For those who are unaware, the “Magnificent Seven” stocks are Microsoft (NASDAQ:MSFT), Apple (NASDAQ:AAPL), Nvidia (NASDAQ:NVDA), Tesla (NASDAQ:TSLA), Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), and Amazon (NASDAQ:AMZN). With the exception of Nvidia, those top tech stocks are largely focused on the cloud (MSFT and AMZN), the internet (GOOG and AMZN), software (MSFT), or hardware (Apple). While the cloud and the internet will, of course, continue to be hugely important parts of tech going forward, I believe that they will become somewhat less of a focal point for investors over the long term, while software and hardware will not be major forces in the stock market at all. Instead, in the upcoming age of artificial intelligence, automation and the chips that enable it will get the most attention from the Street. With that said, here are my candidates for the seven top tech stocks of the future.
ServiceNow (NOW)
ServiceNow (NYSE:NOW) appears to be the “top dog” at this point when it comes to the huge field of automating IT functions. As AI evolves, this field will only get bigger and more lucrative as more functions can be automated, causing NOW’s total addressable market and financial results to climb parabolically.
Encouragingly. NOW is working hard to incorporate AI into its operations by, for example, recently launching an AI-powered system that will allow developers to more easily launch apps on its platform. Further, it’s using AI to enable its customers to ship products faster and make programming easier for them.
Impressively, fintel.io gives NOW stock a high Fund Sentiment Scire of 82.39 out of 100, indicating that the “Big Money” remains quite enamored with the name. I expect their fondness for NOW to increase rapidly as the months and years go by.
Workday (WDAY)
Workday’s (NASDAQ:WDAY) cloud applications enable companies to easily manage their finances and human resources functions. It also has apps that allow companies to efficiently analyze their operations and plan initiatives using AI.
Top mutual funds bought $27.6 million of WDAY stock, indicating that some of the best-performing mutual funds are very bullish on WDAY, according to Investor’s Business Daily.
And in a note to investors on June 28, RBC Capital, a prominent Canadian bank, started coverage of WDAY stock with an “outperform” rating. According to the bank, WDAY ‘s subscription revenue will probably surge at least 20% annually for many years, as many businesses are increasingly adopting both its financial and HR offerings. Additionally, its planning app “is gaining meaningful traction against the competition,” RBC reported. The bank also believes that the company tends to make very good acquisitions.
Analysts, on average, expect workday’s earnings per share to surge to $6.41 next year from $3.64 last year.
Super Micro Computer (SMCI)
Super Micro Computer (NASDAQ:SMCI) is a rare hardware company that looks poised to become explosively successful in the AI-dominated world of the future. That’s because, as I pointed out in a previous column, the company markets servers that are very well-suited for creating AI. One of its servers, for example, “supports up to 10 next-gen accelerators.” AI is produced using accelerators.
Indeed investment bank Rosenblatt Securities has maintained that Super Micro Computer “…is perfectly positioned to profit from the AI-driven spending trend,” Investor’s Business Daily reported. The bank is also upbeat on the company’s ” liquid cooling at scale” solution, which effectively combats overheating, allowing more power to be deployed to its servers. Also noteworthy is that SMCI has partnerships with two of the world’s largest chipmakers: Nvidia and AMD (NASDAQ:AMD).
SMCI has a nearly perfect 98 out of 99 Composite Rating from Investor’s Business Daily, and IBD gives it an Acc/Dis rating of A+, showing that large investors have been buying plenty of its shares in the past 13 weeks.
Intel (INTC)
Intel (NASDAQ:INTC) also looks poised to get a big boost from the proliferation of AI, as its Gaudi 2 chips can be used to produce the technology. The Gaudi chips are reportedly only about one-third as fast as Nvidia’s AI-producing chips. But Intel indicated that its chips are significantly cheaper than Nvidia’s, and companies reportedly have to wait many weeks to obtain Nvidia’s chips. Moreover, multiple commentators have said that Intel’s next Gaudi chip could meaningfully close the gap with Nvidia’s offerings. And a Seeking Alpha columnist reported in late March that its Gaudi chips are already competitive when it comes to facilitating AI inference.
After Nvidia’s CEO said in May that he was pleased with the result of a test of Intel’s manufacturing capabilities, it looks probable that Intel will manufacture chips for Nvidia, the world’s largest maker of AI semiconductors. That, in turn, should convince other chip makers to let Intel manufacture their chips, turning Intel into a semiconductor manufacturing powerhouse.
On Semiconductor (ON)
As I noted in a previous column, “On Semiconductor (NASDAQ:ON) is a chipmaker that’s highly leveraged to the automotive and industrial end markets, both of which are growing rapidly.”
Electrification of transportation and increased use of chips in vehicles, partly to enable semi-autonomous driving, are boosting On’s revenue from autos, while the company’s industrial business has also grown very rapidly in recent quarters.
In the first quarter, the company’s automotive sales jumped 38% versus the same quarter a year earlier to a “record 50% of total revenue,” while its “Automotive and industrial end-markets together represented record 79% of revenue.” The results bode very well for the company’s longer-term outlook.
Investor’s Business Daily gives ON a very high Composite Rating of 92, including a Relative Strength rating of 96, indicating that investors have been very upbeat about the name in the last year.
Aurora Innovations (AUR)
Aurora Innovations (NASDAQ:AUR) appears to be the best-positioned American company when it comes to autonomous driving, as the firm’s platform has been used by multiple trucking companies for many months to transport products in Texas. Moreover, the firm has said that all of the necessary features have already been added to its platform.
Aurora anticipates that it will begin generating meaningful revenue from its platform by the conclusion of its next fiscal year.
According to Investor’s Business Daily, the name has an Accumulation/Distribution rating of A+, indicating that large investors have been buying a great deal of the stock in the last 13 weeks.
Stem (STEM)
Stem’s (NYSE:STEM) utilization of AI to make electricity use and the utilization of renewable energy more efficient will transform it into one of the most successful companies of the future.
Among its customers are several huge firms, including Apple, Home Depot (NYSE:HD), and Walmart (NYSE:WMT). The fact that such heavyweights utilize its technology largely validates STEM and its technology.
Also noteworthy is that investment bank Janney Montgomery started the name with a “buy” rating and $12 price target last month, citing the company’s outlook for positive adjusted EBITDA in the second half of this year. The firm’s forecast of adjusted positive EBITDA in the second half bodes well for its longer-term performance.
On the date of publication, Larry Ramer was long INTC, SMCI, STEM and AUR, while his wife was long NOW. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
