Following the 50 bps rate cut on September 18th, the Nasdaq Composite (IXIC) is up 1.47%. The technology-oriented index mirrors investor expectations that cheaper capital will aid capital-intensive tech companies.
This is particularly relevant now, during the shift towards greater cloud-computing reliance and AI infrastructure. In turn, the Big Tech sector is expected to invest even more in property, plant and equipment (PPE) as it becomes the scaffolding for smaller enterprises.
Although these Big Tech companies hold heavy market cap weight already, making them more difficult to move, there are reasons to believe the lower interest rate regime will renew their growth.
Amazon.com
Amazon.com Inc (NASDAQ:AMZN) is up 8.21% over the month, now at $2.013 trillion market cap. This marks the return to June-July level when the company crossed the $2 trillion milestone.
Over the years, Amazon diversified into multiple revenue streams, from e-commerce and third-party sellers to Amazon Web Services (AWS), advertising, subscription and physical stores via Whole Foods and Amazon Go.
In Q2 2024, Amazon generated $148 billion in net sales, which is 10% more from the year-ago quarter. But is there room for substantial growth still? Considering that we are still in the early stage of AI development, AWS is likely to serve as the magnet for most generative AI apps that will come online.
Not only does AWS provide businesses with optimized infrastructure for AI workloads, but it has its own full-stack for developing AI products. Case in point, AWS App Studio can deploy apps by using natural language, making app development pipeline as streamlined as AI-generated images.
For blockchain users, it is not surprising that AWS would easily expand support to AI, as AWS still holds the bulk of workload for Ethereum, Avalanche and Hyperledger Fabric. In Q2, AWS sales rose by 19% YoY to $26.3 billion. Even more is expected of Amazon’s monetization of content with ads. In Q2, advertising services netted Amazon $12.7 billion, up 20% YoY.
With the recent launch of AI Video generator to deploy ads cost-effectively, this revenue source will likely snowball further. In short, Amazon established a cohesive ecosystem that is bound for even greater growth, despite the already impressive results.
Against the present AMZN stock price of $192.45 per share, the average AMZN price target is $223.25 per Nasdaq data, giving investors a potential upside of 16%.
Advanced Micro Devices
Over the last month, Advanced Micro Devices Inc (NASDAQ:AMD) stock is up 1.2%, often neglected in favor of its long-standing rival Nvidia (NASDAQ:NVDA). Judging by the poor sales of AMD’s latest desktop Ryzen 9000 series, the company is in the downward end of the consumer cycle. After all, the increased cost of living eroded the drive to upgrade CPUs for minor gains.
However, the more competitively priced X3D series, utilizing 3D V-cache technology, have seen increased demand in 2024. In Q1, this brought AMD’s market share to a record high of 23.9% across desktop and server sectors. Given the cyclical nature of the market, combined with multi-year negative Intel (NASDAQ:INTC) news cycle, this trend will likely expand AMD’s customer base long-term.
More importantly, AMD is moving aggressively to also bite into Nvidia’s AI pie. The latest MI325X AI chip first unveiled at Computex in June is yet to be unrolled in Q4 2024 for generative AI workloads. The chip will then be followed by MI350 in 2025 and MI400 in 2026, of which the former is purportedly to have 35x superior performance to MI300 series.
To mirror Nvidia’s full-stack approach, which boosted Nvidia as AI king so rapidly, AMD acquired ZT Systems for $4.9 billion in August 2024. Taking all these factors into account, AMD forecasts its own rapid data center growth, forecasted to $400 billion by 2027 from $30 billion in 2023.
This would give investors a CAGR of 70% when exposed to AMD stock, according to AMD CEO Lisa Su. Against the present AMD price of $158.62 per share, the average AMD price target is $190.25 per Nasdaq data, giving investors a potential 20% upside.
Tesla
Year-to-date, Tesla Inc (NASDAQ:TSLA) completely recovered its losing streak, now at positive 1.73%, having gained nearly 15% boost over the last 30 days. TSLA stock is one of the most high-reward, high-risk exposures in the tech sector.
The company has been especially sensitive to the Fed’s hiking cycle, given the capital-intensive nature of high-tech automotive manufacturing at scale. The current TSLA price level of $253 appears to be heading to pre-Twitter purchase level.
The Robotaxi Event on October 10th could prove to be another launching point for TSLA stock. In fact, it may be a transformative milestone that upends Tesla’s business model from a cyclical company into a high-growth robotaxi cash machine.
Against the present TSLA price of $253 per share, the average TSLA price target is $210.56 per Nasdaq data. The big caveat is that nobody really knows what will be the effect of Robotaxi Event and if FSD (full self-driving) is close to launch as viable tech.
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Neither the author, Tim Fries, nor this website, The Tokenist, provide financial advice. Please consult our website policy prior to making financial decisions.