After experiencing a slump in 2022, tech stocks had a remarkable comeback and concluded one of their best years in the past two decades.

• In 2023, the Nasdaq experienced a 43% increase, marking one of its strongest performances in the past twenty years.
• As in 2009 and 2003, the Nasdaq experienced a difficult year for investors in 20XX.
• Nvidia and Meta were the driving forces behind this year's bounceback.

The Nasdaq experienced one of its strongest years in the past two decades as tech stocks recovered from their poor performance in 2022.

In 2023, the Nasdaq, a tech-heavy index, experienced a 43% increase, marking its best year since 2020. This gain was only slightly less than the index's performance in 2009, the only other year since 2003 with a larger increase.

The Nasdaq has dropped by 6.5% from its November 2021 record high.

This year, the major industry trend was a resurgence of risk, resulting from the Federal Reserve's decision to pause its interest rate increases and a more optimistic view on inflation. Additionally, companies were able to improve their profit margins by implementing cost-saving measures earlier in the year, with a focus on enhancing efficiency.

After the Fed stops raising interest rates, you can accurately price companies based on their earnings and the appropriate multiple to apply, according to Kevin Simpson, founder of Capital Wealth Planning, who shared this insight on CNBC's "Halftime Report" on Tuesday. This trend may persist until 2024.

The tech industry experienced growth due to the macro environment and lower borrowing costs, but the emergence of generative artificial intelligence sparked excitement and encouraged companies to invest in what is considered the next big thing.

In 2023, Nvidia was the big winner in the AI rush, with its stock price soaring 239% and its graphics processing units (GPUs) being heavily sought after by large cloud vendors and startups. In the first three quarters of 2023, Nvidia generated $17.5 billion in net income, up more than sixfold from the prior year, and revenue in the latest quarter tripled.

In March, Nvidia's CEO, Jensen Huang, stated that AI's "iPhone moment" has commenced.

Enterprises worldwide are developing AI strategies due to the sense of urgency triggered by generative AI, while startups are building disruptive products and business models, and incumbents are looking to respond, according to Huang at Nvidia's developers conference.

‘Relatively early stages’

Thanks to OpenAI's ChatGPT, consumers became aware of generative AI in late 2022. The chatbot enabled users to initiate a conversation with complex responses in a matter of seconds by typing in a few words of text.

Generative AI is being used by developers to create tools for booking travel, marketing materials, improving customer service, and coding software. Microsoft, Google, and other companies have invested heavily in generative AI and integrated it into their product suites.

In the next few years, Amazon Web Services is expected to generate tens of billions of dollars in revenue through the use of generative AI, as stated by Amazon CEO Andy Jassy during the company's earnings call in October. The models are being utilized for various purposes, including forecasting inventory, establishing transportation routes for drivers, aiding third-party sellers in creating product pages, and assisting advertisers in generating images.

Jassy stated that the growth of generative AI has been surprising, with our business growing at a rapid pace. Despite its significance, he believes that companies are still in the early stages of development.

Amazon shares climbed 81% in 2023, their best year since 2015.

The software company's shares experienced a 58% increase in value, marking a significant rally for Microsoft investors since 2009.

Microsoft integrated OpenAI technology into its products like Bing, Office, and Windows, and branded its broad generative AI service as Copilot. Last month, CEO Satya Nadella described Microsoft as "the Copilot company."

Microsoft's collaboration with OpenAI and subsequent product advancements by 2023 have led to a market shift, according to Michael Turrin, a Wells Fargo analyst who recommends purchasing the stock. As a result, many now view MSFT as the leader in the early AI race, even ahead of market share leader AWS.

Since 2013, when Steve Ballmer was in charge, Microsoft has not seen its gross margin exceed 71% until its latest earnings report. The company has managed to run its data centers more efficiently and has reduced its dependence on hardware, leading to higher margins for the segment that includes Windows, Xbox, and search.

The biggest stock pop among mega-cap tech companies was in shares of , which jumped almost 200%. Nvidia and Meta were the two top performers in the S&P 500.

In February, Meta's CEO Mark Zuckerberg announced that 2023 would be the company's "year of efficiency" after the stock dropped 64% in 2022, largely due to three consecutive quarters of declining revenue.

Meta recorded its sharpest increase in two years with a 23% expansion in the third quarter, thanks to Facebook's growth in digital advertising. The company had previously cut more than 20,000 jobs to streamline expenses.

Where are the IPOs?

The dot-com crash occurred before Meta was founded in 2009, during the financial crisis.

In 2019, Uber became public, but for a long time, it was believed that it could never be profitable due to the significant amount of revenue spent on drivers. However, the economic model eventually became profitable for both its rideshare and food delivery businesses late last year.

Uber's positive earnings in the most recent quarter and over the prior four quarters in total allowed it to be added to the S&P 500 earlier this month.

Uber's stock price reached a new high this week, increasing by 149% year-over-year. The company's shares, traded on the NYSE, ended 2020 as the sixth-best performer in the S&P 500.

Although there was a tech rally in 2023, public investors did not have many new opportunities during the year. In 2022, the tech IPO market was poor, and only a few names emerged in 2023. The three most significant IPOs, namely , , and , all took place in September during a one-week period.

Despite being in the IPO pipeline, many late-stage companies still need to prove their sustainability to the public market, which is a challenge for startups that raised large amounts of cash during the low-interest period of 2020 and 2021.

The valuation of startups in the private market may not translate to the same valuation when they go public, even for profitable software and internet companies.

Insight Partners' managing director Byron Lichtenstein labeled 2023 as "the great reset." He stated that companies most suited for IPOs are unlikely to launch until the second half of 2024 at the earliest. Prior to their debut, they will focus on essential preparations, such as recruiting independent board members and investing in IT and accounting to ensure readiness.

Lichtenstein stated in an interview that there was a dynamic in 2021 where expectations and the prices paid were different. He added that this hangover is still being dealt with.

—CNBC’s Jonathan Vanian contributed to this report

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