Tech stocks are surging ahead, leveraging the artificial intelligence revolution to outshine broader markets. With the S&P 500 boasting a 25% gain fueled by AI’s promise, it’s safe to say that tech stocks had a monumental run last year.
However, with calls of a potential AI bubble burst this year, it’s imperative to use Wall Street’s analytical forecasts as a navigator. These insights from the financial gurus are incredibly relevant as the market exuberance of the past year begins to stabilize. Savvy investors now find themselves at a crossroads, deciphering which tech stocks merit their capital in an evolving economy. As we navigate this shifting landscape, the acumen of Wall Street’s finest becomes imperative for investors, where potential growth meets robust investment strategies.
Taiwan Semiconductor (TSM)
- Analyst Consensus Estimate (Tipranks): ‘Strong Buy’
- Upside Potential: 12.2%
Taiwan Semiconductor (NYSE:TSM) once again demonstrated its robust financial health and long-term outlook, delivering a stronger-than-expected fourth quarter (Q4) performance. With a GAAP EPS of $1.44, surpassing estimates by five cents, and sales of $19.62 billion, edging out by $50 million, TSM sets a positive tone for its future. Its bullish outlook for 2024, expecting sales to surge by 20% or more, underscoring its own growth trajectory while sending an optimistic signal for the global semiconductor industry.
Expanding its geographical footprint beyond Taiwan, TSM is strategically positioning itself for sustained growth. The announcement of a second factory in Japan highlights its commitment to effectively diversify its operations and reduce the geopolitical risks associated with the China-Taiwan tension. Layer that with its promising dividend yield of 1.5% and a remarkable track record of 19 consecutive years of payout expansion, TSM presents itself as an enticing investment.
Microsoft (MSFT)
- Analyst Consensus Estimate (Tipranks): ‘Strong Buy’
- Upside Potential: 17%
Microsoft (NASDAQ:MSFT) is the world’s most valuable publicly traded company boasting a market cap of over $3 trillion. The company is enhancing its software suite by integrating AI across its operations, including the newest Microsoft 365 Copilot addition. This AI-powered solution improves efficiency in applications including Word, Excel, PowerPoint, Outlook, and Teams.
Its strategy is paying off handsomely already, with its Q4 report exceeding expectations, posting an EPS of $2.93 against the anticipated $2.78, with revenue reaching $62.02 billion, beating the $61.12 billion estimate. This 17.6% YOY sales growth is mainly attributed to its thriving cloud computing segment, particularly Intelligent Cloud, which saw a 20% increase in revenue to $25.9 billion.
Looking ahead, MSFT projects sales to fall between $60 billion and $61 billion for the current quarter, aligning closely with analysts’ expectations of $60.9 billion. Hence, its powerful performance and forward-looking guidance highlight Microsoft’s ongoing dominance in the tech sector.
Meta Platforms (META)
- Analyst Consensus Estimate (Tipranks): ‘Strong Buy’
- Upside Potential: 13%
Meta Platforms (NASDAQ:META) continues to grab eyeballs with its blow-out quarterly performances. Its Q4 earnings bested estimates across both lines by a comfortable margin while initiating its first-ever dividend alongside a $50 billion stock buyback program. It picked up from where it left off in the third quarter (Q3), delivering over 20% YOY growth in Q4.
The company’s focus on stringent cost control and its ambitious push into AI are driving its business forward rapidly. Additionally, a revival in online advertising sales and Meta’s exploration of AI to advance virtual and augmented reality add to Meta’s already impressive growth trajectory. Its investments in the Metaverse, position it as a pioneering force, which could redefine communication in the coming years. Additionally, META stock is up 32% year-to-date (YTD), continuing its momentum from last year, when it shot up 172%.
Amazon (AMZN)
- Analyst Consensus Estimate (Tipranks): ‘Strong Buy’
- Upside Potential: 23.4%
Amazon’s (NASDAQ:AMZN) diverse portfolio spans multiple rapidly growing sectors, including eCommerce, cloud computing, AI, video streaming, and others, fueling significant momentum across its operations. Consequently, it has been killing it with its quarterlies, with a healthy 14% increase in total revenue YOY in its Q4 results. Moreover, it boasted a notable 14% boost in eCommerce sales in Q4 and a 13% bump in AWS growth, a testament to its strong performance during the holiday season.
Amazon’s venture into generative AI with Bedrock, which streamlines AI application scaling, promises to bolster AWS demand further. Furthermore, company CEO Andy Jassy’s recent statements underscore the whopping potential of generative AI and advertising as pivotal growth catalysts for AMZN. With the stock experiencing a 78% upswing last year and an 11% increase YTD, Amazon’s strategic investments and innovative leaps signal a stellar future ahead.
Advanced Micro Devices (AMD)
- Analyst Consensus Estimate (Tipranks): ‘Strong Buy’
- Upside Potential: 18.5%
Chip giant, Advanced Micro Devices (NASDAQ:AMD) enjoyed more than 15% surge in its stock value, eclipsing both the S&P 500 and Nasdaq. Its ambitious foray into the competitive AI chip market is set to rival Nvidia’s (NASDAQ:NVDA) stronghold, driven by robust demand across North America, Europe, and Asia.
AMD’s Q4 results were heartening, marked by an EPS of 77 cents, which met analyst expectations, with revenue reaching $6.17 billion, surpassing the expected $6.12 billion. The excitement among analysts was particularly stoked by AMD’s upward revision of its annual AI chip sales forecast from $2 billion to $3.5 billion, reflecting strong demand. This revision underscores AMD’s growing influence in the AI chip sphere while hinting at continued positive momentum for its stock. This optimism is anchored in AMD’s innovative product lineup and stellar market expansion.
ASML Holdings (ASML)
- Analyst Consensus Estimate (Tipranks): ‘Strong Buy’
- Upside Potential: 3.1%
ASML Holdings (NASDAQ:ASML) products play a pivotal role in the tech we use every day. They boast a leadership position in the manufacturer of advanced lithography systems that make advanced semiconductor chips.
In FY23, ASML delivered record sales of $27.6 billion, up 30% YOY. Moreover, the company also saw a record net income of $7.8 billion, driven by strong order intake. Additionally, though it projects flat revenue growth in 2024, key investments in R&D will lay the foundation for vigorous growth in FY25.
It is also making next-generation cutting-edge high-numerical aperture lithography systems, enabling customers to produce even smaller chips. It shipped the first one to Intel (NASDAQ:INTC) late last year, and they sell for a handsome $300 million each. Considering the pace at which AI is moving, there will be no end to the demand for ASML’s equipment. With the power and complexity required to cater to the growing demands of the AI sector, ASML is in a position for sustained expansion.
Alibaba (BABA)
- Analyst Consensus Estimate (Tipranks): ‘Strong Buy’
- Upside Potential: 34.3%
With its expansive ecosystem, Alibaba (NYSE:BABA) showcases incredible synergy across payment platforms, logistics, and cloud services, solidifying its status as an eCommerce giant. Despite a bearish sentiment shadowing BABA stock this year, the company’s resilience is evident through a 5% revenue increase in the latest quarter. This growth, coupled with its dominance in China’s cloud market, positions it as an excellent contrarian pick with robust upside.
Moreover, Alibaba’s performance shines when juxtaposed with its sector counterparts, boasting a YOY revenue growth of 7.28%, comfortably surpassing the sector’s median by 90.7%. This exceptional growth trajectory is further underscored by its forward EBITDA growth of 7.2%, vastly outperforming the sector median by 181.3%. Such impressive metrics highlight Alibaba’s solid position within its industry and signal a turning tide in its favor.
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
