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Dividend-loving investors worldwide woke up with exciting news on Friday, as Facebook parent Meta Platforms, Inc. (META) announced its first-ever quarterly dividend and authorized a $50 billion share buyback program.
The company will pay a cash dividend of 50 cents per share on March 26 to shareholders of record as of February 22, joining other peers, including Apple Inc. (AAPL), Microsoft Corporation (MSFT), and Oracle Corporation (ORCL), which have regular payouts. META’s board intends to issue a cash dividend on a quarterly basis.
“Introducing a dividend just gives us a more balanced capital return program and some added flexibility in how we return capital in the future,” Meta’s Chief Financial Officer Susan Li told analysts on its earnings call.
META’s annual dividend of $2 translates to a yield of 0.4% at the prevailing share price. The stock finished nearly 20% higher to $474.99 on Friday after reporting better-than-expected fourth-quarter and full-year 2023 earnings.
The average yield for a dividend-paying stock in the S&P 500 is nearly 2%. Meta’s dividend payout is lower than that rate; however, companies generally start small. Now, investors can look forward to its dividend growth and stock gains.
Looking at Microsoft, the company initiated its cash dividend on January 16, 2003. Its annual dividend was $0.08 per share, which resulted in a yield of about 0.3%. A year following the dividend declaration, MSFT’s stock was up 10%, and the annual dividend for 2024 was raised to $0.16. Currently, the company pays a quarterly dividend of $0.75.
Talking about Apple, it stopped paying cash dividends in 1995 but then declared again in January 2013. Adjusting for all the splits, cash dividends in 2013 translated to an annualized yield of nearly 1.4%. A year after the dividend restart, AAPL’s stock was approximately 24% up as the company continued payouts. Since the restart, Apple has paid a total of around $34 per share.
Dividends are typically welcomed by shareholders and signal management’s confidence about the company’s future growth. Moreover, initial dividend payouts open up to investors who only hold stock in dividend payers.
Further, Meta’s recently released report marked the fourth quarter of the company’s self-described “year of efficiency,” which founder and CEO Mark Zuckerberg announced in February 2023. The company’s turnaround strategy involved layoffs and other cuts to spending, which in turn ended up being a successful effort to reverse the previous year’s revenue declines and share price weakness.
Outstanding Last Reported Financials
For the fourth quarter that ended December 31, 2023, META reported revenue of $39.17 billion, an increase of 24.7% year-over-year. The revenue surpassed analysts’ estimate of $40.11 billion. The company’s revenue from the Advertising segment grew 23.8% year-over-year, and its revenue from the Family of Apps segment rose 24.2%.
Meanwhile, META’s total costs and expenses reduced by 7.9% year-over-year to $23.73 billion. Its operating margin more than doubled to 41%, a clear sign that several cost-cutting measures are boosting profitability.
Facebook parent Meta’s income from operations rose 156% from the prior year’s period to $16.38 billion. Its net income increased 201.3% from the year-ago value to $14.02 billion. The company posted earnings per share attributable to Class A and Class B common stockholders of $5.33, compared to the consensus estimate of $1.76, and up 202.8% year-over-year.
As of December 31, 2023, META’s cash and cash equivalents stood at $41.86 billion, compared to $14.68 billion as of December 31, 2022. The company’s total assets were $229.62 billion versus $185.73 billion as of December 31, 2022.
Family daily active people (DAP) came in at 3.19 billion on average for December 2023, up 8% year-over-year. Family monthly activity people (MAP) was 3.98 billion as of December 31, 2023, an increase of 6% year-over-year.
Also, Facebook daily active users (DAUs) and Facebook monthly active users (MAUs) were 2.11 billion on average and 3.07 billion as of December 31, 2023, up 6% and 3% year-over-year, respectively.
As of December 31, 2023, the tech giant completed the data center initiatives and the employee layoffs, along with the facilities consolidation initiatives. META’s headcount was 67,317 at the end of the year 2023, a decline of 22% year-over-year.
“We had a good quarter as our community and business continue to grow,” said CEO Zuckerberg. “We’ve made a lot of progress on our vision for advancing AI and the metaverse.”
Fiscal 2024 Outlook
For the first quarter of 2024, META expects total revenue to be in the range of $34.50-37 billion. For the full year 2024, the management expects total expenses to be in the range of $94-99 billion, unchanged from the previous outlook.
The company anticipates full-year capital expenditures to be in the range of $30-37 billion, an increase of $2 billion in the high end of its prior range. Meta expects growth to be driven by investments in servers, including AI and non-AI hardware and data centers, and it plans to ramp up construction on sites with its previously announced new data center architecture.
META’s updated outlook reflects its evolving understanding of its AI capacity demands as the company anticipates what will be needed for the next generations of foundational research and product development.
Ramping up Efforts in AI and Metaverse
Meta is making consistent efforts to secure its place in the increasing AI arms race. Last month, CEO Mark Zuckerberg announced that META plans to build its own artificial general intelligence, known as AGI, which is artificial intelligence that meets or exceeds human intelligence in almost every area. He added that the company further plans to open it up to developers.
In a video posted to Meta’s social network Threads, Zuckerberg said building the best AI for chatbots, creators, and businesses requires enhanced advancement in AI across the board. “Our long term vision is to build general intelligence, open source it responsibly, and make it widely available so everyone can benefit,” he said in a post on Threads.
The tech giant announced building out its infrastructure to accommodate this push to get AI into products, and it planned to have about 350,000 H100 GPUs (graphics processing units) from chip designer NVIDIA Corporation (NVDA) by the end of this year. In combination with equivalent chips from other suppliers, Meta will have around 600,000 total GPUs by the end of the year, Zuckerberg said.
He added that the company plans to grow and bring its two major AI research groups – FAIR and GenAI – together to accelerate its work. He further said he believes that Meta’s vision for AI and the AR/VR-driven metaverse are connected.
“By the end of the decade, I think lots of people will talk to AIs frequently throughout the day using smart glasses like what we’re building with Ray Ban Meta.”
Mark Zuckerberg’s recent announcement is one of the company’s biggest pledges to double down on AI. Earlier last year, after the viral success of OpenAI’s ChatGPT, Zuckerberg announced that Meta is creating a new “top-level product group” to “turbocharge” the company’s work on AI tools.
Since then, Meta has introduced tools and information aimed at assisting users understand how AI influences what they see on its apps. The company has launched a commercial version of its Llama large language model (LLM), ad tools that can generate image backgrounds from text prompts, and a “Meta AI” chatbot that can be accessed directly via its Ray-Ban smart glasses.
In his posts last month, Meta CEO said the company is currently training a third version of the Liama model.
Impressive Historical Growth
Over the past three years, META’s revenue and EBITDA grew at CAGRs of 16.2% and 15%, respectively. The company’s net income and EPS rose at respective CAGRs of 10.3% and 13.8% over the same timeframe. Its levered free cash flow improved at 25.6% CAGR over the same period.
Moreover, the social networking company’s total assets increased at a CAGR of 13% over the same timeframe.
Favorable Analyst Estimates
Analysts expect META’s revenue for the first quarter (ending March 2024) to grow 25.3% year-over-year to $35.88 billion. The consensus EPS estimate of $4.25 for the ongoing quarter indicates a 93.3% year-over-year increase. Moreover, Meta has topped consensus revenue and EPS estimates in each of the trailing four quarters, which is remarkable.
Furthermore, Street expects Meta’s revenue and EPS for the fiscal year (ending December 2024) to grow 17.3% and 32.4% year-over-year to $158.20 billion and $19.69, respectively. For the fiscal year 2025, the company’s revenue and EPS are expected to increase 11.2% and 15.3% from the previous year to $175.98 billion and $22.70, respectively.
Solid Profitability
META’s trailing-12-month gross profit margin of 80.72% is 64.5% higher than the 49.07% industry average. Likewise, the stock’s trailing-12-month EBIT margin and net income margin of 36.33% and 28.98% are considerably higher than the industry averages of 8.47% and 3.50%, respectively.
In addition, the stock’s trailing-12-month ROCE, ROTC, and ROTA of 28.04%, 17.84% and 17.03% favorably compared to the respective industry averages of 4.09%, 3.52%, and 1.43%. Also, its trailing-12-month levered FCF margin of 23.52% is 202.7% higher than the industry average of 7.77%.
Bottom Line
Facebook parent META recently reported a big beat on earnings and revenue for the fourth quarter of fiscal 2023. The company, which owns Facebook, Instagram, and WhatsApp, also announced its first-ever dividend of $0.50 per share and authorized a $50 billion share buyback program. Dividends generally signal management’s confidence about the company’s future growth.
Moreover, Meta’s market capitalization last month surpassed $1 trillion. The company last exceeded this mark in the market cap in 2021, when it was still known as Facebook.
Meta’s “year of efficiency” and several cost-cutting measures paid off in a significant way and offered a sweetener for investors, sending its shares higher. The stock is up nearly 38% over the past month and has gained more than 150% over the past year.
2023 was a pivotal year for the social networking giant, where it raised its operating discipline, delivered solid execution across its product priorities, and significantly improved ad performance for the businesses that rely on its services. In 2024, the company further seems well-positioned to build on its progress in each of these areas while advancing its ambitious efforts in AI and Reality Labs.
Given META’s robust financials, accelerating profitability, dividend initiation, and solid growth outlook, primarily as it seeks to strengthen its position in AI, it could be wise to invest in this stock now.

Advancements in Artificial Intelligence (AI) have yielded remarkable progress in technological and operational efficiencies across various sectors. Yet, AI’s noteworthy penetration into the healthcare field is raising propositions of transformation.
Pharmaceutical companies have been capitalizing on AI long before the recent surge in interest – the utilization of intricate AI models to decipher disease mechanisms serving as a prime example. AI-facilitated applications like AlphaFold2, ESMFold, and MoLeR offer novel insights into protein structures that unravel numerous diseases.
While the most advanced AI-centric medicine entities have Phase 2 clinical trial drugs, the unlocking of AI-healthcare collaboration power, especially in fashioning potential cures for lethal diseases, will witness compelling progression in the upcoming years.
Researchers today regard AI as a pioneering tool offering an expedited analysis of vast data quantities, surpassing human capabilities. Presently, drug development demands a decade or more in research and development, compounded by the escalating production costs over the past decade – a conundrum existing despite technological advancement.
With AI’s intervention, the feasibility of expediting this process, slashing developmental timeframes and drug production costs by up to 30%, emerges. There is also a reduction in failure risk, given the current approximately 90% attrition rate, depending on the therapeutic domain.
GenAI (a subset of deep learning) embarks on a fresh leap in AI evolution and imbues computers with transformative abilities. Its arrival challenges us to envision its implications within the healthcare sphere, particularly drug discovery.
While most ongoing projects are in their infancy stages, the merger of GenAI and drug discovery might instigate not only novel treatments but also breakthroughs potentially outpacing nature. GenAI is revolutionizing several facets of the pharmaceutical realm, from speeding up drug discovery, enhancing procedural efficiency in clinical trials, accelerating regulatory approvals, and ultra-targeting marketing to facilitating in-house medical materials production. GenAI’s potential to unlock billions in industry value is imminent.
By expediting drug compound identification processes and their corresponding development, approval, and efficient marketing, this technology could generate an economic value between $60 to $110 billion annually for the pharma and medical-product industries.
The looming GenAI-steered transformation in life sciences lends immeasurable advancements to human health and quality of life. An accelerated drug discovery process, for instance, aids in combating diseases swiftly, freeing up resources for underserved areas such as orphan diseases.
GenAI’s capability to derive patterns and insights from extensive patient data will ignite more personalized treatments, hence improving patient outcomes and streamlining patient care by minimizing discrepancies in therapeutic manufacture and delivery.
Lastly, by automating mundane tasks like document creation and record-keeping, GenAI carries significant potential to augment productivity within the medical research field and enables researchers and medical liaisons to devote more time to patient-centered tasks. In turn, this holds promise for improved service to both clinicians and patients.
Pharmaceutical powerhouse Merck & Co., Inc. (MRK) has set sights on exploring GenAI platforms. The company’s interest comes on the heels of the Merck Research Labs collaboration announcement with Variational AI, supported by the CQDM Quantum Leap program.
At the core of this innovation is Variational AI, a trailblazer in optimizing drug discovery and development through the efficient employment of GenAI. This potent technology called Enki offers a novel approach to drug discovery. Drawing parallels with AI software like DALL-E and Midjourney, which can translate text prompts into visual images, Enki generates small molecular structures in response to target product profiles (TPPs). The user picks the desirable attributes, selecting the targets they aim to affect alongside those they seek to avoid; then, Enki produces molecules tailored to meet the TPP specifications.
Constructed as a fundamental model for small molecule drug discovery, Enki serves to hasten and mitigate risks attached to the early stages of discovery. The startup believes that a series of prompts about the TPP is all that stands between users and innovative, selective, and lead-like structures ready for synthesis. Utilizing experimental data, Variational trained Enki to generate molecules based on TPPs, thereby handing researchers the tool to canvas a broader scope of chemical space.
Thanks to the Enki Platform, chemists can bypass the complex process of developing their own GenAI models. They can input their TPP and receive an array of innovative, diverse, selective, and synthesizable lead-like structures within days, facilitating a swift transition into lead optimization. With this dynamic start, it is evident that MRK, the leading purveyor of pharmaceuticals, aims to make a significant splash in the new year.
Several other factors present an optimistic outlook for MRK in 2024.
MRK’s flagship oncology drug, Keytruda – the highest-grossing prescription medication worldwide – is slated to gain approval for additional uses. In 2023 alone, Keytruda grossed a remarkable $25.01 billion, equating to 45.2% of MRK’s fourth-quarter sales. Forecasters project Keytruda to yield over $30 billion in sales by 2026.
MRK has already seen the tangible effects of its 2023 transactions, substantially boosting the company’s future revenue projections. The pharma giant now anticipates garnering $20 billion from fresh oncology products in development by the mid-2030s, almost doubling its earlier pipeline forecast of just over $10 billion.
However, as Keytruda approaches its patent expiration in 2028, MRK is already searching for strategic acquisitions within $15 billion, preparing to weather the ensuing patent erosion. This effort is to ensure continuous growth through novel lucrative ventures, replacing the revenue stream provided by Keytruda upon losing its exclusiveness.
MRK’s proactive approach comes on the heels of its recent $680 million acquisition of Harpoon Therapeutics, following the larger purchases of Prometheus Bio ($10.8 billion) and Acceleron Pharma ($11.5 billion).
MRK, buoyed by solid fourth-quarter performances backed by strong Keytruda sales, has secured several deals over the past year. Notably, this includes a notable $5.5 billion agreement with Japan’s Daiichi Sankyo, granting co-development rights for three antibody-drug conjugate cancer treatments. This partnership has contributed to MRK’s non-GAAP R&D expenses, increasing them to $9.63 billion in the fourth quarter of 2023 and $30.53 billion for fiscal 2023.
Aside from its dominant presence in the oncology sphere, MRK is also targeting the weight loss medication market. The company is developing Efinopegdutide, a GLP-1 class drug for weight management that has demonstrated promising trial results.
After securing only 1% year-over-year sales growth in fiscal year 2023, analysts project a 5.3% year-over-year increase in the fiscal year ending December 2024. This predicted growth is expected to propel the company’s EPS to $8.49, a 462.1% year-on-year increase.
MRK estimates its global sales between $62.70 billion and $64, while non-GAAP EPS is expected to be between $8.44 and $8.59.
Furthermore, MRK boasts an impeccable dividend history, with the annual dividend currently at $3.08 per share, yielding 2.55%. In an impressive display of consistency, MRK has increased its dividend for 13 consecutive years and holds a four-year average yield of 2.97%. Also, over the past three and five years, its dividend grew at a CAGR of 7.8% and 9.3%, respectively.
MRK’s shares have gained over 15% year-to-date to close the last trading session at $126.38. Moreover, it trades above the 50-, 100-, and 200-day moving averages of $110.53, $107.39, and $109.24, respectively. If this upward trajectory persists, the company is poised for a notable performance in 2024.
Bottom Line
With the employment of GenAI, the pharma industry has made a considerable stride forward, leading to significant operational enhancements and quicker benefit realization, especially in drug discovery. The GenAI in drug discovery market is projected to surpass around $1.13 billion by 2032, growing at a CAGR of 27.1%.
MRK has swiftly evaluated and addressed the potential impact of GenAI, demonstrating commendable adaptability in deploying the most appropriate tool for each specific use case. This technology holds great promise for MRK’s research, trials, manufacturing, and commercialization endeavors.
Partnerships formed between MRK, AI technology firms, and research institutions could catalyze innovation in GenAI for drug discovery and bolster the company’s product pipeline in the future. MRK, with an abundant oncology pipeline, is utilizing advanced technology for drug research. Furthermore, MRK shares are compelling due to robust shareholder returns, growth prospects, solid profitability, and an optimistic outlook.
However, the stock is priced at a premium compared to its competitors. In addition, despite displaying consistency in its dividend payment, its yield of 2.55% sits not only below the U.S. consumer inflation rate but also under that of its healthcare counterparts, potentially rendering MRK a less appealing proposition for conservative investors.
Further complicating matters, government regulations and the Inflation Reduction Act might unfavorably affect MRK’s operations. Modifications such as negotiations with Medicare, implementation of medication discounts covered under Medicare Part B and D, and enforced penalties for escalating drug prices pose potential financial risks. MRK’s Januvia ended up on this list, jeopardizing the financial stability of MRK’s diabetes franchise.
Sales for the Januvia/Janumet (diabetes) franchise declined 13% year-on-year to $787 million in the fiscal fourth quarter of 2023. The drug’s sales suffered due to dwindling demand in the U.S. and generic competition in certain international markets. Such regulatory restraints could decelerate MRK’s future revenue growth, pressuring management to reassess its R&D approach.
Therefore, investors are advised to weigh both the positive and negative factors prudently before investing in this stock.

 
For the first half of the 20th century, artificial intelligence (AI) remained a subject of intrigue, primarily among science fiction enthusiasts. Characters like sentient machines and androids, frequently depicted in various literary and cinematic masterpieces, embodied the concept of AI at its most imaginative peak. In the second half of the century, scientists and technologists began their diligent pursuit to make AI a reality.
By 2023, the world managed to get an up-close and personal view of the stunning advancements in the field of AI technology. This rapidly evolving innovation is crucial in sculpting the future of humanity across diverse industries. At present, it plays a pivotal role as an impetus behind the emergence of new technologies such as big data, robotics, and the Internet of Things (IoT), to name a few.
Additionally, GenAI, with tools like ChatGPT and AI art generators, is gaining widespread attention. This momentum is anticipated to reaffirm AI’s position as a technological trailblazer for the foreseeable future.
AI has its influence across machine learning, large language models, intelligent applications and appliances, digital assistants, synthetic media software, and autonomous vehicles. Corporations that neglect to invest in AI services and products may face the threat of obsolescence. Company executives project an increase in their expenditure for the year 2024 to modernize data infrastructure and adopt AI.
As AI continues its growth, semiconductors and their components have emerged as key topics of debate in the 2023 business landscape. This technological boom has often drawn parallels to the American Gold Rush of the nineteenth century, with the lucrative vantage point proving not to be the gold miners but the shovel manufacturers. Today, it’s NVIDIA Corporation (NVDA) that positions itself as a prominent “shovel seller” by producing chips; these are rare yet vital resources in the realm of AI development.
Based in Veldhoven, Netherlands, ASML Holding N.V. (ASML) is poised to reap substantial benefits from the swift incorporation of GenAI and machine learning technologies. It is projected that AI will initiate significant growth in leading-edge logic wafer capacity through increased volumes of GPU, CPU, and connectivity chips and escalating die sizes.
ASML holds the unique position of being the sole provider of extreme ultraviolet lithography machines, crucial for generating advanced process nodes, including TSMC’s 5nm and 3nm parts.
This positions chipmakers – who create the bulk of the chips exploited for powering AI training, machine learning, and inference workloads – as dependent on this European equipment supplier.
Before we delve into a comparative analysis of NVDA and ASML to determine a better long-term buy, let’s first individually look at the companies:
NVIDIA Corporation (NVDA)
NVDA, widely acknowledged as the leading U.S. manufacturer of chips and graphics processing units tailored for AI applications, celebrated a banner fiscal year in 2023. The company’s stock skyrocketed over the year, tripling in value, propelled by the introduction of innovative products and a surge in reliance on AI technology. Its third-quarter revenue stood at $18.12 billion, with profits surging nearly fourteenfold from the year-ago quarter to $9.24 billion and pushing the company’s market cap above $1.5 trillion.
NVDA’s reputation for delivering high-quality, AI-ready hardware solutions has earned it a favored status among numerous companies. As a testament to NVDA’s relationship with various multinational corporations, META, a member of the “Magnificent Seven” tech giants, has plans to employ NVDA’s GPUs. With the aim of constructing a “massive compute infrastructure” to meet its ambitious AI objectives, META will integrate 350,000 NVDA H100 GPUs and nearly 600,000 H100 compute-equivalent GPUs into its system by 2024.
Investors’ exuberance for AI can be traced back to OpenAI’s launch of ChatGPT on November 30, 2022. Following this event, NVDA’s shares soared by more than 250%, solidifying the company’s position as an industry frontrunner in semiconductor manufacturing. This upswing guided the S&P 500 Semiconductor stock price index toward a gain of 108%.
As for what’s ahead, NVDA is expanding its production capability for the much-coveted H100 chip.
Further proof of NVDA’s dynamism lies in its net income and EBIT margins of 42.10% and 45.94%, which vastly outperform industry averages of 2% and 4.79%, respectively. Likewise, its trailing-12-months ROCE, ROTC, and ROTA of 69.17%, 33.23%, and 34.88% are also significantly higher than the industry averages of 1.48%, 2.82%, and 0.41%, respectively.
As NVDA gears up for its next earnings announcement on February 21, 2024, anticipation is mounting among investors. Revenue and EPS are projected to be $20.21 billion and $4.52, denoting year-over-year increases of 234.1% and 413.2%, respectively.
That said, investors should stay mindful of potential geopolitical tensions. As history indicates, China is crucial to NVDA, contributing to over 90% of the country’s $7 billion AI chip market. Should the U.S. impose restrictions on high-end chip exports to China, billions of orders could be placed under threat.
Furthermore, with NVDA trading at a forward non-GAAP price-to-earnings (P/E) ratio of 50.82x, it can be inferred that investors are paying a considerable premium, potentially influencing the valuation of the company’s stock. The forward price/earnings-to-growth (PEG) ratio of 0.37, which may seem attractively balanced at first glance, also suggests that any downward revisions to the EPS could trigger a significant decline in stock value. So far, analysts have revised EPS estimates upward. Nonetheless, it should be noted that this trend could reverse if these estimations fail to materialize.
ASML Holding N.V. (ASML)
ASML develops, produces, markets, sells, and services advanced semiconductor equipment systems. Its key product line is high-end, extremely expensive, and intricate systems for semiconductor manufacturing that employ extreme-ultraviolet (EUV) light to print features at a resolution of 13 nm – outpacing the reach of deep-ultraviolet (DUV) lithography, used in another product line that ASML also offers.
The EUV systems, exclusive to ASML, have been tremendously successful, enhancing the company’s profit margins and its stock performance over the past five years. In fact, ASML had emerged as the third most valuable publicly listed firm in European stock markets as of late January.
AI system architecture necessitates the inclusion of chips specifically designed to process substantial quantities of data. High-performance memory chips are crucial to achieving the full potential of AI. The criticality of these chips has prompted chip manufacturers to invest in EUV lithography systems, essential elements of advanced chip manufacturing, made available by ASML. Under normal conditions, the delivery time for ASML’s flagship EUV system ranges from 12 to 18 months.
ASML’s critical tools are required by Taiwan Semiconductor Manufacturing (TSM), Intel (INTC), and Samsung to produce advanced AI chips for both their clients and their own needs. This dependence on ASML’s equipment underscores the company’s pivotal role in the ongoing AI revolution.
In 2023, a lethargic order pace from customers and harsh market circumstances posed challenges for ASML. However, during the same year, the company made a resilient recovery. Its resurgence in orders coincides with the continued competition among top-tier chip manufacturers striving to develop 2-nanometer chips, thus enhancing the computing speed of AI algorithms. The imminent inauguration of several chipmaking facilities is also projected to amplify the demand for ASML machines further.
ASML disclosed solid earnings for the fiscal fourth quarter of 2023. Driven by the demand for the specific equipment necessary for AI chip production, net booking reached €9.19 billion ($9.95 billion), of which €5.6 billion ($5.85 billion) is EUV. Sales escalated to €7.24 billion ($7.84 billion), generating €2.05 billion ($2.22 billion) in profits representing an 8.2% year-over-year increase.
ASML’s order lead time of 12 months to 18 months indicates that customers placing an order now can anticipate delivery during the initial half of 2025. It is projected that the order backlog will maintain its swift growth in subsequent quarters, reinforcing management’s narrative of future growth and market stability at the bottom of the cycle.
ASML was highly profitable last year, with shares peaking in the first half of 2023 before briefly declining and then rebounding to approach historic levels unseen since late 2021. This surge can be attributed to ASML’s well-received earnings report for the fiscal fourth quarter of 2023. However, the company’s current premium valuation and tempered outlook for its 2024 financial performance raise some concerns.
ASML’s non-GAAP P/E ratio of 43.16x suggests a high valuation, indicating the potential for ASML to face some financial pressures. The firm will also need to navigate potential challenges ahead, particularly regarding Chinese chipmakers impacted by export restrictions. Nevertheless, ASML foresees continued robust demand despite potential volatility in this market.
Despite these immediate challenges, ASML remains bullish for the long term about the industry it serves. The company views 2024 as a “transitional” year, predicting that its semiconductor clients are on their way through the bottom of their business cycles and will, therefore, increase demand for its systems significantly in the latter half of 2024 and even more so in 2025. In preparation for this predicted uptick in demand, ASML is actively investing in capacity ramping and technological advancement.
Financial analysis firm Jefferies further supports ASML’s optimistic outlook, declaring that ASML is well-positioned to capitalize on an anticipated surge in AI demand. Based on this projection, it forecasts ASML’s revenue to grow at a 21% CAGR between 2022 and 2025.
The Winner
Peter Lynch once said, “Everybody is a long-term investor until the market goes down.” During a market crash, plenty of investors retreat hastily, potentially missing out on substantial long-term gains. Therefore, a more prudent strategy would be to stay the course throughout downturns or even increase share purchases via dollar-cost averaging.
Nonetheless, this tactic is only applicable to robust, sustainable companies. Two firms fitting these parameters are NVDA and ASML – both undoubtedly presenting compelling long-term retirement investment opportunities.
However, there are certain factors one should consider. NVDA’s trailing-12-month gross profit margin of 69.85% is higher than ASML’s 51.29%. In addition, NVDA’s trailing-12-month cash from operations of $18.84 billion is higher than ASML’s $6.01 billion. Thus, NVDA seems more profitable.
Turning to growth, NVDA has exhibited an impressive revenue increase at a 44.8% CAGR over the past three years, while ASML trails with a still respectable growth at a 25.4% CAGR. During the same period, NVDA’s net income grew at a 70.3% CAGR compared to ASML’s 30.2% CAGR.
However, NVDA carries a heavy price tag reflected by its forward EV/EBITDA multiple of 47.34, higher than ASML’s 33.05. Similarly, NVDA’s high forward EV/Sales of 26.22x, compared to ASML’s 11.31x, further emphasizes the costliness of NVDA stocks.
NVDA possesses an astounding 90% stake in the AI chip market, which, when coupled with its astounding profitability and growth, underscores its industry dominance despite its lofty valuation.
The unprecedented demand surge for ASML machines, prompted by the burgeoning need for AI infrastructure, signifies the pivotal role the company plays in revolutionizing AI technologies. Notably, specialized AI chips, such as those fabricated by NVDA using ASML’s architecture, perpetually dominate the field, stressing the substantial weight ASML carries within the AI sphere.
However, growing production capacity due to ASML’s record orders could produce potential price dips, impacting the industry negatively. The massive investment influx in semiconductor production may reduce pricing power and, contract margins and profits.
Turning a keen eye on dividends, NVDA pays an annual dividend of $0.16 per share, equating to a yield of 0.03%. Meanwhile, ASML offers a substantial dividend of $6.12 per share, yielding 0.70%. Also, ASML’s dividend grew at CAGRs of 34.9% and 30.7% over the past three and five years. Hence, investors aiming for dependable, long-term returns could consider allocating their resources toward incorporating ASML into their portfolios.
Undeniably, NVDA’s robust expansion is praiseworthy, with management consistently portraying an optimistic outlook for the company’s future. However, the firm is not without risk. With NVDA’s shares currently trading at 26.2x sales and 50.8x earnings, these valuations indicate that any slight mishap has the potential to jolt the company’s market standing significantly. Given the prevailing market irregularities, potential hazards, and sluggish price momentum, exercising caution and waiting for a better entry point on the stock may be a sensible strategy.

Since the launch of ChatGPT in November 2022, GenAI has been reshaping the future of work. From automating routine tasks to transforming entire job roles, generative AI is making a significant impact across multiple industries. A rapid acceleration of task automation could assist organizations in driving labor cost savings and boosting productivity.
If generative AI delivers on its promised capabilities, the labor market could face considerable disruption. Using data on occupational tasks in the U.S. and Europe, Godman Sachs Global Investment Research finds that about two-thirds of today’s jobs are exposed to some degree of AI automation. And this technology could substitute up to one-fourth of current work.
Goldman Sachs estimates that GenAI will eventually automate nearly 300 million of today’s full-time jobs globally.
AI’s Role in Latest Tech Layoffs
With just a month into the new year, tech layoffs are starting to pile up; however, analysts consider this a new normal for Silicon Valley in a considerable pivot to AI. The job cuts are not on the same scale as in late 2022 and early 2023 when tech companies got rid of thousands of employees, a blowback from the frenzied hiring that took place during the pandemic when everyday life turned digital.
According to layoffs.fyi, a California-based website that tracks the tech sector, the industry lost around 160,000 jobs last year. So far this year, tech layoffs are at nearly 24,584, the site showed, from 93 companies.
Layoffs.fyi estimates that approximately 20% of job cuts are brought on by AI and restructuring associated with it. Moreover, Silicon Valley jobs are on the front line, with some coding tasks primarily carried out by generative AI.
Cloud-based software provider Salesforce, Inc. (CRM) announced that it will be laying off about 700 employees, roughly 1% of its global workforce, adding to a brutal string of tech layoffs at the start of 2024. This move comes amid ongoing cost-cutting pressures from investors, including activist shareholders like Elliott Management, to boost its profit margins.
A year ago, CRM lowered its headcount by 10% as a part of its rebalancing efforts after a pandemic-era hiring boom.
Despite the recent cuts, Salesforce is still reportedly hiring for 1,000 open roles across the company, indicating that these layoffs could be a part of an adjustment in its workforce. The company’s focus is directing spending toward growth.
An unnamed source cited in the Wall Street Journal report that the latest round of layoffs could be more of a routine adjustment to the company’s headcount rather than a reactive measure to ongoing economic challenges.
Earlier this month, another tech company, Alphabet Inc. (GOOGL), laid off hundreds of employees across the company as it continues to push for efficiency and focus on its biggest product priorities and significant opportunities ahead.
According to the company, the job cuts will impact employees within Google’s hardware, voice assistance, and central engineering teams. Also, other parts of the tech company were affected.
This layoff announcement marks the latest cost-cutting effort at Google as it continues to work to rein in the drastic headcount growth that took place during the pandemic. In January last year, Google cut its workforce by 12,000 employees or nearly 6% of its employee count. Later in the year, the company made other cuts to its recruiting and news divisions.
Moreover, Google shifted its focus to prioritize developments in AI, launching products such as chatbot Bard and the large language model (LLM) Gemini as it aims to keep up with rivals, including Microsoft Corporation (MSFT) and Amazon.com, Inc. (AMZN).
This season’s tech layoffs are being framed more as restructuring rather than cutting down from prior over-hiring efforts; suggesting that even if employees lose their jobs, there could be some security within the industry more broadly. So, investors shouldn’t worry much about the recent job cuts.
Shares of CRM have gained nearly 27% over the past six months and more than 74% over the past year. Meanwhile, GOOGL’s stock has surged more than 14% over the past six months and approximately 55% over the past year.
Now, let’s review the fundamentals of CRM and GOOGL in detail:
Latest Developments
On January 14, 2024, CRM, at NRF 2024, announced new data and AI-powered tools for retail to help businesses drive efficiency and deliver connected shopping experiences. The Einstein 1 Platform will power these new retail innovations.
With generative AI built into Commerce Cloud and Marketing Cloud, retail merchandisers and marketers can tap into these generative tools with a real-time understanding of customer behavior and preferences to optimize every customer interaction — enhancing loyalty, boosting revenue, and driving employee productivity.
Also, on December 14, 2023, Salesforce unveiled major updates to its Einstein 1 Platform, adding the Data Cloud Vector Database and Einstein Copilot Search. Data Cloud Vector Database will unify all business data, including unstructured data like PDFs, emails, and transcripts, with CRM data to allow the grounding of AI prompts and Einstein Copilot.
Einstein Copilot Search will offer AI search capabilities to deliver accurate answers from Data Cloud instantly in a conversational AI experience, thereby driving productivity for all business users.
For GOOGL, 2023 was a remarkable year of significant advances in AI and computing. On December 6, Google launched its largest and ‘most capable’ AI model, Gemini, which will be in three different sizes: Ultra, Pro, and Nano.
Enterprises could use Gemini for advanced customer service engagement through chatbots and product recommendations and identifying trends for companies looking to advertise their products. Also, it could be used for content creation.
In November, Google further announced a new DeepMind model, Lyria, in partnership with YouTube. Lyria is an advanced AI music generative model that will create vocals, lyrics, and background tracks mimicking the style of famous artists. This model is available on YouTube through two distinct AI experiments – DreamTrack for Shorts and Music AI tools.
Last Reported Quarterly Results
CRM’s total revenues increased 11.3% year-over-year to $8.72 billion for the fiscal third quarter that ended on October 31, 2023. Its gross profit was $6.57 billion, up 14.2% from the year-ago value. Its income from operations rose 226.3% from the prior year’s quarter to $1.50 billion. The company’s free cash flow came in at $1.37 billion, an increase of 1,088% year-over-year.
In addition, Salesforce’s non-GAAP net income grew 47.9% from the previous year’s period to $2.09 billion. Its non-GAAP EPS came in at $2.11, surpassing the consensus estimate of $2.06 and up 50.7% year-over-year.
For the third quarter that ended September 30, 2023, GOOGL reported revenue of $76.69 billion, compared to analysts’ estimate of $75.73 billion and up 11% year-over-year. Its income from operations grew 24.6% from the prior year’s quarter to $21.34 billion. Its income before income taxes rose 30.6% year-over-year to $21.20 billion.
Google parent Alphabet’s net income increased 41.5% year-over-year to $19.69 billion. It posted net income per share of $1.55, compared to the consensus estimate of $1.45, and an increase of 46.2% year-over-year. Further, as of September 30, 2023, the company’s cash and cash equivalents stood at $30.70 billion, compared to $21.88 billion as of December 31, 2022.
Past And Expected Financial Performance
Over the past three years, CRM’s revenue has increased at a CAGR of 18.7%, and its EBITDA has grown at a 43.4% CAGR. The company’s normalized net income has increased at a CAGR of 188.3% over the same time frame, and its levered free cash flow and total assets have improved at CAGRs of 24.8% and 15.5%, respectively.
Analysts expect CRM’s revenue for the current year (ending January 2024) to increase 11% and 56.5% year-over-year to $34.79 billion and $8.20, respectively. For the fiscal year ending January 2025, the company’s revenue and EPS are expected to grow 10.9% and 16.5% year-over-year to $38.57 million and $9.55, respectively.
GOOGL’s revenue and EBITDA have grown at CAGRs of 20.1% and 26% over the past three years, respectively. Its net income and EPS have improved at respective CAGRs of 23.2% and 26.3% over the same timeframe. Also, the company’s levered free cash flow has increased at a CAGR of 36% over the same period.
For the fiscal year ending December 2024, GOOGL’s revenue and EPS are estimated to increase 10.8% and 15.4% year-over-year to $340.50 billion and $6.69, respectively. Likewise, Street expects the company’s revenue and EPS for the fiscal year 2025 to grow 10.5% and 15.6% from the prior year to $376.34 billion and $7.73, respectively. 
Profitability
In terms of the trailing-12-month EBIT margin, CRM’s 15.87% is 243.7% higher than the industry average of 4.62%. Its trailing-12-month gross profit margin of 74.99% is 54.8% higher than the 48.43% industry average. Moreover, the stock’s trailing-12-month net income margin of 7.63% is significantly higher than the 2.04% industry average.
GOOGL’s trailing-12-month gross profit margin of 56.12% is 15% higher than the 48.81% industry average. Its trailing-12-month EBIT margin of 27.42% is 226.8% higher than the 18.39% industry average. Likewise, the stock’s trailing-12-month net income margin of 22.46% is 541.4% higher than the industry average of 3.50%.
Bottom Line
The tech industry remains focused on trimming costs via job cuts. More than 20,000 tech employees have been laid off so far in 2024. CRM is the latest tech company to announce about 700 layoffs. However, the company still has plenty of job openings, roughly 1000, suggesting that these cuts might not be a drastic strategy shift but a routine labor force adjustment.
Similarly, tech giant Google signaled layoffs this month. Google CEO Sundar Pichai warned employees of more job cuts this year as the company continues to shift investments toward areas like AI. In a memo titled “2024 priorities and the year ahead,” Pichai stated that the company has ambitious goals and will be investing in its big priorities in 2024.
“The reality is that to create the capacity for this investment, we have to make tough choices,” Pichai said. For some teams, that means eliminating roles, which includes “removing layers to simplify execution and drive velocity,” he added.
Many fear that these job cuts could be related to Google’s rollout of AI across its advertisement department, effectively witnessing the technology replace humans. Also, given Salesforce’s heavy investments in AI, people can’t help but wonder if the technology could be threatening its workforce.
In today’s digital era, AI undoubtedly stands out as one of the most influential forces shaping the future of work. AI technology is making its dramatic impact felt, especially across the tech industry, from automating business operations to transforming entire job roles.
While some tasks/jobs are being automated, replacing humans, new roles are emerging with AI integration. Tech companies’ increased focus on AI is leading to a hiring surge in this area while other sectors face layoffs.
This season’s job cuts in the tech industry are viewed more as restructuring efforts rather than navigating economic challenges or cutting down from previous over-hiring during the pandemic. So, the latest tech layoffs should be the least of investors’ worries, and they can continue to hold CRM and GOOGL shares.