The stock market’s rally shows no signs that it will be ending anytime soon. Investors remain bullish on artificial intelligence (AI), and with the possibility that the Fed will cut interest rates later this year, there could still be catalysts that drive stock prices higher in the months ahead.
If you’re looking for AI-related stocks that could do well in the latter half of the year, consider Nvidia (NASDAQ: NVDA), Advanced Micro Devices (NASDAQ: AMD), and Tesla (NASDAQ: TSLA). These companies have historically done well during second halves, and they could be good buys right now.
Nvidia
Nvidia is an easy pick for investors these days simply because the company is at the forefront of just about anything related to AI. The company’s powerful GPUs put it in an excellent position to keep benefiting from rising AI-related expenditures. And it’s still innovating. Earlier this year, Nvidia unveiled its new Blackwell chips, which will be its best and most efficient yet for training AI models.
The company generated nearly $40 billion in free cash flow over its past four reported quarters, and it has plenty of resources at its disposal to continue investing in its business and enhancing its products and services even further. That’s why many analysts and investors remain bullish on the company, even though its market cap now tops $3.3 trillion.
Historically, Nvidia has done well in the latter part of the year. Here’s a look at its second-half returns over the past 10 years.
|
Average |
2023 |
2022 |
2021 |
2020 |
2019 |
2018 |
2017 |
2016 |
2015 |
2014 |
|
33.1% |
17.1% |
(3.6%) |
47% |
37.5% |
43.3% |
(43.7%) |
33.9% |
127.1% |
63.9% |
8.1% |
Source: YCharts.
There have been some big Q3 and Q4 moves for Nvidia in the past, but I wouldn’t hold out hope for another scorching performance in the latter half of 2024 simply because the stock’s valuation is already high. But with many catalysts still out there, this is an easy AI stock to justify buying and holding.
Advanced Micro Devices
Advanced Micro Devices, or AMD, isn’t nearly as popular as Nvidia, but it could make for an underrated AI investment. The company was a bit late to the AI chip game, but its new hardware entries are solid. Tech giants including Microsoft and Meta Platforms plan to make use of these lower-priced alternatives to Nvidia’s chips.
Some companies may also want to buy AMD chips simply to reduce their dependence on a single supplier. The proof will eventually be in the results, which so far have been a bit underwhelming. During the first quarter, AMD’s revenue rose by just 2% year over year to $5.5 billion. But if demand for its AI chips proves to be strong, the second half could indeed be a good one for AMD. Here’s how its stock has done in the latter halves of previous years.
|
Average |
2023 |
2022 |
2021 |
2020 |
2019 |
2018 |
2017 |
2016 |
2015 |
2014 |
|
30.2% |
29.4% |
(15.3%) |
53.2% |
74.3% |
51% |
23.2% |
(17.6%) |
120.6% |
19.6% |
(36.3%) |
AMD averages a return of more than 30% in the second half, which is only slightly lower than Nvidia’s gains. Investors who want to diversify their semiconductor positions beyond Nvidia or who are concerned about its high valuation may want to pick up AMD, which certainly has the potential to post some strong results in upcoming quarters.
Tesla
Tesla shares are up just 3% so far this year, and that’s with the help of a recent rally. The company is a leading electric vehicle (EV) maker, and automation is a big part of its business, but it has also been working on robotics and other AI technologies. CEO Elon Musk dreams big, so to label Tesla as just an automotive stock would miss the big picture.
For now, however, conditions in the EV market are going to heavily influence how the stock performs. Both macroeconomic and company-specific headwinds have been weighing on Tesla, at least in the near term. But it recently reported better-than-expected delivery numbers for the second quarter, which has helped ignite some bullishness around the stock again. That may suggest that its financial results for Q2, due to be reported later this month, will be better than feared. In Q1 2024, the company’s revenue declined by 9% to $21.3 billion and its operating income plummeted by 56% to less than $1.2 billion.
But if its upcoming earnings show improvement and Tesla’s robotaxi event scheduled for August proves to be a positive catalyst, investors could have multiple reasons to feel bullish about the stock. And consider Tesla’s track record for the back half of the year:
|
Average |
2023 |
2022 |
2021 |
2020 |
2019 |
2018 |
2017 |
2016 |
2015 |
2014 |
|
28.5% |
(5.1%) |
(45.1%) |
55.5% |
226.8% |
87.2% |
(3%) |
(13.9%) |
0.7% |
(10.5%) |
(7.4%) |
Source: yCharts.
Tesla isn’t nearly as consistent as AMD or Nvidia. It’s had some tough years. But it also shows that given the proper catalysts, Tesla is has the potential for large swings in value that could make the second half a winner for investors.
For AI investors and Musk fans, the stock’s reduced valuation could present a timely opportunity to buy it to hold for the long haul.
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History Says These 3 AI Stocks Could Be Big Winners in the Second Half of 2024 was originally published by The Motley Fool
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