The Nasdaq Composite index had a solid 2024 with impressive gains of almost 31% during the year. This isn't surprising considering the tech-heavy nature of the index that benefited from the impressive growth reported by several technology companies last year thanks to catalysts such as artificial intelligence (AI).
It is worth noting that the Nasdaq Composite index's impressive performance in 2024 was preceded by a 43% jump in 2023 as well. This is a positive sign for technology investors as historical trends indicate that the Nasdaq has returned an average of 19% in the year following a calendar year in which it gained more than 30%.
Of course, past performance isn't a reliable indicator of what the future may hold, but favorable factors, such as robust economic growth in the U.S., contained inflation, and rising consumer spending on account of a rise in real income could give stocks another lift in 2025. At the same time, the growing adoption of AI in multiple industries is likely to remain a tailwind for tech stocks in the new year.
That's why now would be a good time for investors to take a look at a couple of Nasdaq stocks that have the potential to deliver impressive gains this year and in the long run.
Marvell Technology: Custom AI chip demand powers its growth
Marvell Technology(NASDAQ: MRVL) delivered stellar gains of 83% to investors in 2024, with the stock rising remarkably in the second half of the year when it emerged that it is becoming a key player in the market for AI chips.
Marvell makes custom processors, known as application-specific integrated circuits (ASICs), which are used in data centers to perform specific tasks. These ASICs have now been adopted by major cloud-service providers for AI model training and inference in data centers so that they can reduce their reliance on Nvidia and bring down their costs of developing AI models.
Amazon, for instance, claims that its Trainium 2 custom AI processor can deliver more computing power than Nvidia's chips while helping customers train certain models at 40% lower cost. What's worth noting here is that Amazon's custom AI chips are designed by none other than Marvell, and both companies have tightened their relationship recently.
On its earnings conference call last month, Marvell management remarked:
Yesterday, we announced the expansion of our strategic relationship with Amazon Web Services through a comprehensive multi-generational five-year agreement. This multi-generational agreement encompasses a broad range of Marvell's data center semiconductors, including custom AI products, optical DSPs, active electrical cable DSPs, PCIe retimers, data center interconnect optical modules, and Ethernet switching silicon solutions.
Management added that the renewed agreement will significantly increase the volume of business between the two companies. Moreover, Marvell has more than one customer for its custom AI chips, which explains why the company's AI business is growing at a faster-than-expected pace. The company expects to sell $1.5 billion worth of AI chips in the current fiscal year, which will end this month, followed by at least $2.5 billion in fiscal 2026 that's set to begin shortly.
However, there is a good chance that Marvell will be able to outpace those estimates in the new fiscal year as its custom AI chip production is set to ramp up. At the same time, Marvell estimates that its total addressable market (TAM) in data centers will grow to $75 billion in 2028 from $21 billion in 2023, which means that the company has a lot of opportunity to drive incremental growth in the long run.
Meanwhile, analysts are forecasting a sharp jump of 77% in the company's earnings in the new fiscal year to $2.76 per share following a small jump of just 3% in the current one. This outstanding earnings growth could be good enough to send Marvell stock higher in 2025, while the long-term opportunity in the custom AI chip market could help it sustain its rally in the long run.
Meta Platforms: Taking a bigger share of digital ad spending
Social media giant Meta Platforms(NASDAQ: META) was in fine form on the stock market in 2024, clocking impressive gains of 65% during the year. Investors can buy this tech stock at an attractive 28 times trailing earnings and 24 times forward earnings even after last year's bull run. Buying Meta at this valuation would be a smart thing to do considering that the spending on digital ads is expected to grow almost 8% in 2025 to just under $799 billion.
Meta Platforms has been gaining ground in this lucrative market. The company's revenue in the first nine months of 2024 increased by 22% to $116.1 billion, and its fourth-quarter (Q4) revenue guidance of $46.5 billion suggests that Meta will finish the year with a top line of $162.6 billion. That would be a 20.5% increase over 2023. What's more, analysts are expecting Meta's top line to grow at double-digit rates in 2025 and 2026, indicating that it is expected to outpace the growth of the digital ad market.
META Revenue Estimates for Current Fiscal Year Chart
In other words, Meta is capturing a bigger share of advertisers' wallets. That's not surprising if we consider that the tech giant has a massive daily active user base of 3.29 billion across its family of apps, which means brands and advertisers can reach a sizable audience by tapping Meta's apps. This also explains why Meta has witnessed an increase of 7% year over year in ad impressions across its apps, while also commanding a higher average price per ad that increased by 11% on a year-over-year basis in Q3 2024.
AI has been playing an important role in driving this improvement in Meta's ad revenue. That's because advertisers and brands have been able to improve audience targeting and significantly increase the returns on ad dollars spent by using Meta's AI tools. The adoption of AI in digital marketing is expected to create a $1.78 trillion revenue opportunity by 2033, suggesting that Meta could be scratching the surface of a massive growth opportunity.
As such, Meta Platforms looks like a solid Nasdaq stock to buy for the long run. At the same time, there is a solid chance that the stock could be a winner in 2025 as well. Analysts are forecasting a 12% increase in the company's earnings this year to $25.42 per share. If Meta hits that mark and trades at even 27 times forward earnings after a year (in line with the Nasdaq-100 index's forward-earnings multiple), its stock price could jump to $689.
That would be a 14% jump from current levels. However, Meta's gains could be higher in case of stronger growth in its earnings, which could lead the market to put a premium valuation on the stock. As Meta is trading at an attractive valuation right now, buying this tech giant could turn out to be a smart move considering its prospects for 2025 and in the long run.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. 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. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, and Nvidia. The Motley Fool recommends Marvell Technology. The Motley Fool has a disclosure policy.
