It’s been a fantastic year for the TSX Index, as it looks to close off 2024 with a gain north of the 20% mark. Indeed, a 20% gain is nothing to complain about, especially for long-term thinkers who’ve felt the pains of the 2022 bear market. And while the Canadian stock market has been shining brightly, the S&P 500 looks poised to outdo it once again, as it eyes a 30% gain for 2024 (that’s close to 3% higher from here). Whether a Santa rally will help make it happen remains one of the big stories in the coming weeks.
Either way, I think the U.S. stocks are worth picking up here as markets look to add to their strengths in 2025. Of course, it’s hard to remember the last time the S&P 500 clocked in gains of 20% or more for two straight years. And while three straight years of such spoils may seem unlikely, I’d argue that anything is possible and that a bearish descent (like the one in 2022) isn’t necessarily a given. Does that mean some stocks aren’t overheated and deserving of skating to the penalty box come 2025?
Though there’s some overexcitement in parts of the tech scene, I’m not so sure investors have become nearly as euphoric as they were prior to the 2000 dot-com bust. With investors taking a bit of profit on some red-hot names this Monday, perhaps some valuable lessons from the internet boom were learned.
Arguably, some U.S. stocks still seem cheap relative to the long-term growth that new artificial intelligence (AI) technologies may have freshly paved. In this piece, we’ll look at one U.S. top performer that I think still has another year of impressive gains in the bag for 2025.
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Amazon
Amazon (NASDAQ:AMZN) may have been caught offside when the AI boom began. But in recent quarters, the right steps (or should I say leaps?) have been taken to catch up. Some folks on Wall Street think the e-commerce and web services giant has already caught up on AI. Indeed, it’s a mistake to count Amazon out when it comes to any emerging, disruptive technology that has the potential to open doors to new market share-taking opportunities.
With a sound AI cloud strategy in place, a freshly-upped stake in Anthropic AI, and Jeff Bezos reportedly putting in 95% of his time in AI efforts at the company, I’d look for Amazon to emerge as one of the AI leaders over the next three years.
Undoubtedly, you’re getting a lot of innovation from the name. And I think a 36.9 times forward price to earnings (P/E) ratio is way too cheap a price for the calibre of growth you’re getting with the name at new all-time highs of $226 and change. Amazon stock’s breakout has finally arrived (year to date, AMZN stock is up an impressive 51%), and with new catalysts in place, my guess is that the current leg-up could extend for many quarters to come.
Sure, it’s tough to justify getting just US$0.70 per Canadian dollar. But if you’re serious about upping your AI exposure, I think the trade-off is worth making going into the new year, especially since the loonie could still have further to fall as Canadians worry over tariffs under Trump.
