This year has presented a rollercoaster ride for stock market investors. On one hand, the benchmark S&P 500 index achieved a remarkable record high of 6,001.35 on November 11, indicating a substantial year-to-date gain of 25.8%. However, throughout 2024, investors and analysts have been grappling with various challenges such as high inflation, elevated private debt levels, supply chain disruptions, and geopolitical tensions.
Meta Platforms: A Leader in AI-Driven Social Media
The first stock worthy of attention is Meta Platforms, a colossal $1.48 trillion market-cap behemoth. Its AI-powered recommendation system plays a crucial role in enhancing user engagement on its suite of apps. In 2024 alone, the company's AI-powered feed and video recommendations have led to an 8% increase in time spent on Facebook and a 6% rise on Instagram. This heightened user engagement translates into better returns for advertisers. Moreover, over 1 million advertisers are leveraging Meta's generative AI tools to create captivating advertisements. Meta estimates that the use of image generation has boosted ad conversions by a significant 7%. Not surprisingly, Meta reported a 7% uptick in the number of ad impressions and an 11% increase in the average price per advertisement across its services during the third quarter of 2024.In addition to fortifying its core advertising business, Meta's AI initiatives are forging new revenue streams. Its AI-powered assistant, Meta AI, is gaining significant traction and has already amassed 500 million monthly active users. Given that 3.2 billion, or 40% of the global population, uses at least one of Meta's applications daily, Meta AI is on track to become the most widely used AI assistant globally. Meta is also making substantial investments in AI infrastructure to establish its open-source Llama AI model as the industry benchmark. By the end of August 2024, Llama downloads reached an impressive 350 million, nearly ten times higher than the previous year. While Llama 3 models continue to show strong momentum, Meta is concentrating on training Llama 4 models on clusters equipped with over 100,000 Nvidia's H100 GPUs.Meta's financials provide further evidence of its robust business momentum. Revenue and net income are growing at a double-digit rate, and its balance sheet remains healthy, with $70.9 billion in cash and marketable securities compared to just $28.8 billion in debt. All these factors combined make Meta an exceptional AI pick for December 2024.Microsoft: A Tech Giant Leveraging AI
Technology titan Microsoft is the second stock to keep an eye on in December 2024. Despite surpassing consensus revenue and earnings estimates in its first-quarter fiscal 2025 results (ended September 30), the stock has faced a setback due to a weaker-than-expected year-over-year revenue growth outlook for the Azure cloud computing business. Nevertheless, there are numerous aspects to admire about Microsoft.Microsoft's $13 billion partnership with OpenAI has been a game-changer, strengthening its core offerings and opening up new revenue avenues. The company's AI business is projected to reach a $10 billion annual revenue run rate in the second quarter, making AI the fastest-growing business in Microsoft's history. Azure and other cloud services also witnessed a 33% year-on-year revenue growth in the first quarter, with AI services accounting for approximately 12 percentage points of this expansion. Microsoft is focused on generating high-quality AI revenue streams by selling the entire AI package, including hardware, software, models, and frameworks, to enterprise customers rather than just GPUs to speculative AI startups.The company is constructing an end-to-end app platform with Azure AI to assist enterprises in building their own Copilots and agents. As the demand for Azure AI services exceeds the available capacity, Microsoft anticipates that its planned data center capacity expansions will accelerate Azure's AI-powered growth in the second half of fiscal 2025.Another significant growth driver for Microsoft is the cloud-based Microsoft 365 productivity suite. It is experiencing solid growth in average revenue per user (ARPU), partly due to the widespread adoption of AI-powered Copilot services. With nearly 70% of Fortune 500 companies now using Microsoft 365 Copilot, this AI service has enhanced the stickiness of Microsoft's offerings among large enterprises. Considering Microsoft's success in leveraging its AI investments with seamless execution in core businesses and healthy finances, this diversified company is well-positioned to be a smart investment in the coming months.Micron Technology: A Memory Player in the AI Era
The third AI-powered stock to watch in December 2024 is memory specialist Micron Technology. The company's high-performance memory offerings are widely utilized by data centers to fuel complex AI and high-performance computing applications. In addition to adding new servers, data centers are replacing multiple older-generation servers with next-generation traditional and AI servers to enhance power efficiency, space management, and performance. Furthermore, the DRAM and NAND content in the newer servers is on the rise, boosting the demand for Micron's memory offerings.Micron is actively capitalizing on this opportunity by transitioning from older nodes to the more advanced one-beta DRAM node technology and G8/G9 NAND process technology. These moves are aimed at increasing the production capacity of its high-margin memory offerings. HBM (high-bandwidth memory, a type of DRAM) has emerged as a major growth catalyst for the company. The HBM market is expected to expand from $4 billion in 2023 to $25 billion in 2025, and Micron aims to capture a 20% to 25% share of this market by 2025. Micron's HBM chips are already in short supply until 2025, with pricing finalized for 2024 and 2025. This has provided high revenue visibility and predictability for Micron's HBM business. Considering these favorable trends, Micron stock appears poised to surge higher in 2025.