The stock market in 2024 ended on a high note, with the S&P 500 (^GSPC) gaining 23.31% and the Nasdaq (^IXIC) climbing 28.64%, dispelling earlier fears of modest gains or even a recession. This unexpected surge was largely driven by tech leaders, which not only defied expectations but also set the stage for continued investment interest into 2025. According to IBD, mutual funds are once again eyeing tech stocks, but with a notable shift in focus away from familiar names like Nvidia (NVDA) and Tesla (TSLA). Instead, Taiwan Semiconductor (TSM) and Alphabet (GOOGL), the parent company of Google (GOOG), have emerged as the top picks among fund managers.
This pivot towards TSM and Google reflects a strategic response to new market dynamics and growth areas like artificial intelligence (AI) and quantum computing. TSM, as the world’s leading contract manufacturer of advanced chips, is well-positioned to capitalize on the AI boom, regardless of which company leads in AI development. IBD notes that the company’s solid performance is reflected in its Ratings, with a Composite Rating of 99, an EPS Rating of 98, and a Relative Strength Rating of 92. The Janus Henderson Forty Fund (JARTX) has already capitalized on this potential, maintaining a significant stake in TSM. According to the latest data, TSM accounts for approximately 2.8% of the fund’s portfolio.
On the other hand, Alphabet‘s 9% stock surge this month came after the announcement of a breakthrough in quantum computing with their new Willow chip. This development not only showcases Alphabet’s commitment to cutting-edge technology but also positions it as a leader in a field that could redefine computing in the coming years. The stock, which has risen by over 27% from its September low of $148.80, has drawn the attention of mutual funds seeking tech stocks with solid fundamentals and promising growth prospects.
However, as 2025 approaches, the landscape is not without its challenges. The potential for new tariffs under the incoming Trump administration could impact certain sectors, while a cautious Federal Reserve might influence rate-sensitive areas like small caps and homebuilders. These risks require fund managers to be particularly discerning in their investments, focusing on companies with solid fundamentals and those that are pivotal in emerging tech trends.
The shift from Nvidia and Tesla to TSM and Google in mutual fund portfolios isn’t just about chasing performance; it’s about anticipating the next wave of technological innovation and economic policy changes. TSM’s role in manufacturing chips for a broad range of tech companies ensures its relevance in any tech-driven market, while Google’s advancements in quantum computing could herald a new era of computational power, affecting industries from pharmaceuticals to finance.
This strategic fund allocation indicates a nuanced understanding of market trends, where the focus isn’t solely on immediate past performers but on future leaders in technology sectors that are poised to drive the next phase of economic growth. As the new year unfolds, these investments might well dictate the pace and direction of market recovery and growth, navigating through both opportunities and the looming risks of 2025.
Price Action: TSM shares closed Tuesday’s session down 1.45% at $197.49. Despite this slight dip, the stock still closed the year 2024 with an impressive 90% gain. Meanwhile, Alphabet shares closed slightly down at $189.30, representing a 1% decrease. However, the stock has still seen significant gains over the past few months, with a 13.36% increase in the last 3 months and a 35.51% gain year to date.
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