The Nasdaq MarketSite in the Times Square neighborhood of New York, on Tuesday, May 31, 2022.
Michael Nagle | Bloomberg | Getty Images
The tech industry made a strong comeback in 2023, boosting the Nasdaq to one of its best years in the past two decades.
After a 33% drop last year, the Nasdaq surged by 43% in 2023, marking its best performance since 2020. This gain was only narrowly surpassed by the index’s performance in 2009. These are the only two years with larger gains dating back to 2003, when stocks were recovering from the dot-com crash.
The Nasdaq is now just 6.5% below its record high reached in November 2021.
The big story of the year was a return to risk across the industry, driven by the Federal Reserve’s decision to halt interest rate hikes and a more stable outlook on inflation. Companies also benefited from the cost-cutting measures they implemented late last year to focus on efficiency and bolster profit margins.
“Once you have a Fed that’s backing off, no mas, in terms of rate hikes, you can get back to the business of pricing companies properly — how much money do they make, what kind of multiple do you put on it,” said Kevin Simpson, founder of Capital Wealth Planning, told CNBC’s “Halftime Report” on Tuesday. “It can continue into 2024.”
Generative artificial intelligence emerged as a driving force in the sector, leading companies to invest in what’s seen as the next big thing.
Nvidia was a major beneficiary of the AI trend, with its stock price jumping 239% in 2023. Large cloud vendors and heavily-funded startups snapped up the company’s graphics processing units (GPUs), which are essential for training and running advanced AI models. In the first three quarters of 2023, Nvidia generated $17.5 billion in net income, up over sixfold from the prior year, and revenue in the latest quarter tripled.
Jensen Huang, Nvidia’s CEO, said in March that AI’s “iPhone moment” has arrived.
“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.
