In 2024, the Federal Reserve is widely anticipated to follow the Bank of Canada and initiate rate cuts. This potential monetary policy shift can have profound implications, making investors consider the best tech stocks to buy.
When interest rates fall, borrowing costs decrease, making it cheaper for companies to finance operations and expansion. Additionally, lower rates often lead to higher valuations for growth stocks. This is particularly relevant for the technology sector, which tends to reinvest profits back into innovation. Leading growth platforms such as artificial intelligence will remain in focus as mega cap tech stocks continue to lead in this revolutionary technology.
These positive developments are extremely bullish for discerning investors focused on driving long term growth in their portfolios.
Now, let’s unpack the three best tech stocks to buy on fed rate cut hopes for 2024.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT), a stalwart in the technology sector, continues to innovate and expand its market reach. Microsoft is well positioned to capitalize on lower interest rates with its leading cloud computing platform, Azure and AI-powered copilot software.
Azure, Microsoft’s cloud computing platform, has been a significant growth driver in recent years. While the computing market is highly competitive, Azure’s extensive service offerings continue to give Amazon Web Services (AWS) a run for its money. In Q3 FY24, Microsoft delivered noteworthy cloud strength, with revenue up 23% year over year to $35.1 billion. Copilot for Microsoft 365 also gained significant traction in 2024 as customers look to gain an edge and increase productivity.
Ultimately, this is great news for the company as it integrates AI across its entire technology stack. Lower interest rates will also make it easier for Microsoft to expand its data center footprint, ensuring continued growth and competitiveness in cloud computing. This ability to innovate and expand makes Microsoft one of the top tech stocks to buy in 2024.
Amazon (AMZN)
Amazon (NASDAQ:AMZN), the e-commerce and cloud computing behemoth, stands to benefit significantly from the Fed’s potential rate cuts. The company’s vast operations, spanning retail, cloud computing and artificial intelligence, position it as one of the best tech stocks to buy.
Regarding cloud computing, Amazon Web Services (AWS) remains the undisputed king. Despite Microsoft and Alphabet’s cloud divisions gaining steam, Amazon holds a 31% market share in cloud infrastructure as of Q1 2024. After delivering record revenue and free cash flow in the 2023 fiscal year, Amazon’s cloud strength is not slowing down. In Q1 FY24, Amazon delivered impressive earnings after CEO Andy Jassy implemented cost-cutting measures in 2023. Revenue increased 13% year over year to $143.3 billion, with operating income more than tripling to $15.3 billion.
The company is driving diversified growth across AWS and e-commerce, with its advertising business seeing notable strength. Furthermore, Amazon Web Services will reach a groundbreaking $100 billion annual run rate in 2024. With the advancements of its generative AI platform (Amazon Bedrock) and EC2 deep learning chip, the future remains extremely bright.
Alphabet (GOOG, GOOGL)
Alphabet (NASDAQ:GOOG, GOOGL), Google’s parent company, is another major tech stock poised to benefit from Fed rate cuts. Lower interest rates will benefit its highly diversified business, which includes search engine technology, digital advertising and cloud computing (GCP).
Alphabet’s AI-powered growth at Google Search and YouTube has further solidified its position in the competitive advertising market. It continues its impressive growth streak in this arena and is expanding its cloud computing capabilities. Much like AWS and Azure, the Google Cloud Platform (GCP) is a critical growth driver for Alphabet. Expanding its infrastructure is even more critical as generative AI applications and LLMs are deployed into the cloud.
Growth in the first quarter of 2024 remained robust, with cloud revenue increasing 28% year over year to $9.6 billion. CEO Sundar Pichai is embracing the Gemini AI as the company bets big on the long-term growth prospects of its next-generation LLM. With Alphabet authorizing its first-ever dividend of $0.20 per share, GOOG stock is one of the top tech stocks to buy in June 2024.
On the date of publication, Terel Miles 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.
