I asked Bard for its prediction of the top 7 performing stocks for 2024. The results were interesting, to say the least. The AI service predicts that 2024 will be a lot like 2023 has been. In other words, tech firms are going to lead the market, and Bard expects that investors will see the best returns by sticking with those firms.
There is one notable absence, though: Apple (NASDAQ:AAPL). Semiconductors are expected to remain strong overall. No doubt, Bard believes that AI demand and digitization trends will keep demand strong. Let’s take a look at those stocks with me, giving my opinion of whether I agree with each of Bard’s recommendations.
AI Stock Picks: Nvidia (NVDA)
Bard gave me a broad introduction to Nvidia (NASDAQ:NVDA) and its stock: “Nvidia is a leading semiconductor company that designs and manufactures graphics processing units (GPUs). GPUs are used in a wide range of applications, including gaming, artificial intelligence, and data center computing. Nvidia is well-positioned to benefit from the continued growth of these markets.” So, as you can see, 2024 is expected to be a continuation of 2023. That which led the markets higher this year is expected to continue in the new year.
The presumption, then, is that U.S. chip export restrictions to China will not negatively affect NVDA’s shares over the coming 15 months. I think that’s a fair assumption. Nvidia has to pivot into other markets due to the restrictions, but it appears that demand remains high enough that the mid-term won’t be negatively affected.
The other overarching question is that of valuation. My take is that Nvidia isn’t extremely expensive currently. Its price-to-earnings ratio is just under 100 but has been much higher in the past. 89% of chipmakers’ stocks are cheaper, but Nvidia, I would argue, is worth that price. It’s a 99.99th percentile firm.
Alphabet (GOOG, GOOGL)
Google’s own AI believes Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL) will be one of the most dominant stocks of 2024. Its reasoning was as follows: “Alphabet is the parent company of Google, which is the world’s leading search engine and advertising platform. Alphabet is also a leader in artificial intelligence, cloud computing, and self-driving cars. The firm is well-positioned to benefit from the continued growth of these markets.”
I strongly agree with Bard here. I think Google’s shares are an excellent buy following the haircut it received after releasing Q3 earnings. Thus, I believe the markets have overreacted in classic fashion in this instance. Shareholders are too dependent upon Wall Street opinions and too easily swayed by them.
Google’s revenues were $690 million ahead of expectations. However, the fact that cloud revenues only reached $8.4 billion instead of $8.6 billion prompted a selling frenzy. It’s an overreaction. Is Google a cloud-dependent firm, or is it a search-dependent firm? The answer is search. It was strong there and everywhere else, yet a slight issue with cloud sent it dropping by 10%. That discount won’t last for long.
Amazon (AMZN)
Bard expects Amazon (NASDAQ:AMZN) to be a top performer in 2024 based on eCommerce and cloud computing: “Amazon is the world’s largest online retailer. Amazon is also a leader in cloud computing and artificial intelligence. Amazon is well-positioned to benefit from the continued growth of e-commerce and cloud computing.”
It’s impossible to argue that Amazon isn’t well-positioned to benefit from secular trends. I won’t do that. That’s the broad strength of the tech giants in a nutshell: They are exposed to massive, sustainable growth trends and have the resources to steer those markets. It applies to Amazon and all the other tech titans.
I just got done stating that Wall Street’s analysts are often wrong, so let me contradict myself. They believe AMZN shares have a 40% upside currently. Gurufocus, a metrics-heavy analytics firm, believes it’s closer to 50%. AWS is doing better than Google but lags behind Azure growth-wise of late. AI is the theme into 2024, and Amazon has a very strong horse in that race with AWS cloud.
AI Stock Picks: Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) isn’t going anywhere in 2024. Its stock is expected to be among the best performers by just about everyone. Bard notes: “Microsoft is a leading software company that produces a wide range of products, including the Windows operating system, the Office suite of productivity applications, and the Azure cloud computing platform. Microsoft is well-positioned to benefit from the continued growth of cloud computing and the digital transformation of businesses.”
While I generally agree with that sentiment, I’m not so sure that Microsoft is going to be a ‘top’ performer in 2024. What I mean is that it simply doesn’t have as much upside at the moment. That’s true because Microsoft hasn’t faltered much at all. It has been the heaviest AI investor among the tech titans. That investment has paid off, keeping shares steadily strong.
Invest in Microsoft with the expectation of growth in 2024, but it’s leading, and that means others are playing catch up. MSFT shares have less upside because of that. When it does well, it’s expected, and shares don’t explode upward. If it doesn’t, it stands to lose more. It’s still a great stock, and it’s just that I don’t see why it should be a great performer for those reasons.
Meta Platforms (META)
I think Meta Platforms (NASDAQ:META) strategy is destined to create large gains for owners of its stock in 2024. Bard cites exactly what you’d expect: “Meta Platforms is the parent company of Facebook, Instagram, and WhatsApp. Meta is the world’s leading social media company. Meta is well-positioned to benefit from the continued growth of social media and the digital advertising market.”
Ad revenues have rebounded in 2023, and that’s the core driver of the company. The prevailing 9-month and 3-month periods continue to show strong improvement following a difficult 2022. Ad revenue over the last 9 months eclipsed $93 billion. It was only $82 billion a year ago during the same period.
AI promises to improve ad targeting, which should theoretically lead to further increases in ad revenues. What I also like is that Meta showed its strongest quarterly growth since its rebrand. It is dedicated to the metaverse, and that doesn’t look like such a terrible decision currently. The firm streamlined operations, cut costs, grew its top line rapidly, and continues to do all of that while funding the metaverse.
AI Stock Picks: Tesla (TSLA)
Tesla (NASDAQ:TSLA) stock is well-positioned to benefit from the continued growth of the electric vehicle market. Its position as the leader in that market is a positive factor leading into 2024.
I’m afraid I have to disagree with Bard’s recommendation here. Yes, Tesla is the dominant EV manufacturer. Yes, EVs are here to stay. However, Tesla is facing several issues that are going to hold its growth down. Trade tensions are one of the strongest factors in that regard. The tit-for-tat export restrictions between the U.S. and China directly affect Tesla. A day after the U.S. restricted chip exports to China, China curbed graphite exports to the U.S. Graphite is a key component in battery production, so Tesla’s costs just took a hit.
That’s an especially troublesome problem for Tesla as it grapples with increased market share by lowering prices. It serves to knock its margins down further and, in my opinion, will serve to throttle TSLA’s upside potential into 2024.
Taiwan Semiconductor Manufacturing Company (TSM)
Bard believes in Taiwan Semiconductor Manufacturing Company (NYSE:TSM) stock in 2024 because it “is the world’s largest semiconductor foundry. TSMC produces chips for a wide range of companies, including Apple, Nvidia, and Qualcomm. TSMC is well-positioned to benefit from the continued growth of the semiconductor market.”
While TSM is clearly among the most important firms globally, its shares don’t have the growth potential to justify Bard’s recommendation — at least not per Wall Street’s expectations.
I think Taiwan Semiconductor can produce much greater returns than those consensus projections for 2024. The firm’s revenues are expected to grow by $14 billion, rising above $80 billion in 2024.
Taiwan Semiconductor gave a weak outlook following slowing quarter-over-quarter growth earlier this summer. A lot can change over a year, so I personally don’t care about that news. I do care that TSMC is a major player in the efforts to bring chip manufacturing to the U.S. That alliance is huge for shareholders, and it’s the biggest foundry globally, providing Nvidia and all the other chip titans with the AI tech that fuels current trends. That can’t be overlooked at any point.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.