The tech sector continues to set new highs, having investors wonder which Nasdaq stocks to buy next. Supported by substantial tailwinds, the Nasdaq 100 is heavily weighted towards the booming Artificial Intelligence (AI) sector. Despite relatively high valuations, few Nasdaq stocks may also benefit from lower interest rates as the market awaits for the Fed’s anticipated easing.
On the one hand, some analysts who note parallels to the dot-com bubble raise concerns about current valuations. On the other hand, despite overvaluation worries, other analysts point to Nasdaq stocks to buy, which could capitalize on secular growth trends through the rest of the year. And there is another cohort that argues fundamentals support the stock market, pointing to mega-cap stocks as providing growth potential.
Certain stocks are better positioned to thrive as the index may trend to new extremes. These Nasdaq stocks to buy are built to perform well in potential market volatility and take advantage of themes expected in the coming months:
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is one of the top Nasdaq stocks to buy. The software company has been blazing higher lately thanks to its pivot to AI, given its pole position in ChatGPT’s innovations. No doubt, Microsoft will stand to benefit from a continuation of the investor obsession with tech. However, there is a reason why Microsoft is a particularly compelling option in this list of Nasdaq stocks to buy: its largest and fastest-growing division is cloud computing.
The drive for AI has accelerated demand for hosted computer processing technology. However, cloud hosting was already growing fast before ChatGPT arrived on the scene. And as companies look to cut costs, more services are being moved online. As a result, Microsoft’s revenues are growing at a solid double-digit clip.
Microsoft trades at a price-to-earnings (P/E) ratio of 35.7x, below the tech industry average of 43.3x. Analysts agree that the company will continue to see sales growth of 14% next year, making it one of the top Nasdaq stocks to buy.
Meta Platforms (META)
Meta Platforms (NASDAQ:META) is another one of the top Nasdaq stocks to buy as the social media company revamps itself as an AI superstar. It has become one of the top performers in the tech world. Its share price more than quadrupled in less than two years. That is a substantial rebound from 2022 when investors were wary of the company’s foray into the metaverse as interest rates rose.
The latest moves from Meta leadership suggest that the rebound among Nasdaq stocks to buy is set to continue. The tech company has transformed into a more traditional firm, starting to pay dividends and pledging to buy back $50 billion in stock.
As one of the top Nasdaq stocks to buy, Meta has an even lower P/E ratio than Microsoft at just 26.8x, despite recent rallies. Thanks to advertising on its platform, the company continues to lock in solid growth. It is also poised to benefit from expected lower interest rates.
Nvidia (NVDA)
Nvidia (NASDAQ:NVDA) is the final pick in this list of top Nasdaq stocks to buy. As the symbol of the tech boom thanks to AI, Nvidia remains the top producer of the semiconductor element that makes AI possible. Nvidia controls 80% of the market, the hottest of the Nasdaq stocks to buy in AI-terms. While other companies have pledged to develop chips to compete, the competition hasn’t materialized to take market share.
Meta created its own custom chip but still buys as much as it can from Nvidia. Intel’s (NASDAQ:INTC) new Gaudi 3 chip might beat Nvidia’s standard H100 AI chip. Still, Nvidia is already marketing its superior H200 chip. This leaves Intel trying to play catch up instead of taking market share. Although Nvidia’s dominant position isn’t assured forever, it seems to be ahead of the competition. Although there are multiple candidate Nasdaq stocks to buy looking to take a piece of the growing AI pie, there is also plenty of demand for AI chips.
Nvidia is one of the most expensive Nasdaq stocks to buy. Thanks to its continual growth through the quarter, it trades at a P/E ratio of 75x. But investors are counting down the days to when it reports Q1 earrings, the last of the major tech companies to do so. It has a history of beating estimates. Even though analysts expect the company’s EPS to grow by more than 500% to $5.55, it is thanks to a 275% growth in revenue to $24.5 billion.
On the date of publication, Stavros Tousios did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.