AI to recharge AWS revenue expansion in coming years.
Once the market recognizes AI’s potential to disrupt Amazon’s core business segments, the stock could rerate higher to close the valuation gap with other tech titans. Savvy investors should consider buying AMZN shares before that rerating gains steam.
History Shows There’s Still Time to Buy Before the Next Nasdaq Surge
Historical data demonstrates tech stocks tend to rebound for years following major pullbacks like 2022. Current trends point toward continued Nasdaq momentum in 2024 thanks to rapid AI innovation. AI promises lucrative rewards for companies that fully embrace it across their business models.
Yet few stocks fully reflect AI’s transformative potential despite the recent tech sector run-up. That leaves further upside for first movers like Microsoft while creating buying opportunities in stocks like Amazon.
So while the Nasdaq seems poised to continue skyrocketing in 2024, don’t worry excessively about pinpointing one specific stock. Consistent AI adoption should lift many ships in the years ahead. But buying AMZN stock sooner than later looks like a wise move before inevitable future gains.
