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Hurray, 2023 is officially in the books! While the Dow Jones Industrial Average and S&P 500 both posted double-digit gains for the year, the tech-heavy Nasdaq Composite was the big winner with its 42% return.

The frenzy surrounding artificial intelligence (AI) was a big catalyst that fueled momentum in tech stocks throughout 2023. But you might be wondering which companies are positioned to continue winning in 2024. Let's explore three members of the exclusive "Magnificent Seven" club and assess why each of these stocks look poised to continue dominating in 2024.

Investors can credit Microsoft (MSFT -0.05%) with kicking off the AI arms race. Following prior investments in 2019 and 2021, Microsoft committed to a $10 billion investment in OpenAI in early 2023. OpenAI is the unicorn start-up behind the wildly popular ChatGPT.

Following its partnership, Microsoft swiftly integrated ChatGPT throughout its Windows operating system. The AI-powered applications are already generating billions in incremental revenue, especially in its Azure cloud business. However, the area investors should keep a close eye on in 2024 is Microsoft's productivity assistant called CoPilot.

Investors can get a glimpse of Wall Street's purview based on surveys from research analysts. Perhaps two of the biggest bulls are Evercore ISI analyst Kirk Materne and Truist Securities' Joel Fishbein. Materne believes that CoPilot could generate $100 billion of revenue before the end of the decade.

Given that Microsoft introduced CoPilot to the masses in November, there isn't a ton of tangible data to assess just yet. So while Materne's forecast is encouraging, it's too early to know its accuracy. The broader theme here is that Wall Street is bullish on the secular trends that generative AI present, and clearly believe Microsoft will be one of the biggest beneficiaries. To add some quantitative analysis here, Fishbein's most recent report on Microsoft included a three-year price target of $600. That assumes 60% upside from Microsoft's current trading levels.

The way I see it, Microsoft has proved it can command meaningful growth from its investments in AI. Now, the bigger challenge will be whether it can sustain this growth, and do so profitably. As an investor in Microsoft, I will keep a close eye on CoPilot's progress throughout 2024, as well as the company's operating margin. Should Microsoft accelerate both its top and bottom lines, I wouldn't be surprised to see the stock continue soaring.

Unlike its cohort, Amazon (AMZN 0.46%) wasn't the fastest in Big Tech to join the AI marathon. After months of sitting on the sidelines, the company made headlines after its $4 billion investment in OpenAI competitor Anthropic. Although some investors may view the partnership as too little, too late, I see things differently.

The cornerstone of the Anthropic deal is cloud computing. Throughout 2022 and 2023, corporate software spend decelerated as businesses were trying to navigate a cloudy macroeconomy plagued by inflation and high interest rates. As a result, Amazon's cloud business started to shrink.

But as the best companies often do, Amazon exercised patience and waited for an attractive opportunity to reignite growth. The specific condition from the Anthropic partnership that has me most excited is the role AI will play on Bedrock. Bedrock is a managed service offering developers various large language modelsand a multitude of generative AI applications, including text generation for blogs, virtual assistants, and image generators for graphic designers.

AMZN PS Ratio data by YCharts

With the stock trading at just a 2.8 price-to-sales (P/S) ratio, investors can see Amazon is trading at a steep discount to its 10-year average based on this measure. At just $150 per share, Amazon stock looks like an absolute bargain right now. I see Bedrock as the next phase of growth for Amazon Web Services, and 2024 could provide investors with a glimpse of the cloud platform's evolution, which should lead to further shareholder gains.

Image source: Getty Images.

Advertising leader and cloud computing giant Alphabet (GOOG -0.47%) (GOOGL -0.48%) may be the most interesting stock on my list for potential winners in 2024. Alphabet is the parent company to the world's top two most visited websites -- Internet search engine Google and video-sharing platform YouTube.

Alphabet completely reimagined digital advertising, which helped the company generate billions in sales and profits. But over the past few years, competitors such as Instagram and TikTok have gained popularity, particularly in the highly coveted Gen Z and millennial demographics. This dynamic, coupled with a tough economy, caused advertisers to rethink how and where to prioritize their budgets.

But amid this crisis, Alphabet found a silver lining. Like its peers that we've discussed, Alphabet saw the potential in artificial intelligence (AI) and how the technology could play an integral role in its ecosystem. Most recently, Alphabet introduced Gemini, its competitor to ChatGPT. Similar to Microsoft, Alphabet is integrating AI across its entire suite of products and services, including productivity tools and cloud infrastructure.

MSFT PE Ratio (Forward) data by YCharts

The chart illustrates Alphabet's forward price-to-earnings (P/E) multiple of 24.2 is the lowest among the "Magnificent Seven." I see this as a major buying opportunity as the capital markets overlook the potential that AI can play for Alphabet's business. With the stock trading at roughly $140 per share, 2024 could be a unique opportunity to begin dollar-cost averaging into a position.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, and Truist Financial. The Motley Fool has a disclosure policy.

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