The Nasdaq-100 tracks the performance of the 100 largest non-financial companies listed on the Nasdaq Stock Exchange. Component weighting is adjusted quarterly in March, June, and September, and the entire index is reconstituted annually in December.
The Nasdaq-100 is heavily weighted toward the technology sector, a corner of the market where the rise of artificial intelligence (AI) has been particularly impactful. Indeed, Nvidia (NASDAQ: NVDA) and Meta Platforms (NASDAQ: META) have led the index higher since ChatGPT debuted in late 2022, with two-year returns totaling 910% and 510%, respectively, at the time of writing.
Overall, Wall Street remains bullish on both stocks. The figures below come from CNN Business.
- Among the 65 analysts that follow Nvidia, 92% rate the stock a buy. The median price target of $150 per share implies 2% upside from its current share price of $147.
- Among the 70 analysts that follow Meta Platforms, 84% rate the stock a buy. The median price target of $655 per share implies 11% upside from its current share price of $589.
Here's what investors should know about these red-hot Nasdaq stocks.
Nvidia: 2-year return of 910%
Nvidia graphics processing units (GPUs) are the industry standard in accelerating data center tasks like training machine learning models and running artificial intelligence (AI) applications. GPUs can perform technical calculations more quickly and efficiently than central processing units (CPUs), and Nvidia systems consistently set performance records at the MLPerfs, unbiased benchmarks that measure AI training and inference capabilities.
"One key aspect of Nvidia's success lies in its vertical integration across hardware and software domains," according David Harold at Jon Peddie Research. To elaborate, Nvidia complements its GPUs with CPUs, networking equipment, and interconnects, all of which run its proprietary CUDA software that streamlines application development across use cases ranging from recommender systems to robots. In other words, the company provides a full-stack solution for AI.
Nvidia reported strong financial results in the second quarter of fiscal 2025 (ended July 2024). Revenue surged 122% to $30 billion on strong demand for AI hardware and software. And non-GAAP earnings climbed 152% to $0.68 per dilute share. The company is well positioned to maintain that momentum in future quarters given that spending on AI accelerators is projected to grow at 29% annually through 2030, according to Grand View Research.
Going forward, Wall Street expects Nvidia's earnings to increase at 35% annually over the next three years. That makes the current valuation of 69 times earnings look tolerable, but not cheap. Importantly, Nvidia shares could be quite volatile in the coming weeks because the company reports third-quarter financial results on Nov. 20. Investors comfortable with volatility should consider buying a few shares today.
Meta Platforms: 2-year return of 510%
Meta Platforms owns four of the seven most popular social media platforms on the planet in Facebook, Instagram, WhatsApp, and Messenger. Each one has over a billion monthly active users, and they collectively draw over 3.2 billion unique visitors each day. The ability to engage users and collect data on that scale has helped Meta become the second-largest ad tech company in the world behind Alphabet's Google.
Meta is leaning on artificial intelligence to deepen engagement and reduce costs for advertisers. Year to date, AI recommendations have increased time spent on Facebook and Instagram by 8% and 6%, respectively, according CEO Mark Zuckerberg. And the new conversational assistant Meta AI has drawn over 500 million monthly users since its beta release a little over a year ago. Zuckerberg says its on pace to be the "most used AI assistant by the end of the year."
Meta Platforms reported solid financial results in the third quarter, beating estimates on the top and bottom lines. Revenue increased 19% to $40.6 billion and GAAP earnings jumped 37% to $6.03 per diluted share. Zuckerberg told analysts, "We're seeing AI have a positive impact on nearly all aspects of our work from our core business and monetization to our long-term road maps for new services and computing platforms."
Since 2020, Meta Platforms has recorded a total operating loss exceeding $58 billion within Reality Labs, the business unit focused on augmented reality (AR). That massive cash burn has led to concern in some corners, but the company may realize greater returns on those investments in the not-to-distant future. Rosenblatt analyst Barton Crockett at says Meta's Ray-Ban smart glasses could "be something of a hit this Christmas."
Additionally, Meta Platforms recently showcased Orion, its first pair of fully holographic AR glasses. Mark Zuckerberg mentioned the product on the recent earnings call. "We're not too far off from being able to deliver great-looking glasses the let you seamlessly blend the physical and digital worlds," he told analysts.
Looking ahead, Wall Street expects Meta Platforms' earnings to increase at 21% annually over the next three years. Compared to that consensus estimate, the current valuation of 28 times earnings look very reasonable. Investors should feel comfortable buying a small position in this stock today.
Should you invest $1,000 in Nvidia right now?
Before you buy stock in Nvidia, consider this:
The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Nvidia wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.
Consider when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $904,692!*
Stock Advisor provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month. The Stock Advisor service has more than quadrupled the return of S&P 500 since 2002*.
*Stock Advisor returns as of November 4, 2024
Suzanne Frey, an executive at Alphabet, 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. Trevor Jennewine has positions in Nvidia. The Motley Fool has positions in and recommends Alphabet, Meta Platforms, and Nvidia. The Motley Fool has a disclosure policy.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
