Perhaps best known as the parent company of Google, Alphabet was created as part of a 2015 restructuring. Google, its crown jewel and also predecessor, was founded in 1998 in Menlo Park, Calif., as a project led by Sergey Brin and Larry Page at Stanford University. In the beginning, Google was a humble search engine, but today it and its parent company have grown to become online advertising and web services behemoths.
The company formerly known as Facebook is now named Meta Platforms to emphasize its embrace of the so-called metaverse. Facebook was originally founded by Mark Zuckerberg and a small cadre of Harvard classmates in his dorm room in 2004.
Samsung is a South Korean electronics giant based in Suwon-si. The company is the oldest on our list, having originally been founded as a grocery trading store in 1938, though its electronics arm launched in 1969. The company has had its share of bad press in recent years, with multiple reports of devices catching fire. However, it has largely recovered from early damage done to its public image and remains a solid maker of precision electronics.
ASML is a Netherlands-based company that designs and manufactures the machinery used by companies that make microchips. The company is a major supplier to two other firms on our list, Taiwan Semiconductor and Samsung. In fact, ASML has a near monopoly on making the photolithography machines employed by the global semiconductor industry, giving it an absolutely indispensable role in the global microprocessor supply chain.
Alibaba is a Chinese technology company that was founded in 1999 by a group that included Jack Ma, a tycoon who largely disappeared from public view over a year ago. Alibaba got its start as an online wholesaler linking manufacturers, distributors and importers and exporters. While it is still largely focused on e-commerce, it has since expanded into tools and services, including web portals, payment transfer and cloud computing. Alibaba shares trade on the New York, Hong Kong and Frankfurt exchanges.
Many tech companies are active in both hardware and software. Alphabet, for example, manufactures devices like phone and home assistants while also offering its Google search engine and a full suite of online productivity tools.
Growth companies boost returns. Buying tech stocks lets investors dial up the risk in their portfolios to increase their returns. While risk certainly cuts both ways, buying fast-growing tech names is a very effective way of boosting returns in a low interest rate environment.
Strong demand from indexing. Tech companies now compose over 20% of the S&P 500 stock market index. With hundreds of billions of dollars pouring into index funds each year, that helps sustain growth for shares of the largest tech companies.
Low dividends. Most technology companies pay minimal dividends. Tech companies in the S&P 500 average a dividend yield under 2%. Many of these companies forego dividends to reinvest in their future growth.
The biggest gains may be over. The biggest tech companies have already experienced explosive growth, and the best time to invest in them may have passed. Investors may be able to achieve higher returns by investing in smaller firms, though that introduces the risk of determining how to pick the biggest winners.
Shifting regulatory environment. Regulators can change the landscape for emerging technologies rapidly when things go wrong. Data breaches, revelations about data collection and other headlines spur regulators to pass new laws and regulations that can impede future tech sector growth.
Tech stocks delivered an uncharacteristically sluggish performance in 2022. The Technology Select Sector SPDR ETF (ticker: XLK), a popular exchange-traded fund, lagged behind the S&P 500 by about 10% last year as investors rotated from growth stocks to value stocks. For more than a decade, brief periods of tech sector underperformance have consistently been long-term buying opportunities, and tech stocks have once again tipped back toward outperformance so far in 2023. Inflation and interest rates remain headwinds for tech stock valuations in the near-term, however, making stock selection critical.
Microsoft is the world's largest software company that is best known for Windows, Office and Azure cloud services. Analyst John Freeman says Microsoft's transition to a cloud-based business model has been a tremendous success, and offerings such as Office 365, Dynamics and Teams have gained major traction. Microsoft's Azure infrastructure cloud services may be the crown jewel of its cloud business, but the company also generates cloud-based revenue from LinkedIn, Bing and Xbox Live. Freeman says Microsoft also has \"tremendous potential\" with OpenAI's ChatGPT artificial intelligence chatbot. CFRA has a \"strong buy\" rating and $317 price target for MSFT stock.
Nvidia designs and sells high-end graphics and video processing chips used for desktop and gaming computers, workstations, and other advanced computing servers and supercomputers. Not only is Nvidia one of the best-performing stocks in the entire market in the past 15 years, its year-to-date gain of 63.5% through March 3 is the best performance of any stock on this list so far in 2023. Zino says he is bullish on Nvidia's data center momentum, its opportunities in the central processing unit, or CPU, market and its investments in generative AI. CFRA has a \"buy\" rating and $250 price target for NVDA stock.
Mastercard is another leading credit card and digital payments specialist and is the second-largest global payment processing company. Like Visa, Mastercard is relatively insulated from economic volatility. Holt is bullish on Mastercard's exposure to trends such as remittances, virtual cards and commercial point-of-sale payments. In addition, an ongoing recovery in cross-border payments could be a positive catalyst, and Holt says Mastercard's capital-light business model generates operating leverage and impressive earnings growth. He says Mastercard is a long-term winner from the secular shift from cash and check payments to digital payments. CFRA has a \"buy\" rating and $415 price target for MA stock.
Accenture is a global information technology services firm that specializes in consulting and outsourcing. Holt says Accenture has a loyal client base, a solid balance sheet and a long track record of peer-leading earnings growth. Exposure to Russia and foreign exchange headwinds have weighed on that growth in the past year, but Holt says Accenture's underlying business remains strong. He says Accenture is a long-term market share gainer, and roughly $7 billion in capital returns in fiscal 2023 will also help support the stock. CFRA has a \"strong buy\" rating and $333 price target for ACN stock.
Salesforce is the world's largest provider of cloud-based customer relationship management, or CRM, software. Freeman says Salesforce is one of the most disruptive, innovative software companies in the world, yet its stock is trading at an historically low valuation. He says Salesforce is the largest winner from cloud migration, and he anticipates the company will continue to expand its roughly 30% share of the CRM market. Freeman projects the company's sales and service clouds will continue to grow revenue in the mid-teens percentage range. CFRA has a \"strong buy\" rating and $256 price target for CRM stock.
Shares of microprocessor and graphics semiconductor stock Advanced Micro Devices are up a whopping 3,296% over the past decade, but Zino says there's still more room for upside. He says the ramp up of the company's next-generation EPYC processor will improve AMD's share of the data center CPU market. In addition, he says new product launches will help expand gross margins in the second half of 2023 and beyond. Zino projects flat revenue growth in 2023 but a rebound to at least 20% growth in 2024. CFRA has a \"buy\" rating and $90 price target for AMD stock.
We decided to look at tech companies that have dropped in value over the last year but could be considered a good investment if the economy turns around. These are all tech giants that are relying on the overall economy to improve this year.
This tech giant had seen shares drop significantly in 2022 due to the usual macroeconomic factors as well as production issues. Apple had to deal with factory issues in China that slowed down the delivery of the newest iPhone. The share price is currently falling as of this writing, and the market cap has dropped below $2 trillion because investors are concerned about the iPhone supply chain disruptions and the reduced demand for the new product.
However, the company is still in a strong financial position, and there are rumors of a major new product line launch in the form of the AR/VR headset that could come out in 2023. When we wrote about Apple stock previously, we noted that the company reported record revenue for the most recent quarter of $90.1 billion during a time when other companies were struggling with earnings. The robust iPhone and Mac computer sales helped the company set this revenue record.
Despite the popularity of their products, the company saw its shares sliced by half in 2022 as consumer fears over a recession led to many tech companies dropping throughout the year. The company lost revenue due to the issues with the cryptocurrency space. Many analysts feel that Nvidia stock could rebound in 2023 because of the booming cloud-based data center business and the possibility of the gaming industry bouncing back in 2023.
PayPal is still the leader in digital payment processing, and the service is used globally. What makes this tech stock a buy is that the shares have dropped almost 60% while the company has remained a highly profitable business. Even though the present-day issues with inflation and fears of a recession may have hurt volume, the company is in a position to capitalize when the economy rebounds. With a growing buy-now-pay-later program and the addition of cryptocurrency, PayPal, with its customer base of 432 million worldwide, should be a stock to keep an eye on. 59ce067264