The Nasdaq Composite (^IXIC 1.51%) has been soaring over the last two years thanks in large part to growing opportunities in the field of artificial intelligence (AI).
After posting gains of 43% and 29% in 2023 and 2024, respectively, how likely is it the Nasdaq will soar again this year?
Historical trends hint at what could be in store for this year. Moreover, I'll detail why Micron Technology (MU 3.07%) is one of my top picks among opportunities in the AI chip market.
Here's what history suggests about the Nasdaq in 2025
One thing that is certain about the stock market is that it is resilient. Despite periods of volatility and economic weakness, history shows the capital markets have always come out stronger following a tumultuous period.
The Nasdaq is no exception here. In the table below, I've specifically called out the years in which the Nasdaq posted negative annual returns:
| Year(s) | Annual Return |
|---|---|
| 1973 and 1974 | (31%) and (35%) |
| 1981 | (3%) |
| 1984 | (11%) |
| 1987 | (5%) |
| 1990 | (18%) |
| 1994 | (3%) |
| 2000 through 2002 | (39%), (21%), and (32%) |
| 2008 | (41%) |
| 2011 | (2%) |
| 2018 | (4%) |
| 2022 | (33%) |
Data source: Macrotrends.
As you can see, the Nasdaq has only experienced an annual loss 14 times in its 55-year history. More importantly, the index has only experienced pronounced drops in excess of 20% on seven occasions. When drops of this magnitude happened in the early 2000s, 2008, and 2022, the U.S. found itself facing a number of complicated issues, including the dot-com bubble, geopolitical strife, the subprime mortgage crisis, and most recently, a period of abnormally high inflation.
Given the data above, it becomes clear the Nasdaq tends to rebound following a year of decline. And taking this a step further, the Nasdaq's gains often go on for several years before taking another breather.
So, while Nasdaq's gains over the last two years were quite generous, 2025 could still be another solid year for the tech-heavy index.
Image source: Getty Images.
Why I've got my eyes on Micron
While semiconductor stocks have gotten a lot of attention over the last two years, Micron isn't necessarily top-of-mind for most investors. Rather, many AI investors have become enamored with Nvidia, Broadcom, or Taiwan Semiconductor Manufacturing.
Don't get me wrong. All three of those companies deserve a position in the spotlight, given the fact they each play a critical role in the chip industry. For example, demand for graphics processing units (GPUs) from Nvidia (and Advanced Micro Devices) have been through the roof. Their GPUs have the capacity to run the complicated algorithms needed for generative AI applications, such as training large language models (LLMs) or machine learning.
During these processes, training and inferencing become critical for honing AI models. This is where high-bandwidth memory (HBM) protocols become important, and that is exactly what Micron specializes in.
Ongoing demand trends in AI infrastructure suggest that investment in training and inferencing is going to continue for many years. In fact, by 2030, Micron expects the total addressable market for HBM chips to climb above $100 billion -- more than sixfold what it's valued at today.
Micron's valuation may be too good to pass up
Over the last year, shares of Micron have gained 26%, right in line with the S&P 500. But the stock is is also down more than 30% from its 52-week high. Clearly, shares have taken a breather -- and now is the time to pounce.
Right now, Micron's forward price-to-earnings (P/E) ratio of 15.3 is considerably lower than many of its peers in the chip industry and even a discount to the S&P 500. Investors are missing just how important HBM chips are going to be down the road and are therefore overlooking Micron's importance in the semiconductor landscape.
That's why Micron is such an attractive stock to buy for the new year and one investors should hold onto for the long run.
