The NASDAQ Composite could have a strong year in 2024, from which Amazon shares in particular could benefit.
• The NASDAQ Composite could be set to soar in 2024
• Amazon is increasing its efforts in the area of AI
• Experts are confident about Amazon shares
NASDAQ: Soaring Ahead?
The AI trend topic caused the NASDAQ Composite to rise by around 43 percent last year. The “Magnificent Seven” in particular contributed a large part to this rally.
Over the past fifty years, the NASDAQ has posted a negative annual return in just 14 years. However, there were only two periods in which there were consecutive declines: 1973-1974 and 2000-2002, as The Motley Fool explains. Since 2001, the NASDAQ has experienced annual declines of 30 percent or more three times – in 2002, 2008 and 2022. However, after the market crashes of 2002 and 2008, the index experienced significant rebounds in subsequent years. From 2003 to 2007, the index averaged a return of 16 percent per year. In 2009 and 2010, the index rose by an average of 30 percent.
However, whether these historical patterns will repeat themselves and the NASDAQ will experience a rally this year remains uncertain. But while no one can predict the exact outcome, the general perception is that capital markets are resilient and tend to recover relatively quickly, according to The Motley Fool.
Amazon: AI laggard with potential?
Amazon didn’t seem to be advancing at the same pace as its Big Tech counterparts when it came to AI. But the company has made strategic moves that should inspire confidence among investors, according to The Motley Fool. These measures are likely to be received positively, especially given the optimism for a strong 2024 for the NASDAQ.
Amazon last made headlines at the end of 2023 with its investment in Alphabet-backed Anthropic. While this might seem like Amazon is trying to catch up with Microsoft and Alphabet, there were several significant aspects to the deal.
First, Anthropic will now use Amazon Web Services (AWS) as its primary cloud provider. In addition, Anthropic plans to use Amazon’s own chips to train future generative AI models. This partnership is therefore important for several reasons.
AWS’s revenue growth has slowed in recent quarters. Anthropic’s integration into the AWS ecosystem is expected to give the cloud computing leader new momentum as it opens the door to numerous new AI-powered applications. Additionally, using Amazon’s Trainium and Inferentia chips could also represent a profitable opportunity, as the AI semiconductor market is currently dominated by NVIDIA and AMD.
Is Amazon stock a buy?
Not only is the company’s price-to-earnings (P/E) ratio at 3.1, the lowest compared to its big tech peers, but it also remains flat compared to its 10-year average. It’s both fascinating and confusing that Amazon’s P/E ratio has remained flat given the company’s significant evolution over the last decade, explains The Motley Fool. As a result, investors may be underestimating the importance of the company’s partnership with Anthropic and may view competition from Microsoft and Alphabet as too formidable to fend off. However, experts at The Motley Fool have a different opinion.
AWS is going through a new phase of its evolution, and AI is at the center. As generative AI increasingly becomes a focus of IT budgets, sooner or later there will likely be a shift in business software spending from primarily on-premises applications to more cloud-based protocols. Amazon’s in-house development of chips and the deal with Anthropic are crucial steps to benefit from this trend. While investors may not yet see explosive growth, the company’s position in AI should not be overlooked. The long-term outlook is encouraging and there is a tempting opportunity to take advantage of dollar-cost averaging and start buying some stocks.
The Buy rating also reflects the general consensus among Wall Street analysts, according to data from TipRanks. A total of 39 reviews in the past three months (39x “buy”) result in a strong buy recommendation for Amazon shares. The average price target is $207.92 with a high forecast of $230.00 and a low forecast of $175.00. The average price target offers growth potential of 21.60 percent compared to the last price of $170.98 (as of February 14, 2024).
Editorial team finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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