This article was originally published on Forbes on Jan 1, 2025,06:21pm EST

The Nasdaq 100 is capping off 2024 with a return of 27.0%, building upon 2023’s 53.8% return (its best year since 1999). Since the start of 2023, the Nasdaq 100 has nearly doubled with stellar returns of 95.3%, its second highest two year performance since 1998 and 1999’s 274.2% rise.

This year, the Nasdaq had countless winners and strong repeat performances from AI leaders like Nvidia, but 5 stocks took the market by surprise with significant outperformance relative to the broader indices. I think it’s important to pause and draw some parallels around the stocks that performed well in 2024 to form an opinion on what might perform well in 2025, as many of the year’s top performers shared similar fundamental improvements or had similar thematic tailwinds such as AI, nuclear and quantum computing.

Below, I review five of the top stocks of 2024, selected based on their price action, fundamentals and presence withing leading tech themes. Choosing a top 5 means many great stocks were left off this list, yet this sample helps to form conclusions around how 2024 shaped up versus years past, centered around leading, core thematic opportunities.

Read about our Top 5 Stocks from 2023 here and our Top 5 Stocks from 2022 here – many of which went on to lead the following years.

AppLovin (APP)

AppLovin was one of the Nasdaq’s best performers, up 735%and joining the Nasdaq 100 on a special rebalance in November. From the start of 2024, AppLovin rose from a mere $13 billion valuation to $111 billion, peaking above $135 billion in early December – the stock has done the unthinkable this year, awakening a low-growth mobile gaming ads industry with an AI engine that is showing demonstrable results.

This meteoric rise stems from APP’s AXON 2.0 AI advertising engine, which has driven significant revenue acceleration and massive fundamental improvements to margins and cash flow. AppLovin has reported four consecutive quarters with revenue growth above 30% YoY, a major acceleration from late 2022 and late 2023 where three of four quarters saw declining revenues. Management expressed confidence in maintaining 20% to 30% YoY growth for the foreseeable future due to the efficiencies of AXON’s self-learning and catalysts from web-based e-commerce expansion.

AppLovin has reported four consecutive quarters with revenue growth above 30% YoY, a major acceleration from late 2022 and late 2023. Source: I/O Fund

Not only has revenue accelerated substantially, but AppLovin’s margins have more than doubled further down the income statement. GAAP gross margin expanded more than 8 points to 77.5% in Q3, while operating margin rose more than 13 points to 44.6%. Taking a look annually, AppLovin is on track to potentially double its operating margin to ~38% from 19.7% in FY23. Additionally, net margin nearly tripled to 36% in Q3 on a GAAP basis, up from 13% a year ago. EPS rose 317% YoY to $1.25, with YTD EPS reaching $2.81, up 462% YoY.

AppLovin is on track to potentially double its operating margin to ~38% from 19.7% in FY23. Source: I/O Fund

AppLovin’s near-flawless execution has also translated to strong cash flow generation, with operating cash flow margin doubling, rising from 23% a year ago to 46% in Q3. Free cash flow margin followed, reaching 45.5%, up from 22% a year ago.

This kind of operating leverage while maintaining revenue growth rates in the 30% range is quite rare indeed, separating AppLovin from a majority of its ad-tech and software peers. Analysts are excited to see what the company’s expansion to e-commerce can contribute to growth and a path to $6+ in EPS next year from AppLovin’s very strong margin profile.

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Palantir (PLTR)

Palantir joins this Top 5 list for a second-year running, with shares rising 356%. My firm’s free stock newsletter previously pointed out that Palantir was “one of the rare few that sees AI drive both real returns for its business and real value for its customers,” as it continues to crush its software competitors in AI-related growth. Palantir’s Artificial Intelligence Platform (AIP) has driven a significant revenue re-acceleration following its launch, with profitability also expanding – a rare combination for growth software stocks.

Palantir has capitalized on the AI software opportunity at hand via AIP’s unique value proposition, its scalability and versatility. November and December’s partnership announcements alone help demonstrate the versatility of Palantir’s platform, spanning numerous different industries from autonomous drone navigation to AI models for defense tech to more government program wins. Palantir benefits from the best of both worlds in both government contracts and AI exposure, as enterprise adoption of AI builds.

For a deeper look at AIP and how it has been transforming Palantir and driving revenue growth higher, read This Stock Is Crushing Salesforce, MongoDB And Snowflake In AI Revenue.

Palantir’s 2024 was characterized by strong underlying AI momentum, with Q3 seeing revenue growth reach 30%, more than 10 points faster than when it entered the year and nearly 5 points above guidance for 25.2% growth. AIP has aided this revenue acceleration story by driving significant growth in Palantir’s US commercial segment, with the past two quarters seeing growth there above 50% YoY.

Palantir’s 2024 was characterized by strong underlying AI momentum, with Q3 seeing revenue growth reach 30%, more than 10 points faster than when it entered the year. Source: I/O Fund

Similar to AppLovin, these AI growth tailwinds are not just driving revenue, but also aiding operating margin expansion and EPS growth. GAAP operating margin was 16% for the second quarter in a row, up 9 points from last year, while adjusted operating margin is approaching 40% and has been >30% for four quarters in a row. Cash flow margins have been strong — operating cash flow was nearly $420 million, or a 58% margin, while adjusted free cash flow was $435 million, a 60% margin in Q3, up from the low-20% range in the first half of 2024. Palantir is targeting adjusted FCF of $1 billion-plus this year, or ~36% of revenue.

Fundamentally, to have revenue growth around 30%, free cash flow margin of 30%, and adjusted operating margin nearing 40% is impressive, to say the least. Palantir’s returns this year reflect that fundamental strength from AI-driven growth as well as optimism about its AI growth prospects for next year.

IonQ (IONQ)

Quantum computing stocks have been on a tear to end the year, with a handful of names seeing returns of more than 2,000% over the past three months. IonQ has risen 244% on surging enthusiasm for the quantum computing sector and revenue reaccelerating 40 percentage points over the past three quarters.

IonQ reported $12.4 million in revenue in Q3, with revenue growth of 102% YoY, following on 106% YoY growth in Q2. This has accelerated 42 points from 60% YoY growth in Q4, as IonQ is starting to quickly scale revenues as it has been consistently delivering on its technical roadmap ahead of schedule. IonQ also slightly raised its full year revenue guidance to $40.5 million at midpoint, for growth of 84% YoY.

As it is still in its scaling phase, IonQ is by no means profitable or close to profitability, with analysts not expecting the quantum computing firm to break into profitability until well after 2027. However, revenue is currently expected to grow at a ~95% CAGR through 2027, from $22 million last year to an estimated $315 million.

IonQ's revenue is currently expected to grow at a ~95% CAGR through 2027, from $22 million last year to an estimated $315 million. Source: I/O Fund

This positioning in a leading theme among investors in the second half of 2024, as well as consistent execution ahead of schedule with revenue growth forecast to rise at a nearly triple digit CAGR through 2027 has landed IonQ a spot on this list.

Reddit (RDDT)

Despite not even trading for the entire year with its IPO in March, Reddit has returned a remarkable 224% from its first day close of $50.44. The social media and online community platform reported a blowout beat and raise in Q3, with investors eyeing some AI training data opportunities ($60M/year deal with Google) on top of strong advertising growth.

Q3 revenue rose 68% YoY to $348 million, a 14 point acceleration from 54% YoY growth in Q2 and up 20 points from 48% YoY growth in Q1. Advertising revenue growth accelerated 15 points sequentially, rising 56% YoY to $315 million. Q4’s guide for $385 million to $400 million in revenue came in well above the $361 million consensus estimate, pointing to growth of 57% YoY. The market is expecting another blowout in Q4, with analysts already projecting $403 million in revenue, above the high end of management’s guided range.

Reddit's Q3 revenue rose 68% YoY to $348 million, a 14 point acceleration from 54% YoY growth in Q2 and up 20 points from 48% YoY growth in Q1. Source: I/O Fund

Reddit is demonstrating significant operating leverage, as it surprised the Street by reporting GAAP net income in the high single-digit percents in the quarter. GAAP operating expenses rose 53% YoY, less than that 68% YoY revenue growth, pushing GAAP operating margin to 8.6%, up from (3.4%) a year ago and (3.7%) in Q2.

Cash flow generation has improved, with Reddit generating $71.6 million in operating cash flow and $70.3 million in free cash flow in Q3, or margins of ~20%. This doubled from ~10% cash flow margins in Q2. Adjusted EBITDA has increased more than 9x from the start of the year, at $94.4 million in Q3, a 27% margin, up from just $10.0 million in Q1.

Reddit excites the market due to its fundamentals — a 90% gross margin business quickly shifting to GAAP profitability on rapid quarterly revenue growth. This combination hints at potentially strong EPS growth, should it scale from the single-digit net margin range of 8.6% in Q3, to the double-digit range in short time.

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Astera Labs (ALAB)

Though Nvidia arguably deserves a spot on this Top 5 list with a 114% gain following Hopper’s breakout 2023, with data center revenue continuing to beat estimates by $1 billion each quarter, I think it’s time to highlight an Nvidia supplier and ASICs beneficiary – Astera Labs. Astera returned 179% in Q4 for a total YTD gain of 128%, with the company showing multiple growth opportunities and a push for profitability despite still solidly being in its hypergrowth phase.

Astera is a major supplier to Nvidia’s PCIe-enabled GPUs with PCIe5 retimers and components, and its upcoming Scorpio fabric switches built on its lead in PCIe5. Management expects the new product to “exceed 10% of revenues in 2025” with “good momentum going into 2026” as it unlocks a $12 billion TAM by 2028.

Astera reported record revenue of $113.1 million in Q3, up 47% QoQ and 206% YoY, beating estimates by 16.1%. Management guided for $126 million to $130 million in revenue in Q4, well ahead of the $108 million consensus estimate and representing YoY growth of 153%, its fifth consecutive triple-digit growth rate.

Astera Labs reported 206% YoY revenue growth in Q3 and guided for 153% YoY growth in Q4, its fifth consecutive quarter of triple-digit growth. Source: I/O Fund

Even with revenue growth expected to be triple-digits for at least the next two quarters, management forecast for GAAP net income in Q4, though at a razor thin margin. GAAP operating margin is moving towards positive territory, from (7.9%) in Q3 to (4.3%) at midpoint of Q4’s guide. Adjusted operating margin expanded significantly to above 32% in Q3, up from 2% a year ago, while adjusted net margin improved 35.6% compared to (-1.1%) last year.

Astera was one of a handful of AI-exposed semiconductors to see dazzling returns this year, as AI semiconductors remained investor favorites throughout the year. Astera also shared key similarities to the rest of this list: adjusted margins showing strong expansion, high cash flow margins (56% operating cash flow margin in Q3), and AI-related rapid revenue growth.

For a more detailed look at Astera’s product lines, Blackwell and ASICs opportunities and its AI-driven TAM growth, read more here.

Conclusion

If there’s one major takeaway from this selection of 2024’s top tech stocks, it’s that being at the top comes with quite the price tag and premium. All five of these stocks trade at quite high multiples, headlined by IonQ at 230x forward revenue and Palantir at a 2021-esque 63x forward revenue and 32x 2027 revenue. Astera Labs trades at 53x forward revenue, while AppLovin and Reddit are not quite as high, at 24x and 22x respectively. However, these revenue multiples are all 130% to 500% higher than they were six months ago, highlighting just how quickly these five have gotten more expensive as they’ve rallied.

All five of these stocks trade at quite high multiples, headlined by IonQ at 230x forward revenue and Palantir at a 2021-esque 63x forward revenue and 32x 2027 revenue. Source: YCharts

Looking back at 2024 can be important as it often provides clues for tech investors as the new year begins. Winners have kept winning, from Nvidia to the five discussed here, and that is one reason I like to reflect on the clear winners from the previous year. These five stocks above highlighted similarities among winning tech stocks in 2024 – presence and prevalence in leading themes such as AI and quantum computing, strong revenue acceleration (and rapid growth), and operating leverage driving margin expansion.

For 2025, the I/O Fund has worked to identify key Nvidia suppliers with Blackwell on deck to ramp significantly, sharing this research and buy zones with premium members. Stay tuned for our upcoming 2025 and Q1 webinars to hear more about what the I/O Fund expects for the new year. Learn more here.

I/O Fund Equity Analyst Damien Robbins contributed to this report.

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