The tech-heavy Nasdaq has been on a tear recently, which has left investors hunting for the best Nasdaq stocks to add to their portfolios. But with a rally already in progress, some are questioning whether they’ve missed the boat. The answer to that is a resounding no—particularly given the strong fundamentals underpinning this lift.
Perhaps the biggest underlying cause for the Nasdaq’s improvement is a brightening outlook for interest rates. While the prospect of a cut has become a little less likely, most investors are expecting to see the current rate levels remain. Inflation isn’t fully tamed, but it isn’t running away anymore either, and that’s giving central bankers the confidence to sit back and see how previous cuts filter through the economy before making another move. This is good news for the stock market, particularly tech stocks, which have seen their valuations plummet on interest rate hikes. Simple math is responsible for the decline—as rates rise, the value of a dollar’s worth of earnings in the future falls. But as rates come back down to earth, the reverse will be true, so fast-growing tech stocks that are promising big bucks down the line will be back in favor.
Interest rates aren’t the only thing driving positivity on Wall Street and big jumps in some of the best Nasdaq stocks. Corporate earnings season is also lifting spirits. That’s because companies are faring better than expected, especially in the tech sector. While conditions are more challenging than they have been, earnings showed that the need for technology isn’t slowing down. Plus, AI has been dominating the headlines as a major game-changer for just about every industry. That’s helped propel the tech companies that support AI development and lift the tech sector as a whole.
Best Nasdaq Stocks: Amazon (AMZN)
You really can’t talk about top Nasdaq stocks without including Amazon (NASDAQ:AMZN). The group’s name has become synonymous with e-commerce, and that puts it in a strong position heading into the festive shopping season. Over the next few weeks, we’ll get a read on how consumers held up during the period and whether the cost of living crisis will limit the number of gifts under the tree. It’s anyone’s guess how things play out, but one thing is for sure—Amazon will be a front-runner when it comes to winning customers’ dollars.
Weaker-than-expected shopping trends could put a dent in the retail sector, but luckily, Amazon’s not a one-trick-pony. In fact, its retail arm isn’t what’s driving profits. Instead, Amazon’s cloud services have become the group’s bread and butter, and part of the business is cooking with gas. Management is pouring money into AWS’ AI capabilities, which should drive growth well into the future.
The growing AI trend has been a boon for semiconductor stocks like Nvidia (NASDAQ:NVDA), making this one of the top NASDAQ stocks at the moment. But there’s a lot to be excited about when it comes to NVIDIA; underpinning its growth story is a rock-solid balance sheet with around $6bn floating around. So, although the valuation has been climbing somewhat, that price tag is justified, given the growth potential ahead.
Starting with AI, NVIDIA’s advanced chips are the backbone of this budding technology. It’s what attracted the likes of Amazon, Meta, and Alphabet, all of whom are customers. But NVIDIA is becoming more than just a chipmaker, with software options with varying degrees of capability. At the moment, this is only a drop in the bucket, but as more companies look for easy ways to slot AI into their tech suite, this could become an important opportunity for NVIDIA to increase recurring revenue.
Microsoft (NASDAQ:MSFT) is the OG of the tech space, and its ability to weather just about any storm is what makes it one of the best Nasdaq stocks to buy. The OpenAI shakeup saw the group’s share price get a temporary bump, but the investors’ optimism about the stock comes from strong earnings in the first quarter. The group’s results suggest Microsoft’s position in the cloud is getting stronger, and although conditions are getting rockier, the group is poised to perform.
While end customers are continuing to snap their wallets shut, Microsoft is peddling a service that should help with cost-cutting—efficiency. For now, cloud growth is making up for a slowdown in personal computing, and AI capabilities should only continue to increase the group’s cloud momentum. It will take time for the group’s AI development work to make its way through to usable products, but the scene is set for explosive growth ahead.
On the date of publication, Marie Brodbeck held MSFT. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.