Looking for Tech Stocks? These 3 Are Great Buys
Tech stocks have long had a reputation for reliable growth, primarily thanks to the innovative nature of the industry. Over the last decade, the Nasdaq-100 Technology Sector index soared 395%. Meanwhile, the Nasdaq Composite index is up 286% in the same period. As a result, it's wise to dedicate a good portion of your portfolio to tech companies to profit from the industry's consistent development.
Companies like Apple (NASDAQ: AAPL), Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL), and Advanced Micro Devices (NASDAQ: AMD) are attractive options right now alongside the potential of their respective markets. Apple's dominance in consumer tech makes it one of the most reliable investments. Meanwhile, Alphabet is making promising moves in artificial intelligence (AI). Additionally, AMD is a buy with its ability to supply chips to the entire market.
So, looking for tech stocks? Here are three great buys.
1. Apple: Unrivaled dominance with consumers
Apple is one of the easiest tech stocks to recommend, thanks to its reputation for consistent growth. The company's stock has climbed more than 1,000% in the last decade, attracting some of the world's most successful investors. Warren Buffett is famously a big fan of Apple, with his holdings company Berkshire Hathaway making the iPhone manufacturer 48% of its portfolio. Comparatively, its second-largest holding is Bank of America, with a 9% portion.
The company's success can mainly be attributed to its nearly unrivaled dominance in consumer tech. Apple holds leading market shares in smartphones, tablets, smartwatches, and headphones as it has attracted millions of shoppers with its priority quality and user-friendly design language.
Apple's dominance in the market has proved its strength over the last year amid an economic downturn. According to data from IDC, in the first quarter of 2023, Samsung and Xiaomi experienced smartphone shipment declines of 19% and 24%. Meanwhile, the same period saw Apple report a 2% revenue rise in its iPhone segment.
As Apple continues to grow its business through new products and services, it makes an excellent tech stock to hold onto for the long term.
2. Alphabet: A bargain buy
Alphabet has had a challenging couple of years, with rises in inflation causing businesses to cut digital ad spending. As a result, the company's Google advertising segment, responsible for 78% of all income, reported a decrease in revenue in Q1 2023. The decline comes after years of critics noting Alphabet's earnings were far too reliant on digital advertising.
However, after recently pivoting its business to include AI and cloud computing, the company's stock has become a compelling buy. Alphabet's stronger focus on these markets comes as its cloud platform Google Cloud hit profitability for the first time in Q1 2023, reporting $191 million in operating income. The achievement is a promising sign of the company's potential in the booming sectors.
Data by YCharts.
Moreover, Alphabet's stumble over the last year has made its stock a bargain compared to the competition. The chart above shows that Alphabet's forward price-to-earnings ratio is far lower than fellow tech giants Amazon, Microsoft, and Apple. The figure makes Alphabet shares an exciting way to invest in the future of the cloud and AI markets.
3. Advanced Micro Devices: A diversified business model
Advanced Micro Devices has captured Wall Street's attention in 2023, with its stock up 97% since Jan. 1 based on its prospects in AI. However, don't let the significant rise in stock price scare you off. The company's shares have increased by 710% in the last five years alone. Meanwhile, AMD's participation in multiple high-growth markets indicates its stock still has plenty of room to rise over the long term.
While some might say the most compelling part of AMD's business is its potential in AI, I'd say it's how varied its earnings have grown in recent years. The company offers investors the opportunity to back several lucrative industries, including cloud computing, AI, console gaming, PC components, and more, thanks to the varied uses of AMD's chips. The company has become the go-to for many tech companies seeking powerful hardware to take their devices to the next level.
AMD's potential is evident by its price/earnings-to-growth ratio of 0.2, which suggests projected growth is not priced into its shares. So despite a rally this year, AMD remains a great tech stock to buy right now.
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Bank of America is an advertising partner of The Ascent, a Motley Fool company. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon.com, Apple, Bank of America, Berkshire Hathaway, and Microsoft. The Motley Fool has a disclosure policy.
