Inarguably, the world’s attention remains focused on rising novel coronavirus cases due to the stubbornly persistent Delta variant. In the U.S., new infections are rising while the death toll is mounting. But even if the pandemic were to peter out tomorrow, the devastation that the crisis caused to the technology sector will take time to heal. Cynically, then, investors ought to consider tech stocks heading into the final quarter of the year.
Because outside of the pandemic, the next most-discussed topic is the semiconductor supply chain impact. As soon as the coronavirus started rippling away from China and into other countries, manufacturers which rely on computer chips — most notably firms in the automotive industry — cancelled their orders. Obviously, they didn’t anticipate the demand surge that would follow which has caused a massive boom in semiconductor-related tech stocks.
Having reversed course, the automotive industry is now on their knees begging for their original supply allocation. Unfortunately, chip manufacturers had to take their own evasive action, which translated into an expansive backlog. Moreover, it’s not as if supply can materialize overnight. And even if such a miracle were to happen, the end products won’t reach the retail floor until much later, which adds to the relevancy of tech stocks.
But it’s not just the supply constraint that fuels demand for this sector. Throughout the trailing year, we’ve seen cyberbreaches that have imposed serious economic damages to the U.S. As well, many question the viability of the protocols built to protect our digital secrets. Combined with the massive influx of people working from home, tech stocks in the cybersecurity realm should command a sizable premium.
If anything, the public health crisis has taught us that we’re incredibly reliant on digitalization trends and innovative products. This dependency isn’t going away anytime soon. Therefore, investors may be best served by considering these tech stocks heading into the fourth quarter.
- CrowdStrike (NASDAQ:CRWD)
- ASML (NASDAQ:ASML)
- Nvidia (NASDAQ:NVDA)
- Matterport (NASDAQ:MTTR)
- Alarm.com (NASDAQ:ALRM)
- Boxlight (NASDAQ:BOXL)
- American Well (NYSE:AMWL)
As per my usual cautionary guidance, you’ll want to carefully buy into this sector. Even though tech stocks represent arguably the most relevant market segment right now, speculation is still rampant. Therefore, have a long look at these names but keep the powder keg dry.
Best Tech Stocks to Buy: CrowdStrike (CRWD)
Personally, I believe that the mass-scale work-from-home initiative that companies were forced to implement to survive will eventually come to an end. Just from a company culture perspective, it’s going to be a nightmare to distinguish which category of employees can operate remotely and which cannot. Can you spell discrimination lawsuits?
If that wasn’t enough to freak out upper management, here’s another sobering concept. According to a Forbes article this year, “Companies have had to get better at cybersecurity in our digital age, but cybersecurity threats have grown significantly with distributed work. Work-from-home employees are at much greater risk than those in offices. Since home connections are less secure, cybercriminals have an easier entry into the company network.”
But if remote work continues to be the new standard, then you can reasonably expect cybersecurity expert CrowdStrike to be an extremely relevant name. Over the trailing year, CRWD shares have more than doubled. Beyond the corporate narrative, cybercrimes have been impacting every avenue of life in recent years. Therefore, CRWD is one of the most pertinent tech stocks to buy.
On paper, ASML “gives the world’s leading chipmakers the power to mass produce patterns on silicon, helping to make computer chips smaller, faster and greener,” according to its website. Although I like to think that I have a reasonably solid command of the English language, corporate marketing talk has always perplexed me, so here’s the real deal.
Essentially, ASML produces the equipment necessary for the production of integrated circuits. Thus, other companies within the expansive arena of tech stocks — including blue chips like Intel (NASDAQ:INTC) and Taiwan Semiconductor Manufacturing (NYSE:TSM) — are huge ASML clients.
But as an ASML executive explained to Reuters in February of this year, the “higher demand for most types of computer chips — including those considered one step below cutting edge — looks stronger and more permanent than most players in the industry” had anticipated when the novel coronavirus pandemic upturned our paradigm.
In fact, the ASML exec referenced above stated that the situation was “stressful,” implying that we may not get through this supply chain crunch for quite some time. As well, major automakers cutting production means that ASML will probably rise above many other investments — and that includes other tech stocks.
Best Tech Stocks to Buy: Nvidia (NVDA)
When the Covid-19 crisis first impacted the developed world, the one sector that enjoyed a serious upside catalyst was video games. With nothing better to do in terms of entertainment, many gamers wiled away the days turned to weeks through gaming endeavors. And I’m sure non-gamers who became bored out of their minds also joined in on the fun.
The statistics don’t lie. From a USA Today report published in July of this year, “More than half of players (55%) said they played more games during the pandemic, and most players (90%) said they will continue playing after the country opens up, according to a survey of 4,000 U.S. adults conducted by market research firm Ipsos in February for the Entertainment Software Association.”
The above represents a huge potential lift for NVDA stock, considering the anticipated long-term demand for gaming even after the pandemic fades away. Furthermore, Nvidia is involved in countless segments of digitalized innovation, ranging from blockchain-based endeavors to autonomous driving. If you’re looking for tech stocks that have both Covid-based catalysts and pandemic-agnostic tailwinds, NVDA offers prime exposure.
One of the hottest names in tech stocks right now, Matterport might not sound like a household name to you. However, if you were (or still are) in the market for a home, then you’ve surely used its innovations. Billed as the standard for 3D space capture, Matterport transforms what would otherwise be boring photographs into immersive representations of various environments.
Such capacities were of course invaluable last year when the pandemic was raging. At the time, we just didn’t know how infectious or deadly the new virus was — only that it was definitely killing people. In the absence of full knowledge, touchless services became a top priority, providing Matterport with what amounted to a free organic marketing opportunity.
Now to be fair, back in March when Matterport was still trading under its SPAC name of Gores Holdings VI, I wasn’t exactly thrilled with the opportunity. In fact, I stated that MTTR “may be a hot play among blank-check firms but I’m staying on the sidelines for now.”
Since it lost considerable value heading into the May 19 session, I don’t regret those words. However, with the housing market remaining red hot, there might be an opportunity for MTTR if you don’t mind absorbing potential volatility in your tech stocks.
Best Tech Stocks to Buy: Alarm.com (ALRM)
Not only did the pandemic cause widescale disruption to tech stocks, it also completely shifted attention toward certain categories at the expense of others. For instance, as I alluded to above, everyone’s fixated on the computer chip industry and for understandable reasons. Until the supply chain situation normalizes in the semiconductor space, we’re going to have to pay elevated prices for cars, which directly affects our personal economy.
But notice how we’re not talking as much about the Internet of Things (IoT), which is quite remarkable. Prior to the pandemic, smart connected devices were all the rage. In fact, different IoT segments, including for industrial applications, occupied the top spots in the discourse of tech stocks.
Because the pandemic is a temporary circumstance, investors ought to consider tech-based security solutions such as Alarm.com. Specializing in cloud-based services for remote control, home automation and monitoring services, ALRM may be a good pickup considering its year-to-date loss of 21%.
The red ink really could be a discounted opportunity. Due to the far-reaching effect of the public health crisis, there’s brewing desperation in society. As well, record-breaking gun sales suggest that people are concerned about personal security, which bodes well for ALRM stock.
While the headlines focus on the “sexy” topics of the pandemic’s impact — such as the salacious issue of ever-rising used car prices — the crisis also imposed a heavy toll on education. Worse yet, the influence here may not be manifest for years to come, at which point it may be too late to address the circumstance.
According to a report from McKinsey & Company, “the impact of the pandemic on K–12 student learning was significant, leaving students on average five months behind in mathematics and four months behind in reading by the end of the school year. The pandemic widened preexisting opportunity and achievement gaps, hitting historically disadvantaged students hardest.”
To get ahead of this problem, academic professionals need to act now, which brings to mind education-related tech stocks like Boxlight. A platform designed to maximize students’ learning capabilities and imbue them with the skills they need for success in a competitive, globalized workplace, Boxlight provides educators with the tools they need to impart effective learning.
Intriguingly, BOXL is priced at $2.40 at time of writing, potentially making it a meme-able trade. If you’ve got some risk funds laying around, you might want to take a look at Boxlight.
Best Tech Stocks to Buy: American Well (AMWL)
Given that we’re still in a pandemic, it would be remiss of me not to include a healthcare name in this list of tech stocks. But rather than discuss a biotech play involved in the Covid-19 vaccination or treatment space, I think it might be time to reexplore the narrative of telehealth.
Fundamentally, you might view this as a sector that has lost its luster due to the acclimatization to the global health crisis. For instance, American Well launched its initial public offering on a relatively promising footing based off the pandemic-fueled success of rival Teladoc Health (NYSE:TDOC). But on a year-to-date basis, AMWL is down almost 58%, while TDOC has shed 32%.
But before you write off telehealth as an industry, consider another report from McKinsey & Company, which stated that “Strong continued uptake, favorable consumer perception, and tangible investment into this space are all contributing to the continued growth of telehealth in 2021.” As well, its research suggests that “telehealth use has increased 38X from the pre-COVID-19 baseline.”
If so, AMWL priced at a few cents under $11 might make for an attractive proposition for speculators.
On the date of publication, Josh Enomoto 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.
A former senior business analyst for Sony Electronics, Josh Enomoto has helped broker major contracts with Fortune Global 500 companies. Over the past several years, he has delivered unique, critical insights for the investment markets, as well as various other industries including legal, construction management, and healthcare.