In 2023, tech stocks to buy have boomed led by the ‘Magnificent 7’ which have propelled much of the overall market gains. However, they’ve also proven volatile experiencing hiccups early in August as valuation concerns mounted. That cost investors hundreds of millions in aggregate. Then Nvidia (NASDAQ:NVDA) released blockbuster results that more than exceeded expectations and losses stabilized.
So, even though artificial intelligence (AI) remains clearly on track to provide continued gains investors are looking outside of the usual suspects. The gains from ‘Magnificent 7’ look to be slowing. That pivot is creating opportunities for the next tier of winning tech stocks to buy.
AMD (AMD)
AMD (NASDAQ:AMD) is one of the more prominent contenders to consider when searching for the next big tech stocks to buy in the AI race. The firm is essentially the little brother to Nvidia in most regards. Its chips aren’t as powerful, its prospects not quite as good and its overall outlook just that much weaker.
And that’s why AMD hasn’t soared to the degree that Nvidia has despite providing strong returns in 2023 overall. AMD is a laggard relative to Nvidia and has significant barriers to overcome in that regard. It’s playing catch-up in the AI chip space. Investors should remember that AMD is expected to release its competitor AI chips late this year.
It’ll be about GPU chips which are much better suited to AI purposes. The company unveiled its Radeon RX 7800 XT and Radeon RX 7700 XT chips highlighting their AI functionality and optimization for AI workloads. AMD is closing the gap and investors worried that Nvidia is overvalued should pile into AMD as its potential becomes clearer in late 2023.
Analog Devices (ADI)
Analog Devices (NASDAQ:ADI) is another chip stock to consider for investors looking beyond tech’s biggest players. The company produces integrated circuits, another name for chips that describes the wafers you might think of when envisioning a semiconductor chip.
The company is particularly strong in the automotive and industrial sectors with revenues growing in both Q2 and Q3. Overall revenues declined by 1% during the period but increased over the prevailing 9-month term. Analog Devices was prudent during both periods and cut costs resulting in increased net income in Q2 and the trailing 9-month period.
I like the company for its exposure to the automotive and industrial sectors. EVs and IoT will provide access to long-term growth that will benefit the company and provide it with growth options. Further, ADI shares include a dividend that was last reduced in 2004. It’s a stable firm with exposure to growth which is attractive to a large portion of investors overall.
Adobe (ADBE)
Adobe (NASDAQ:ADBE) is a significant player in the generative AI conversation. The stock is rising and I believe that its September 14 earnings will be strong. If true, that would be a continuation of the last 2 quarters during which Adobe reported EPS and revenue beats.
The software giant known for Photoshop, Acrobat and Illustrator is continuing to grow at a steady pace after growing by 12% in 2022 to $17.6 billion. It’ll eclipse $19 billion this year and is on track to make $21 billion in sales in 2024.
As with most other tech firms, Adobe’s growth is currently predicated upon generative AI. Its Firefly AI products are centered on the application of AI to its creative suite. The use of AI in creating graphics is clearly disrupting more traditional methods. Adobe has a clear opportunity at its feet. Enterprise revenues are an obvious point of attraction. Adobe is a massive enterprise creative software provider. It’s difficult to see why Adobe sales shouldn’t improve as AI integrations take root.
UpWork (UPWK)
Upwork (NASDAQ:UPWK) is one of the tech stocks to buy worth considering for a few prominent reasons. Firstly, Upwork is the biggest freelancer platform. More and more workers are either choosing to freelance on their own or simply being forced to as the economy shifts. The market is expected to grow at an average annual rate of 16.5% through 2030 according to recent estimates. That will benefit Upwork significantly as the leading freelancer platform.
Beyond the clear growth opportunity, Upwork is also worth considering for its trajectory. The firm found profitability during the first 6 months of 2023 posting $13.2 million in net income. That was a substantial improvement over the $48.5 million loss a year earlier during the same period. The firm has improved operations drastically while revenues continue to grow at a more modest pace. Upwork is also benefiting from the AI boom as many creators are plying their wares on the platform’s newly launched AI Services hub.
SEMrush Holdings (SEMR)
SEMrush Holdings (NYSE:SEMR) provides tools that help firms improve their search engine optimization (SEO) and search engine marketing (SEM) rankings. In the digital age appearing earliest on Google and other search engines determines failure and success. Thus, SEMrush continues to experience strong demand.
That strong demand is evident in the latest earnings report in which revenues grew by 19% to $74.7 million. ARR grew slightly faster, at 20%, representing contractual growth within the firm. It’s a particularly important metric because it indicates that the company is adept at maintaining relationships with its clients.
Like Upwork, SEMrush is attractive because the firm is flirting with a pivot into profitability. The firm posted a net loss of $279 thousand in the second quarter. That figure narrowed significantly from $8.3 million a year earlier. The company raised its non-GAAP net income guidance to between $2 to $4 million from $0 to $3 million following the strong results.
Fortinet (FTNT)
Fortinet (NASDAQ:FTNT) stock is now cheaper after plunging a few weeks ago. The drop was predicated on broad macroeconomic uncertainty. That said, Fortinet remains fundamentally strong and provided strong quarterly results that should serve to allay those broader fears.
Fortinet is a cybersecurity firm with a particularly strong footing in the enterprise sector. Firms of all stripes are beefing up their security for a multitude of reasons and demand is increasing. That has resulted in strong top-line growth for Fortinet which saw sales jump 26% in the second quarter. Net income growth, at 54%, was even higher over the same period and points to a strong company with strong fiscal controls in place and a firm grasp on costs.
Fortinet is projecting 20% growth moving forward. Enterprise security concerns are only growing as AI complicates the picture while simultaneously benefiting the firm. It’s difficult to find much to dislike which is why FTNT shares are a buy.
Mastercard (MA)
Investors should understand that Mastercard (NYSE:MA) is a stock that is firing on all cylinders. Pretty much everything is in place for the firm to continue to improve making it a clear buy.
A lot of that opportunity is based on the continued increase of U.S. credit card debt. Americans hold more than $1 trillion in collective credit card debt. Balances are rising as Americans deal with inflation by charging it to their cards while simultaneously allowing their balances to grow rather than paying them off.
In turn, Mastercard’s revenues grew by 14% in Q2 and net income was up by 25%. Those figures are likely to balloon moving forward as the firm is set to increase merchant fees. That means firms that take credit card payments will now foot a larger fee for doing so while consumers should be largely shielded from the increases.
In any case, Mastercard’s future revenue stream is only continuing to get brighter and brighter as American consumers fall further behind.
On the date of publication, Alex Sirois 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.
