These 3 Tech Stocks Have More Than Doubled in 2023. Can They Do It Again?

Numerous technology stocks experienced a downfall in the previous year due to the surge in interest rates and various macroeconomic challenges. Consequently, investors shifted their focus towards safer investments. However, in the present year, the market witnessed a sudden surge of optimism as the obstacles that hindered growth in the technology sector began to fade away.

Consequently, numerous leading technology stocks have witnessed a price surge of over 100% this year. Now, we will examine three of these highly sought-after stocks: Meta Platforms (META 0.50%), Nvidia (NVDA 1.32%), and C3.ai (AI -6.61%), to assess their potential for doubling in value once more.

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The value of Meta's shares dropped to its lowest point in seven years back in November due to the decline of its main advertising business. The modifications implemented by Apple's iOS made it difficult for Facebook and Instagram to create tailored ads using data from outside sources, while TikTok from ByteDance was attracting a younger audience away from them. Additionally, the overall advertising industry faced challenges due to unfavorable economic conditions. Making matters worse, Meta angered its investors by spending vast amounts of money on the development of virtual reality and augmented reality devices.

However, Meta's shares have experienced a remarkable surge of approximately 160% since the start of 2023. The market's affection for Meta was reignited as its advertising earnings displayed consistent growth in the initial and subsequent quarters of 2023. This notable progress can be attributed to the escalating advertisement acquisitions from Chinese cross-border online market platforms, aiming to connect with international purchasers. Moreover, Meta effectively responded to TikTok's presence by launching its own short video platform called Reels, and simultaneously enhanced its advertising resources to adapt to Apple's iOS modifications.

Meta continued to experience steady revenue growth and took proactive measures to reduce costs without giving up on its virtual reality and augmented reality projects. This move aimed to improve the company's operating margins. Due to these actions, experts forecast a remarkable 14% increase in revenue and a staggering 56% rise in earnings for Meta in the current year. These growth rates are even more impressive considering the stock's valuation, trading at only 25 times its future earnings.

In the coming years, I anticipate that Meta's stocks have the potential to grow exponentially once more. This is due to the continuous expansion of its user base across various apps such as Facebook, Messenger, Instagram, and WhatsApp. Currently, these platforms collectively serve a staggering 3.88 billion individuals globally every month.

Last year, a lot of investors became disinterested in Nvidia because its sales of gaming GPUs declined in a market after the pandemic. However, this year, Nvidia's stocks have increased significantly as optimistic investors paid attention to its rapidly growing sales of advanced data center GPUs. These GPUs are critical for handling complicated tasks related to machine learning and AI. Currently, all the major "generative AI" platforms, such as ChatGPT and DALL-E, rely on Nvidia's GPUs.

Experts anticipate that Nvidia's rapid data center GPUs' sales, coupled with the gradual rebound of its gaming sector, will significantly enhance its total annual revenue and adjusted earnings by 61% and 138% correspondingly in fiscal year 2024, concluding in January.

This would show a remarkable increase compared to Nvidia's stagnant revenue growth and significant drop of 25% in adjusted profits in fiscal year 2023. Nevertheless, critics may argue that a large portion of this growth has already been factored into its stock, which is currently valued at 60 times projected earnings. This considerable valuation may restrict its ability to rise further and make it vulnerable to a sharp decline if the hype surrounding AI diminishes.

The possibility of Nvidia achieving significant short-term gains is limited, however, there is a potential for its share price to double once again in the upcoming years if it continues to be the favored chipmaker in the generative AI industry. According to Allied Market Research, this market is projected to experience a compound annual growth rate (CAGR) of 34% from 2023 to 2032. Nevertheless, Nvidia must contend with competition from other chipmakers within this expanding market, and it remains uncertain whether they can sustain their technological advantage in the long run.

C3.ai, a company that creates AI algorithms for big businesses, also experienced a surge in buying frenzy for AI stocks. These algorithms are designed to be integrated into an organization's current software, making tasks more automated, fraud detection more effective, employee safety enhanced, and spending optimized. C3.ai's stock rose by an impressive 240% this year. However, I personally think that this increase was solely due to market excitement rather than actual growth in their business.

Before its market introduction as C3.ai in 2020, C3.ai used to go by the names C3 Energy and C3 Internet of Things (IoT). It gained significant interest initially due to two factors: its appealing ticker symbol and the fact that its founder and CEO, Thomas Siebel, had previously sold his company Siebel Systems to Oracle for a staggering amount of $5.8 billion back in 2006.

However, C3.ai has some notable issues lurking beneath the surface. A significant portion of its income, more than 30%, is derived from its collaboration with the massive energy corporation Baker Hughes. However, this arrangement is scheduled to terminate in the fiscal year 2025 and there is uncertainty regarding its renewal. Additionally, C3.ai has consistently modified its methodology for calculating customer figures, undergone three changes in CFOs since its initial public offering, and unexpectedly transitioned from a subscription-focused business model to a usage-oriented one just last year.

C3.ai experienced a modest 6% increase in revenue during the fiscal year 2023, which concluded in April. The company anticipates improved conditions in the larger economy, projecting a growth rate of 10% to 20% for fiscal year 2024. Nonetheless, C3.ai remains significantly unprofitable, and its stock valuation appears inflated when considering that it trades at 14 times the annual sales for this year. Therefore, I am of the opinion that rather than doubling, the value of C3.ai's stock is likely to be halved in the coming months.

Randi Zuckerberg, who previously served as a director of market development and spokesperson for Facebook and is the sibling of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Leo Sun holds positions in Apple and Meta Platforms. The Motley Fool also holds positions in and suggests Apple, Meta Platforms, Nvidia, and Oracle. Additionally, The Motley Fool recommends C3.ai. The Motley Fool abides by a disclosure policy.