After months of uncertainty, the stock market is finally showing signs of life. Investors everywhere can sense that opportunity is in the air. Indeed, there are many reasons for this newfound excitement with certain tech stocks and other beaten-down sectors.
The Federal Reserve’s commitment to increasing interest rates to battle inflation has been priced into the market. Additionally, there’s a growing expectation that the economy will soon regain its previous strong momentum. As such, smart (and optimistic) investors should consider taking advantage of this moment by researching the hottest tech stocks to buy in what could be a much more bullish market in the years to come.
Despite the current economic climate, long-term investors may benefit form lower prices to get better returns. Indeed, Wall Street often overreacts to macroeconomic headwinds, which create opportunities to snap up the best tech stocks at incredible discounts. Here are seven such tech stocks I think could be potentially lucrative investments right now, benefiting investors in 2023 and beyond.
| TSM | Taiwan Semiconductor | $80.43 |
| LRCX | Lam Research | $464.30 |
| ANET | Arista | $130.96 |
| IBM | International Business Machines | $149.21 |
| CPNG | Coupang | $17.82 |
| BIDU | Baidu | $116.60 |
| NOW | ServiceNow | $401.64 |
Taiwan Semiconductor (TSM)
Big-money investors have been scooping up shares of Taiwan Semiconductor (NYSE:TSM) in recent months (Ahem, Warren Buffett). As one of the juggernauts in in the semiconductor space, Taiwan Semi provides investors with a durable competitive advantage in this high-growth space. The ability for this company to charge higher prices for its essential chips is something that’s seemingly lured some of the greatest investors of all time to this stock.
The company’s strong pricing power also translates into strong results for the company. This year, TSM stock has outperformed its peers, proving to be a resilient chips stock, despite the unfavorable semiconductor cycle. Year-over-year sales growth for the firm is over 37%, which is heads and shoulders above its competition. Much of this has been driven by excess demand for semiconductors. Accordingly, while demand may be waning right now, Taiwan Semi’s incredible EBITDA margins of 37.5% for the year are what have long-term investors excited. This margin is approximately 20% above its 5-year average, meaning there’s ample room for some contraction to be priced in during the next few quarters.
Lam Research (LRCX)
Founded in 1980, Lam Research (NASDAQ:LRCX) has worked tirelessly to provide the semiconductor industry with quality wafer fabrication equipment and related services. The company boasts a diversified portfolio of 80,000 fab chambers spanning various sub-sectors within the semiconductor technology space.
Accordingly, Lam is well-positioned to benefit from technological advancements such as higher-layer counts in 3D NAND and the development of etching and deposition technologies for ultra-violet lithography. All in all, these positive catalysts provide a strong long-term outlook for Lam Research in the years to come.
Like other top tech stocks on this list, Lam has done a great job of providing top- and bottom-line growth. This has made LRCX stock an intriguing play for many investors looking to play the chips sector. One notable medium-term catalyst such investors have their eye on is the Biden Administration’s newly introduced CHIPS and Science Act. The government is allocating $50 billion to bring manufacturing and supply-chain activities across high-tech industries back to US soil. This is an exciting prospect for the industry and presents a significant opportunity for Lam Research to leverage its expertise in advanced semiconductor processing.
Arista (ANET)
A standout among cloud networking solutions providers, Arista (NYSE:ANET) is taking full advantage of the promising growth seen in the cloud, data centers, and edge computing sectors. With its dedication to innovation and industry-leading customer service, the company continues to add new services to improve the quality of its products. Its systems can also handle multiple updates with little to no downtime, an impressive feat that gives the company an added competitive edge.
The firm boasts an excellent track record of growing sales and earnings over the past several years. Arista expects to provide investors with a 20% annual compound growth rate on its top line through 2025, with 25% revenue growth expected in 2023. Gross margins are likewise projected to reach multi-year highs at an impressive 61% to 64%. Underpinning this success is the company’s strong demand from enterprise and cloud customers, that many analysts expect will continue to grow over time.
With no indications Arista’s growth rate will take a hit from what could be some near-term volatility, this is among the top tech stocks investors should consider right now.
International Business Machines (IBM)
International Business Machines (NYSE:IBM) has come a long way since its inception. Today, Big Blue is an impressive force in information technology, keeping pace with growing industry trends like cloud computing and artificial intelligence. IBM’s acquisition of Red Hat, a premier open-source software provider, set the tone for the company’s future strategic direction in the IT realm.
Its strategic change has been paying dividends of late, with explosive growth in revenues tied to the company’s software and consulting business lines. These two lines alone accounted for just about 70% of its total sales during the third quarter.
This strategic shift further indicates IBM’s shift toward becoming a key player in the digital solutions space. In fact, the company forecasts higher growth over time, as the company aims its sights at the AI and hybrid cloud services sectors. IBM’s hybrid cloud business alone is expected to grow by an 18.4% clip from 2021 to 2030.
Coupang (CPNG)
South Korea-based e-commerce giant Coupang (NYSE:CPNG) is performing exceptionally well, with impressive growth and profitability. The company’s third-quarter results show record bottom-line results, demonstrating the company’s profitability focus as well as its aim of providing customers with an unrivaled online shopping experience.
Coupang owes its success to its innovative and powerful technology, expansive logistics network, and unwavering focus on efficiency. As Coupang’s CEO Bom Kim proudly noted, the company can process orders received as late as midnight and enable shoppers to return items without packing materials or labels. As Coupang continues to expand across Asia, its potential for growth knows no bounds. With state-of-the-art technology underpinning Coupang’s model, this company’s well-oiled delivery chain and committed approach to improving customer experience should provide excellent long-term returns for tech investors in the years and decades to come.
Baidu (BIDU)
Baidu (NASDAQ:BIDU) is a company that’s often hailed as the “Google of China.” This globally underrated tech powerhouse provides approximately 80% of all the search results in the fast-growing Chinese market. If that’s not enough, this company also holds a market share of around 10% in China’s cloud technology industry.
Baidu is a full-fledged internet giant, with more than one billion users across China alone. Additionally, this company happens to be a pioneer in driverless AI technology, holding permits to provide driverless services in Beijing and other cities. With a strong foothold in its core market, plus growth opportunities in other Asian countries, Baidu is certainly one of China’s finest tech stocks to buy.
Other tech verticals such as AI, ride-sharing, and smart devices, has significantly boosted Baidu’s addressable market. I view this company as a stable, defensive growth stock, providing investors with essentially a call option on these great high-growth businesses.
ServiceNow (NOW)
ServiceNow (NYSE:NOW) wrapped up another fantastic quarter with double-digit revenue growth. What has been particularly encouraging was the reception of this company’s results from Wall Street. An analyst from Wolfe Research noted that, compared to their peers in the cloud software industry, NOW stock was “the safest SaaS asset to own into year-end.” This is exciting news for the cloud software services provider heading into next year.
ServiceNow appears to be gaining ground in its IT service management business, attracting new customers with its impressive operations capabilities. This has provided a solid base for the company to expand into other high-growth segments, such as employee workflow, customer workflow, and creator workflow segments. As the company grows, it stands to benefit from an improved cost structure that benefits from enhanced profitability and efficiency of sales. Management has expressed faith in achieving their 2026 subscription revenue target of $16 billion-plus. Currently, this epic milestone seems within the realm of possibility.
On the date of publication, Muslim Farooque did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
