Tech stocks rebounded from a disastrous 2022 and lifted the Nasdaq to one of its strongest years in the past two decades.
According to CNBC, after last year’s 33 per cent plunge, the tech-heavy Nasdaq finished 2023 up 43 per cent, its best year since 2020, which was narrowly higher. The gain was also just shy of the index’s performance in 2009. Those are the only two years with bigger gains dating back to 2003 when stocks were coming out of the dot-com crash.
The Nasdaq is just 6.5 per cent below its record high it reached in November 2021.
Across the industry, the big story this year was a risk-return, driven by the Federal Reserve halting its interest rate hikes and a more stable inflation outlook. Companies also benefited from the cost-cutting measures they put in place starting late last year to focus on efficiency and bolstering profit margins.
While the tech industry got a big boost from the macro environment and the prospect of lower borrowing costs, the emergence of generative artificial intelligence drove excitement in the sector and pushed companies to invest in what’s viewed as the next big thing.
Nvidia was the big winner in the AI rush. The chipmaker’s stock price soared 239 per cent in 2023, as large cloud vendors and heavily funded startups snapped up the company’s graphics processing units (GPUs), which are needed to train and run advanced AI models. In the first three quarters of 2023, Nvidia generated $17.5bn in net income, up more than sixfold from the prior year. Revenue in the latest quarter tripled.
Jensen Huang, Nvidia’s CEO, said in March that AI’s “iPhone moment” has begun.
“Startups are racing to build disruptive products and business models, while incumbents are looking to respond,” Huang said at Nvidia’s developers conference. “Generative AI has triggered a sense of urgency in enterprises worldwide to develop AI strategies.”
Consumers got to know about generative AI thanks to OpenAI’s ChatGPT, which the Microsoft-backed company released in late 2022. The chatbot allowed users to type in a few words of text and start a conversation that could produce sophisticated responses in an instant.
Developers started using generative AI to create tools for booking travel, creating marketing materials, enhancing customer service and even coding software. Microsoft, Google, Meta, and Amazon touted their hefty investments in generative AI as they embedded the tech across product suites.
Amazon CEO Andy Jassy said on his company’s earnings call in October that generative AI will likely produce tens of billions of dollars in revenue for Amazon Web Services in the next few years, adding that Amazon is using the models to forecast inventory, establish transportation routes for drivers, help third-party sellers create product pages and help advertisers generate images.
“We have been surprised at the pace of growth in generative AI,” Jassy said. “Our generative AI business is growing very, very quickly. Almost by any measure, it’s a pretty significant business for us already. And yet I would also say that companies are still in the relatively early stages.”