Tech stocks were a popular topic during the early days of the pandemic.
Businesses that were able to quickly adapt were handsomely rewarded by the stock market for their capacity to meet the difficulties of an ever-changing global environment.
Since then, however, there has been a decline in optimism; in particular, the IT industry has been hit particularly hard by worries over an imminent economic slump.
The typical outcome of high inflation followed by considerable interest rate increases is a decrease in profits for debt-heavy technology companies.
Despite this, many traders continue to show interest in information technology stocks, and there is a strong explanation for this.
The use of technology in the future may make it possible to solve a variety of problems, including those relating to affordable housing, environmentally friendly energy production, economical medical treatment, and more.
You will find an explanation of what tech stocks are, as well as a list of the best tech stocks on the market at present, and details on how you can invest in tech stocks.
If you want to invest as an expat or high-net-worth individual, which is what i specialize in, you can email me (advice@adamfayed.com) or use WhatsApp (+44-7393-450-837).
We don’t advise holding individual stocks. ETFs and funds are a better option.
This article merely looks at some of the better options.
Table of Contents
What is a Tech Stock?
Technology stocks refer to shares of publicly traded firms that specialize in the development and commercialization of technology products and services.
It is highly probable that you possess a certain level of familiarity with several prominent entities operating within this particular industry.
The technology industry constitutes a significant and multifaceted segment of the stock market. Companies that are categorized within the technology sector encompass a diverse array of industries and provide a wide spectrum of services and products.
The Global Industry Classification Standard (GICS) facilitates comprehension by categorizing technology equities into three primary classifications: semiconductors, hardware and equipment, and software and services.
Companies can be classified into a single category or span multiple categories, contingent upon the range of products or services they provide.
Benefits of Investing in Tech Stocks
Technology stocks exhibit significant growth potential, albeit at a potentially higher cost to investors.
As of August 28th, the technology sector had a price-to-earnings ratio of 43, while sector-wide earnings are projected to see an annual growth rate of 17% over the forthcoming years.
The rate of expansion within the technology industry can exhibit significant disparities. Small-capitalization and low-priced technology stocks have the potential to undergo significant growth in the event of achieving a breakthrough success.
Numerous larger corporations face limited growth prospects.
However, the technology sector stands out due to the fact that even the largest companies within it, including Meta Platforms Inc. (META), Amazon.com Inc. (AMZN), Netflix Inc. (NFLX), and Alphabet Inc. (GOOGL) – collectively known as the original FANG group – continue to possess considerable potential for substantial expansion.
The FANG stocks have exhibited an approximate 25% rate of return during the preceding decade.
Technology stocks play a prominent role in driving technical advancements.
Investors that allocate their resources to these enterprises not only have the potential to reap the rewards of transformative technologies but also contribute to the expansion of this particular sector.
Risks of Investing in Tech Stocks
While it may be alluring to perceive tech stocks as on an uninterrupted trajectory towards substantial expansion, this notion does not align with the actuality of the industry.
In 2022, the technology industry experienced a notable decline in performance compared to the broader market.
This decline can be attributed to the challenges faced by companies in adapting to the aftermath of the COVID-19 pandemic and coping with supply shortages.
Even prominent industry leaders such as Apple and Alphabet witnessed substantial declines in their stock prices, with Apple falling by 27% and Alphabet by 39%.
The notable advancements observed in the technology industry across its extensive timeline might potentially deceive investors into developing an inaccurate perception of stability.
However, it is crucial to recognize that the technology sector is equally vulnerable to fluctuations and unpredictability, similar to other industries.
Investors without expertise in the technological domain of the companies they are selecting may face an additional risk due to the dynamic nature of the technology sector.
Frequently, individuals lacking a high level of awareness regarding shifts in the technological domain may find themselves arriving at a novel trend or advancement belatedly, so limiting their potential to optimize investment returns.
What are the Best Tech Stocks to Buy in 2023
Arrow Electronics, Inc. (NYSE:ARW)
Arrow Electronics, Inc. (NYSE:ARW) is a prominent American corporation specializing in the distribution of semiconductor devices and related services.
Despite experiencing a year-to-date increase of 20.56%, the company’s shares encountered a decline in early August subsequent to the announcement of its most recent earnings outcomes.
Out of the 910 hedge funds, 27 of them had made purchases of shares belonging to Arrow Electronics, Inc. (NYSE:ARW).
Among these options, AQR Capital Management, led by Cliff Asness, emerges as the largest investor in the firm, with a stake valued at $272 million.
Arrow Electronics, Inc. (NYSE:ARW), Tower Semiconductor Ltd. (NASDAQ:TSEM), Silicon Motion Technology Corporation (NASDAQ:SIMO), and Gen Digital Inc. (NASDAQ:GEN) are among the technology stocks that hedge funds are now acquiring due to their favorable affordability.
STMicroelectronics N.V. (NYSE:STM)
STMicroelectronics N.V. (NYSE:STM) is a prominent semiconductor fabrication enterprise engaged in the production and distribution of integrated circuits to various industries, including automotive manufacturers and other corporate entities.
Despite a deceleration in the semiconductor industry, the company has surpassed the earnings per share (EPS) forecasts provided by analysts in three out of its four most recent fiscal quarters.
Furthermore, experts have projected a potential increase of $14 in the company’s stock price.
As of June 2023, a total of 22 hedge funds out of the 910 were identified as investors of the firm.
STMicroelectronics N.V. (NYSE:STM) is primarily backed by Point72 Asset Management, a prominent hedge fund managed by Steve Cohen, with a significant investment valued at $111 million.
Concentrix Corporation (NASDAQ:CNXC)
Concentrix Corporation, a prominent information technology firm listed on the NASDAQ exchange under the ticker symbol CNXC, boasts a substantial workforce exceeding three hundred thousand individuals.
The company’s earnings per share (EPS) has failed to meet the EPS projections provided by analysts in each of the four most recent quarters.
Presently, the company is actively pursuing a corporate merger with another information technology (IT) firm.
At the conclusion of the second quarter of 2023, it was seen that 28 hedge funds, out of the total 910 hedge funds, possessed an ownership interest in Concentrix Corporation (NASDAQ:CNXC).
Among the aforementioned stakeholders, Impactive Capital, which is under the ownership of Lauren Taylor Wolfe, emerges as the largest shareholder of the corporation.
This distinction is attributed to Impactive Capital’s possession of 2.5 million shares, which possess a market value of $201 million.
Silicon Motion Technology Corporation (NASDAQ:SIMO)
Silicon Motion Technology Corporation (NASDAQ: SIMO) is a chip business headquartered in Hong Kong, specializing in the sale of products designed for memory and storage systems.
The company is presently engaged in a legal dispute with an American semiconductor corporation over a substantial monetary claim following the termination of an acquisition agreement.
At the conclusion of the second quarter of 2023, it was seen that 40 out of the 910 hedge funds had maintained an ownership interest in Silicon Motion Technology Corporation (NASDAQ: SIMO).
Among the several stakeholders, Millennium Management, led by Israel Englander, holds the largest share in the company, amounting to $96.1 million.
Amkor Technology, Inc. (NASDAQ:AMKR)
Amkor Technology, Inc. (NASDAQ:AMKR) is a semiconductor enterprise. The company offers backend products and services to semiconductor businesses, enabling them to conduct testing and development activities for their products.
Analysts have projected a significant increase of $10 in the share price, and the stock has received an average Buy rating.
At the conclusion of the June quarter of the current year, a total of 26 hedge funds, out of the 910 hedge funds, were found to possess a financial interest in the aforementioned company.
The primary shareholder of Amkor Technology, Inc. (NASDAQ:AMKR) is SW Investment Management, headed by Stephen White, with a significant ownership of shares valued at $63.9 million.
Avnet, Inc. (NASDAQ:AVT)
Avnet, Inc. (NASDAQ:AVT) is a semiconductor company that provides a range of products and design services.
In early September, the company raised its dividend to 31 cents per share; yet, the average rating for its stock remains as Hold.
Out of 910 hedge funds’ investments during the June quarter of 2023, 31 funds had allocated investments in the aforementioned firm.
Richard S. Pzena’s Pzena Holding Management holds the highest hedge fund holding in Avnet, Inc. (NASDAQ:AVT), amounting to $438 million.
Sanmina Corporation (NASDAQ:SANM)
Sanmina Corporation, listed on the NASDAQ stock exchange under the ticker symbol SANM, is a prominent American technology corporation specializing in the provision of consulting services and the manufacturing of printed circuit boards.
The stock in question has garnered a Strong Buy rating on average from analysts, which may be attributed to the company consistently surpassing analyst EPS projections in its most recent four quarters.
Out of 910 hedge funds’ investment activities during the second quarter of 2023, 23 investors have allocated their funds towards Sanmina Corporation (NASDAQ:SANM).
Diamond Hill Capital, managed by Ric Dillon, holds the largest stake among hedge fund shareholders, with ownership of 684,681 shares valued at around $41.2 million.
Gen Digital Inc. (NASDAQ:GEN)
Gen Digital Inc., a small American company specializing in cybersecurity technologies, is listed on the NASDAQ stock exchange under the ticker symbol GEN.
The company has seen consistent growth in its earnings per share (EPS) and has consistently outperformed analyst projections for this metric in each of its most recent four quarters. Additionally, it provides a dividend of 25 cents.
At the conclusion of the second quarter of the current year, a total of 36 hedge funds, out of the 910 included, had made purchases of shares belonging to Gen Digital Inc. (NASDAQ:GEN).
Starboard Value LP, managed by Jeffrey Smith, holds the largest investment in the company, with a holding valued at $350 million.
Daqo New Energy Corp. (NYSE:DQ)
Daqo New Energy Corp. (NYSE:DQ) is a Chinese semiconductor enterprise engaged in the provision of chip components to manufacturers of solar power equipment.
The firm’s income statement has been adversely affected by a deceleration in the Chinese economy, resulting in the firm falling short of analyst EPS projections in each of its most recent four quarters.
Nevertheless, in order to appease investors, the company has implemented a share repurchase program valued at $700 million.
As of June 2023, a total of 22 hedge funds out of the 910 were found to have ownership of the shares belonging to the firm in question.
The primary hedge fund investor of Daqo New Energy Corp. (NYSE:DQ) is Hillhouse Capital Management, managed by Lei Zhang, with a stake valued at $80.8 million.
Tower Semiconductor Ltd. (NASDAQ:TSEM)
Tower Semiconductor Ltd., a prominent Israeli semiconductor business listed on the NASDAQ stock exchange under the ticker symbol TSEM, gained significant attention in recent months due to the cancellation of a proposed acquisition by Intel Corporation, a leading player in the chip industry.
Intel is presently facing the need to implement cost-cutting measures due to a slowdown in the semiconductor sector.
Meanwhile, Tower Semiconductor Ltd. (NASDAQ:TSEM) is generally regarded as a favourable investment, with an average rating of Buy for its shares.
In the June quarter of 2023, 48 hedge funds out of the 910 were investors in the firm.
Tower Semiconductor Ltd. (NASDAQ:TSEM) is primarily backed by Rima Senvest Management, an influential hedge fund managed by Richard Mashaal, which holds a significant stake of approximately $95 million in the company’s shares.
Vishay Intertechnology, Inc. (NYSE:VSH)
Vishay Intertechnology, Inc. (NYSE:VSH) is an additional maker of semiconductors. In September, the company experienced an increase in its manufacturing capacity as a result of the establishment of a new facility in Mexico.
As of the conclusion of the second quarter of 2023, a total of 22 hedge funds out of the 910 had made purchases of Vishay Intertechnology, Inc. (NYSE:VSH) shares.
Fisher Asset Management, headed by Ken Fisher, holds the largest stake among the investors in question, with a total ownership value of $90.6 million.
How to Invest in Tech Stocks
How you decide to put your money into technology stocks will depend on your investment aims and methods.
Putting all of your money into a single stock is a risky move and not one that works for every investor.
This needs to be done with care, investigation, and a careful assessment of potential outcomes. In addition, if you don’t already have one, you’ll probably need to open a brokerage account if you want to pursue this path.
Understanding the company’s mission, its products and services, and how its business model responds to future needs is essential.
It is also important to look at the company’s financials, such as its balance sheet, profit margins, and price-to-earnings ratios.
Choose your stocks carefully, but keep in mind that experts recommend allocating no more than 10% of your portfolio to any one stock.
Finally, be sure that any new investments you make are consistent with your level of comfort with risk and the current asset allocation of your portfolio.
If you’re hesitant to put all your money into one tech company, investing in the best tech ETFs is a good alternative.
How to Analyze Tech Stocks
For profitable IT enterprises, the price-to-earnings ratio is useful. Divide the stock price by the company’s earnings per share to get a multiple that shows investors’ valuation of its current earnings.
A high multiple indicates that investors value the company’s future earnings growth potential.
Many tech companies are unprofitable, therefore the P/E ratio cannot evaluate them. Younger companies prioritize top-line growth.
Be careful to invest in something new that has growth potential.
Tech companies in financial trouble must also increase their profits. The sales and marketing needed to close business may become more efficient as a firm grows. If not, or if spending exceeds revenue, that may be a sign.
A good tech stock is priced fairly for its predicted growth. The hardest part is predicting the rise. Paying a premium for the company makes sense if you expect significant earnings growth. If you misjudge the market’s growth, your investment could fail.
Final Thoughts
Delaying an investment in technology stocks until the investor is confident that the company’s development prospects are sufficient to warrant the current market price is one strategy for mitigating the risks involved with investing in technology stocks.
One strategy to limit losses is to invest solely in the best-performing tech ETFs.
If you are an investor who wants to diversify your portfolio and capitalize on the rise of the technology business, you might want to think about purchasing some tech stocks.
There are a lot of opportunities for profit in this market right now.
Whether one invests in the technology sector through private banking services, investment funds, or by selecting the best FTSE 250 stocks and the best AIM stocks, the sector possesses adequate growth potential and has the ability to function as a buffer against the volatility of the market.
As technology becomes increasingly integrated into our daily lives, the question of whether or not one should invest in technology equities is assuming an increasingly prominent role.
This is due to the fact that companies involved in the tech industry are almost always at the forefront when it comes to promoting innovation, flexibility, and long-term value for investors.
Pained by financial indecision? Want to invest with Adam?
Adam is an internationally recognised author on financial matters, with over 760.2 million answer views on Quora.com, a widely sold book on Amazon, and a contributor on Forbes.
