The tech rally has been helping the broader market this year. Although markets have been volatile over the past couple of weeks, the tech-heavy Nasdaq has been making a steady climb. On Oct. 25, the Nasdaq hit an all-time high, led by mega-cap stocks ahead of their upcoming earnings and the ongoing enthusiasm surrounding artificial intelligence (AI).
Given the ongoing tech rally and expectations of more rate cuts this year, it would be ideal to invest in Nasdaq stocks such as Alphabet Inc. GOOGL, Broadcom Inc. AVGO, Netflix, Inc. NFLX and Palo Alto Networks, Inc. PANW, whichhave strong potential for the near term. These stocks have a Zacks Rank #1 (Strong Buy) or 2 (Buy) and assure good returns. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nasdaq Hits Record High
On Friday, the Nasdaq rose 0.6% to close at an all-time high of 18,518.61 points. The index also closed 0.2% higher for the week, recording its seventh straight week of gains, its longest winning streak for 2024.
Year to date, the Nasdaq Composite has gained 23.4% after soaring 43.4% in 2023, recording its best year since 2020.
Tech stocks rallied last year after a lackluster 2022 when rising interest rates negatively impacted growth stocks. The rally has since continued and gathered steam this year, boosting the Nasdaq. The current rally is largely being fueled by stocks focused on artificial intelligence, especially generative AI, which is also helping the broader market.
AI Enthusiasm Powering Tech Rally
While AI experts' opinions, particularly on the future of generative AI, are divided, the optimism surrounding this field has been enormous over the past year. Many believe that AI is still in its early stages and that its full potential has yet to be tapped. NVIDIA Corporation (NVDA) has been a frontrunner in generative AI and has been pivotal in the surge in interest in this field. Its shares have soared 185.8% year to date.
NVIDIA’s solid progress in the generative AI space has seen several tech giants trying to leave a prominent footprint in that area. Also, the advancement of smart devices is supporting the field as they require computing and learning abilities for tasks like face detection, image recognition and video analytics. These functions require high processing power, speed, memory, low power consumption, and improved graphic processors and solutions, which are all favorable conditions for the semiconductor industry.
Moreover, the semiconductor industry is experiencing a strong recovery as a result, following a period of challenges until the first half of 2022.
Also, the Federal Reserve cut interest rates by 50 basis points in September, its first since March 2020. This has been further aiding growth assets, especially tech stocks. Low interest rates typically have a positive impact on growth assets. Market participants are now expecting two more interest rate cuts of 25 basis points each this year, which should further help tech stocks.
4 Nasdaq Stocks With Upside
Alphabet Inc.
Alphabet Inc. is one of the most innovative companies in the modern technological age. Over the last few years, GOOGL has evolved from primarily being a search-engine provider to cloud computing, ad-based video and music streaming, autonomous vehicles, healthcare providers and others.
Alphabet’s expected earnings growth rate for next year is 31.9%. The Zacks Consensus Estimate for current-year earnings has improved 0.3% over the past 60 days. GOOGL presently carries a Zacks Rank #2.
Broadcom Inc.
Broadcom Inc. is a premier designer, developer and global supplier of a broad range of semiconductor devices with a focus on complex digital and mixed signal complementary metal oxide semiconductor-based devices and analog III-V-based products. AVGO’s semiconductor solutions are used in end products such as enterprise and data center networking, home connectivity, set-top boxes, broadband access, telecommunication equipment, smartphones and base stations, data center servers and storage systems, factory automation, power generation and alternative energy systems, and electronic displays.
Broadcom’s expected earnings growth rate for the current year is 14%. The Zacks Consensus Estimate for the current-year earnings has improved 2.1% over the past 60 days. AVGO currently has a Zacks Rank #2.
Netflix, Inc.
Netflix, Inc. is considered a pioneer in the streaming space. NFLX has been spending aggressively on building its portfolio of original shows. This is helping Netflix sustain its leading position despite the launch of new services like Disney+ and Apple TV+, as well as existing services like Amazon Prime Video.
Netflix’s expected earnings growth rate for the current year is 64.4%. The Zacks Consensus Estimate for the current-year earnings has improved 3.7% over the past 60 days. NFLX currently carries a Zacks Rank #2.
Palo Alto Networks, Inc.
Palo Alto Networks, Inc. offers network security solutions to enterprises, service providers and government entities worldwide. PANW’s next-generation firewall products deliver natively integrated application, user, and content visibility and control through its operating system, hardware and software architecture.
Palo Alto Networks’ expected earnings growth rate for the current year is 10.4%. The Zacks Consensus Estimate for the current-year earnings has improved 0.2% over the past 60 days. PANW currently carries a Zacks Rank #2.
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