Wall Street was rangebound in the past month as market participants remained indecisive regarding U.S. economic growth and interest rate trajectory. In its recently concluded May FOMC meeting, the Fed raised the benchmark interest rate by 25 basis points to the range of 5-5.25%, marking the highest Fed Fund rate since August 2007.

In first-quarter 2023, U.S. GDP growth rate came in at a moderate 1.1% compared with the consensus estimate of 2% and the fourth-quarter 2022 growth rate of 2.6%. Moreover, the Conference Board’s Leading Economic Index, a gauge of future economic activity, dropped to 108.4 in March from February’s revised reading of 109.7, its 12th successive monthly drop and the lowest reading since November 2020.

Precipitous contraction in ISM manufacturing and services activities, a decline in orders of durable goods, a reduction in construction activities, and a freight recession are all signaling a recession later this year. Fed Chair also acknowledged that the current banking turmoil in the United States has led to tighter credit conditions, and may impact economic activities.

Despite the above-mentioned headwinds, the tech-heavy has maintained its northbound journey since the beginning of 2023. Year to date, the Nasdaq Composite has rallied 16.4%. The Dow and the S&P 500 have gained 1.3% and 7.3%, respectively, in the same period.

Nasdaq Composite’s performance is primarily linked to the movement of interest rate. The performance of growth stocks like technology is inversely related to the interest rate trajectory. The Nasdaq Composite was the best performer in the pandemic-ridden 2020 and 2021 as the Fed kept the benchmark interest rate to almost zero.

Just the opposite happened in 2022 as the central bank hiked the lending rate by a massive 4.5% to combat record-high inflation. The valuation of most of the technology behemoths plunged last year.

The situation once again turned in favor of the Nasdaq Composite as Fed Chairman Jerome Powell indicated that the ongoing rate hike cycle is perhaps reaching its end, although it will depend on the outcome of economic data.

Our Top Picks

We have narrowed our search to five Nasdaq Composite listed technology stocks that have rallied more than 20% year to date. These stocks have strong potential for 2023 and have seen positive earnings estimate revisions in the last 30 days. Each of our picks carries either a Zacks Rank #1 (Strong Buy) or 2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The chart below shows thw price performance of our five picks year to date.

Image Source: Zacks Investment Research

uMeta Platforms Inc. (META Quick QuoteMETA - Free Report) is benefiting from steady user growth across all regions, particularly Asia Pacific. Increased engagement for its products like Instagram, WhatsApp, Messenger and Facebook has been a major growth driver. META is considered to have pioneered the concept of social networking.

However, as developed regions mature, Meta Platforms has taken measures to drive penetration in emerging markets of South East Asia, Latin America and Africa. Of all places, India deserves a-special mention in terms of user growth. The world’s second-largest populated country offers tremendous potential for META. With China off the radar, India can prove to be a terrific growth engine for Meta.

Zacks Rank #1 Meta Platform has an expected revenue and earnings growth rate of 8.6% and 19.6%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 12.6% over the last 30 days. The stock price of META has jumped 94% year to date.

Fortinet Inc. (FTNT Quick QuoteFTNT - Free Report) is benefiting from rising demand for security and networking products amid the coronavirus crisis as a huge global workforce is working remotely. FTNT is also benefiting from robust growth in Fortinet Security Fabric, cloud and Software-defined Wide Area Network offerings.

Moreover, continued deal wins, especially those of high value, are solid drivers. Higher IT spending on cybersecurity is expected to aid Fortinet in growing faster than the security market. Also, focus on enhancing its unified threat management portfolio through product development and acquisitions is a tailwind for FTNT.

Zacks Rank #1 Fortinet has an expected revenue and earnings growth rate of 23.1% and 19.3%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 0.7% over the last seven days. The stock price of FTNT has appreciated 36.9% year to date.

Manhattan Associates Inc. (MANH Quick QuoteMANH - Free Report) is the global leader in providing supply-chain execution and optimization solutions. MANH develops, sells, deploys, services, and maintains software solutions to manage supply chains, inventory, and omni-channel operations.

MANH offers Manhattan SCALE, a portfolio of logistics execution solutions that provide trading partner management, yard management, optimization, warehouse management, and transportation execution services. MANH also offers and Manhattan Active, a set of enterprise and omnichannel solution, which include enterprise solutions and omnichannel solutions for stores. In addition, MANH also provides inventory optimization, planning, and allocation solutions.

Zacks Rank #1 Manhattan Associates has an expected revenue and earnings growth rate of 12.1% and 4%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 6.3% over the last 30 days. The stock price of MANH has climbed 39.2% year to date.

NVIDIA Corp. (NVDA Quick QuoteNVDA - Free Report) is gaining from the strong growth of artificial intelligence, high-performance computing and accelerated computing, which is boosting its Compute & Networking revenues. A surge in Hyperscale demand and a solid uptake of artificial intelligence-based smart cockpit infotainment solutions are acting as tailwinds for NVDA.

Collaboration with Mercedes-Benz and Audi is likely to advance NVDA’s presence in autonomous vehicles and other automotive electronics space. We expect its Automotive segment’s revenues to witness a CAGR of 29% through fiscal 2023-2025.

Zacks Rank #2 NVIDIA has an expected revenue and earnings growth rate of 10% and 34.7%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.2% over the last 30 days. The stock price of NVDA has soared 95.5% year to date.

CrowdStrike Holdings Inc. (CRWD Quick QuoteCRWD - Free Report) is benefiting from the rising demand for cyber-security solutions owing to the slew of data breaches and the increasing necessity for security and networking products amid the growing hybrid working trend. Continued digital transformation and cloud-migration strategies adopted by organizations are key growth drivers.

CRWD’s portfolio strength, mainly the Falcon platform’s 10 cloud modules, boosts its competitive edge and helps add users. Additionally, strategic acquisitions, like that of Humio and Preempt, are expected to drive growth for CRWD.

Zacks Rank #2 CrowdStrike has an expected revenue and earnings growth rate of 33.8% and 49.4%, respectively, for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.9% over the last 30 days. The stock price of NVDA has advanced 23.5% year to date.