The start of a new year is a great time to expand your portfolio by investing in companies likely to flourish over the next 12 months and long into the future.
The tech market is an excellent place to start, with its reputation for delivering consistent and significant gains over the long term. Its lucrative history means the industry has a wealth of attractive growth stocks to choose from that have solid outlooks in 2024.
Budding sectors like artificial intelligence (AI) boosted many tech stocks last year, with demand for the technology only likely to continue rising. According to data from Grand View Research, the AI market is projected to have a compound annual growth rate of 37% until at least 2030, which would see it surpass a value of $1 trillion.
So it's not a bad idea to consider investing in a company prioritizing AI, with the sector attracting some of the biggest names in tech. Here are two such hypergrowth stocks to buy in 2024 and beyond.
1. Nvidia
As a leading chipmaker, Nvidia(NASDAQ: NVDA) seems like a no-brainer for anyone looking to make a long-term investment in tech. The company supplies its hardware to companies across the industry, for use in AI models, cloud platforms, video game consoles, laptops, and custom-built PCs.
That leaves it in a good position to profit from the tech market for years to come, with chip demand on the rise.
Nvidia's success has seen its stock rise more than 1,000% since 2019, with revenue climbing 130% to $27 billion. And stellar growth last year suggests the company is only just getting started.
The launch of OpenAI's ChatGPT triggered a boom in AI, with the platform causing many to rethink what was possible with the technology. Countless tech firms began restructuring their businesses to prioritize AI development and needed powerful chips like Nvidia's graphics processing units (GPUs) to do so.
Soaring demand for GPUs and almost no competition saw Nvidia climb to the top of the AI chip market, snapping up an estimated 90% market share while rivals like AMD and Intel struggled to catch up. As a result, shares in Nvidia are up 230% since last January after multiple quarters of impressive growth.
The chart above shows earnings per share (EPS) could hit $24 by fiscal 2026. Multiplying that figure by the company's forward price-to-earnings ratio (P/E) of 40 yields a stock price of $960, with growth of 96% over the next two fiscal years.
With Nvidia's powerful position in multiple areas of tech, you won't want to miss out on this hypergrowth stock.
2. Microsoft
Microsoft(NASDAQ: MSFT) is the world's second-most-valuable company (after Apple), with a market cap of $2.7 trillion. The company is home to some of the most widely recognized names in tech: Windows, Office, Xbox, LinkedIn, and Azure, which attract billions of users.
The growth of these offerings sent Microsoft's stock soaring 260% over the last five years, with annual revenue up 68%. The company posted over $63 billion in free cash flow in 2023, giving it the funds to invest heavily in high-growth markets and overcome possible headwinds.
That has allowed it to invest billions of dollars in AI. It partnered with OpenAI in 2019, initially putting $1 billion into the start-up, and has since achieved a 49% stake in OpenAI, granting it exclusive access to some of the industry's most advanced AI models.
Microsoft has so far used the partnership to introduce AI across its product lineup, including improvements to its search engine Bing, new tools on its cloud service Azure, and an AI assistant added to its various Office productivity services through Microsoft 365. The assistant, called Copilot, was launched as a $30 add-on to a 365 subscription, the company's first steps to monetize its AI offerings.
As with Nvidia, EPS estimates suggest Microsoft has much to offer new investors. This table shows its earnings could achieve $15 per share over the next two fiscal years. When multiplying that figure by Microsoft's forward P/E of 33, you come to a stock price of $495. If these projections are correct, the company's shares could increase 34% by fiscal 2026.
That growth might not come close to Nivida's potential, but it still beats the S&P 500's rise of 24% over the last three years. And with that, Microsoft is an attractive stock to buy in 2024 and hold indefinitely.
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Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel, long January 2025 $45 calls on Intel, and short February 2024 $47 calls on Intel. The Motley Fool has a disclosure policy.
