As we hurdle past the recent macroeconomic challenges, the horizon looks bright for investors, with signs pointing to a potential surge in the Nasdaq Composite. After taking a nosedive in 2022, registering its worst performance since 2008, the index rebounded impressively with a 43% gain in 2023. The historical trend following such a recovery is that the Nasdaq surges again the following year, with average gains of 19%. Despite potential economic uncertainties in 2024, historical patterns suggest a promising year for investors.

Recent strides in the realm of artificial intelligence (AI) played a vital role in driving the market’s upward trajectory in 2023 and are likely to be a major force fueling further gains in 2024. Estimates point to generative AI contributing between $2.6 trillion and $4.4 trillion annually to the global economy in the coming years, signaling significant windfalls for companies in this domain. Here are the top seven AI stocks to consider investing in before the Nasdaq hits new heights in 2024.

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1. Nvidia: Leading the AI Innovation Race

Nvidia (NASDAQ: NVDA) is a trailblazer in AI innovation, with its graphics processing units (GPUs) setting the standard in an expanding array of AI applications, including data centers, cloud computing, and machine learning. The company pivoted swiftly to adapt its processors for generative AI requirements and, despite ongoing efforts to ramp up production, the AI chip shortage is projected to persist until 2025 due to soaring demand. While competition looms large, Nvidia’s substantial investments in research and development have consistently kept it at the forefront.

The company’s triple-digit year-over-year growth is anticipated to persist into 2024. Notably, Nvidia remains attractively priced, boasting a price/earnings-to-growth ratio of less than 1, signifying an undervalued stock.

2. Microsoft: Pioneering AI Investments

Microsoft (NASDAQ: MSFT) kickstarted the AI surge by injecting $13 billion into OpenAI, creator of ChatGPT, shining a spotlight on generative AI. Leveraging OpenAI’s technology across a wide spectrum of its cloud-based offerings and Bing search, Microsoft has decisively positioned itself at the vanguard of AI integration.

The company’s AI assistant, Copilot, has the potential to generate up to $100 billion in additional revenue by 2027, contributing significantly to Azure Cloud’s growth, which has already outpaced its competitors in Q3. Despite trading at 35 times forward earnings, a premium to the S&P 500’s price-to-earnings ratio of 26, Microsoft’s growth prospects make it an attractive investment.

3. Alphabet: AI Integration and Digital Advertising Rebound

Alphabet (NASDAQ: GOOGL) (NASDAQ: GOOG) has long been at the vanguard of AI integration to enhance its search results and digital advertising relevance. Recognizing the potential of generative AI, Alphabet has fortified many of its products with enhanced functionality and plans to incorporate new AI tools into its search product. As the world’s third-largest cloud infrastructure provider, Google Cloud is well-positioned to offer AI systems to its clientele.

Alphabet’s collaboration with its AI research lab, DeepMind, gave rise to Gemini, billed as its “largest and most capable AI model.” Additionally, Google Cloud’s Vertex AI offers 130 foundational models, facilitating rapid development and deployment of generative AI applications. Coupled with the ongoing resurgence in its digital advertising business, Alphabet’s valuation of 27 times earnings presents an enticing investment proposition.

4. Amazon: Embracing AI for Growth

Amazon (NASDAQ: AMZN) has seamlessly integrated AI to enhance the shopping experience, provide tailored product recommendations, optimize Prime Video content suggestions, streamline e-commerce deliveries, predict inventory levels, and more. The company has also initiated trials for an AI tool designed to address customer queries about products.

Amazon Web Services (AWS) offers a comprehensive suite of popular generative AI models for its cloud customers and leverages purpose-built AI chips such as Inferentia and Trainium to accelerate AI on its infrastructure.

With inflation slowing visibly, an increasing number of consumers and businesses are turning to Amazon, reflecting the expanding scope for the company’s AI-driven growth.

Revolutionizing the Future: Top AI Stocks to Invest In

Meta Platforms

Meta Platforms (NASDAQ: META) has a storied history of leveraging AI to its advantage. The company has been at the forefront of utilizing AI for activities such as identifying and tagging people in photos and surfacing relevant content on its social media platforms. Moreover, Meta has cleverly circumvented its lack of a cloud infrastructure service for its AI offerings by developing an open-source Llama AI model, which it made available on all major cloud services for a price. Additionally, the company provides a suite of free AI-powered tools to aid advertisers, ensuring a broad reach of its AI solutions. With the promise of improved economic conditions, there is a high likelihood of a surge in its digital advertising business. At a mere 22 times forward earnings, Meta represents an attractive investment opportunity relative to its potential.

Palantir Technologies

Palantir Technologies (NYSE: PLTR) boasts two decades of expertise in developing AI-powered data analytics, making it well-prepared for the mainstream adoption of AI. The company swiftly expanded its portfolio by incorporating generative AI models into its existing data analytics tools, a move met with significant enthusiasm upon the introduction of the Palantir Artificial Intelligence Platform (AIP). As fears of a downturn ebb, businesses are ramping up their nonessential spending, particularly in relation to AI services, thereby amplifying demand. With a PEG ratio of less than 1, Palantir presents an undervalued investment opportunity.

Tesla

Tesla (NASDAQ: TSLA) has made a remarkable impact by spearheading the transition of electric vehicles (EVs) into the mainstream. The company’s success in the future is poised to be closely linked with AI, notably its “full self-drive” system. Despite some hiccups in the system’s performance, the potential for autonomous driving presents a lucrative opportunity for Tesla, especially considering Ark Investment Management’s projection that robotaxis could yield $4 trillion in revenue in 2027. With approximately 2.7 million vehicles collecting data, Tesla is poised for a technological advantage, provided it successfully cracks the code on autonomous driving. At a valuation of just 6 times forward sales, Tesla emerges as an industry leader with substantial potential.