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Top 5 High-Flying Tech Giants of 2023 With More Upside Left
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Wall Street rebounded in 2023 after a highly disappointing 2022. The rally was primarily led by growth stocks, especially, technology stocks. Consequently, the tech-heavy Nasdaq Composite Index took the lead role in enabling U.S. stock markets to resume their northward journey.
However, the market has faced hurdles in the last three consecutive months. Market participants were worried as the Fed warned of one more rate hike of 25 basis points by the end of this year and pursued a higher interest rate regime for a longer period. The first rate cut is not expected before September 2024 and the inflation rate is unlikely to decline to the central bank’s target rate of 2% before 2026.
In his post-FOMC statement on Nov 1, Fed Chairman Jerome Powell said “economic activity expanded at a strong pace in the third quarter,” compared with the September statement in which he said that the economy had expanded at a “solid pace.” According to Powell, “employment gains have moderated since earlier in the year but remain strong.”
As several key economic data in the past three months are gradually cooling, a large section of market researchers and economists expect the Fed to be already through with this round of the interest rate hike cycle. This will pave the way for a year-end rally.
Our Top Picks
We have narrowed our search to five Nasdaq Composite-listed technology behemoth that have flourished in 2023 and have more upside potential for the rest of this year. These stocks have seen positive earnings estimate revisions in the last 60 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 the price performance of our five picks year to date.
Image Source: Zacks Investment Research
NVIDIA Corp. (NVDA - Free Report) is gaining from the strong growth of artificial intelligence, high-performance computing and accelerated computing, which is boosting its Compute & Networking revenues. The datacenter end-market business is likely to benefit from the growing demand for generative AI and large language models using GPUs based on NVIDIA Hopper and Ampere architectures.
A surge in Hyperscale demand and a solid uptake of AI-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 the autonomous vehicles and other automotive electronics space.
Zacks Rank #1 NVIDIA has an expected revenue and earnings growth rate of more than 100% each for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the last 60 days. The stock price of NVDA has soared 214.3% year to date.
Synopsys Inc. (SNPS - Free Report) is benefiting from strong design wins owing to a robust product portfolio. Growth in the hybrid working trend is driving demand for bandwidth. Strong traction for SNPS’ Fusion Compiler product boosted the top line. Growing demand for advanced technology, design, IP and security solutions is also creating solid prospects for SNPS.
Zacks Rank #1 Synopsys has an expected revenue and earnings growth rate of 12% and 12.9%, respectively, for the current year (ending October 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. The stock price of SNPS has surged 56.3% year to date.
Meta Platforms Inc. (META - 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 #2 Meta Platforms has an expected revenue and earnings growth rate of 14.2% and 43.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the last 30 days. The stock price of META has jumped 164.9% year to date.
Broadcom Inc. (AVGO - Free Report) has been benefiting from the strong deployment of generative AI by hyperscalers, service providers and enterprises. AVGO expects generative AI to contribute more than 25% of semiconductor revenues in fiscal 2024 compared with an estimated 15% in fiscal 2023 and roughly 10% in fiscal 2022.
Strong demand for Tomahawk 5, Jericho, 10-gigabit PON and DOCSIS 3.1 with embedded Wi-Fi 6 and 6E aids AVGO’s prospects. Expanding portfolio with the launch of the second-gen Wi-Fi 7 wireless connectivity chip is a catalyst. AVGO expects networking revenues to grow nearly 20% year over year in the fiscal third quarter.
Zacks Rank #2 Broadcom has an expected revenue and earnings growth rate of 7.6% and 8.9%, respectively, for the current year (ending October 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. The stock price of AVGO has climbed 60.6% year to date.
Microsoft Corp. (MSFT - Free Report) has gained from strong Intelligent Cloud and Productivity and Business Processes revenues. Intelligent Cloud revenues were driven by growth in Azure and other cloud services. Productivity and Business Processes revenues of MSFT rose due to the strong adoption of Office 365 Commercial solutions.
Continued momentum in small and medium businesses, frontline worker offerings and a gain in revenue per user drove the top line of MSFT. Steady growth in Dynamics products and cloud services aided LinkedIn revenues.
Zacks Rank #2 Microsoft has an expected revenue and earnings growth rate of 14.1% and 13.3%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the last 30 days. The stock price of MSFT has appreciated 50.3% year to date.
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Top 5 High-Flying Tech Giants of 2023 With More Upside Left
Wall Street rebounded in 2023 after a highly disappointing 2022. The rally was primarily led by growth stocks, especially, technology stocks. Consequently, the tech-heavy Nasdaq Composite Index took the lead role in enabling U.S. stock markets to resume their northward journey.
However, the market has faced hurdles in the last three consecutive months. Market participants were worried as the Fed warned of one more rate hike of 25 basis points by the end of this year and pursued a higher interest rate regime for a longer period. The first rate cut is not expected before September 2024 and the inflation rate is unlikely to decline to the central bank’s target rate of 2% before 2026.
In his post-FOMC statement on Nov 1, Fed Chairman Jerome Powell said “economic activity expanded at a strong pace in the third quarter,” compared with the September statement in which he said that the economy had expanded at a “solid pace.” According to Powell, “employment gains have moderated since earlier in the year but remain strong.”
As several key economic data in the past three months are gradually cooling, a large section of market researchers and economists expect the Fed to be already through with this round of the interest rate hike cycle. This will pave the way for a year-end rally.
Our Top Picks
We have narrowed our search to five Nasdaq Composite-listed technology behemoth that have flourished in 2023 and have more upside potential for the rest of this year. These stocks have seen positive earnings estimate revisions in the last 60 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 the price performance of our five picks year to date.
Image Source: Zacks Investment Research
NVIDIA Corp. (NVDA - Free Report) is gaining from the strong growth of artificial intelligence, high-performance computing and accelerated computing, which is boosting its Compute & Networking revenues. The datacenter end-market business is likely to benefit from the growing demand for generative AI and large language models using GPUs based on NVIDIA Hopper and Ampere architectures.
A surge in Hyperscale demand and a solid uptake of AI-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 the autonomous vehicles and other automotive electronics space.
Zacks Rank #1 NVIDIA has an expected revenue and earnings growth rate of more than 100% each for the current year (ending January 2024). The Zacks Consensus Estimate for current-year earnings has improved 2.7% over the last 60 days. The stock price of NVDA has soared 214.3% year to date.
Synopsys Inc. (SNPS - Free Report) is benefiting from strong design wins owing to a robust product portfolio. Growth in the hybrid working trend is driving demand for bandwidth. Strong traction for SNPS’ Fusion Compiler product boosted the top line. Growing demand for advanced technology, design, IP and security solutions is also creating solid prospects for SNPS.
Zacks Rank #1 Synopsys has an expected revenue and earnings growth rate of 12% and 12.9%, respectively, for the current year (ending October 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. The stock price of SNPS has surged 56.3% year to date.
Meta Platforms Inc. (META - 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 #2 Meta Platforms has an expected revenue and earnings growth rate of 14.2% and 43.7%, respectively, for the current year. The Zacks Consensus Estimate for current-year earnings has improved 4.3% over the last 30 days. The stock price of META has jumped 164.9% year to date.
Broadcom Inc. (AVGO - Free Report) has been benefiting from the strong deployment of generative AI by hyperscalers, service providers and enterprises. AVGO expects generative AI to contribute more than 25% of semiconductor revenues in fiscal 2024 compared with an estimated 15% in fiscal 2023 and roughly 10% in fiscal 2022.
Strong demand for Tomahawk 5, Jericho, 10-gigabit PON and DOCSIS 3.1 with embedded Wi-Fi 6 and 6E aids AVGO’s prospects. Expanding portfolio with the launch of the second-gen Wi-Fi 7 wireless connectivity chip is a catalyst. AVGO expects networking revenues to grow nearly 20% year over year in the fiscal third quarter.
Zacks Rank #2 Broadcom has an expected revenue and earnings growth rate of 7.6% and 8.9%, respectively, for the current year (ending October 2024). The Zacks Consensus Estimate for current-year earnings has improved 0.1% over the last 30 days. The stock price of AVGO has climbed 60.6% year to date.
Microsoft Corp. (MSFT - Free Report) has gained from strong Intelligent Cloud and Productivity and Business Processes revenues. Intelligent Cloud revenues were driven by growth in Azure and other cloud services. Productivity and Business Processes revenues of MSFT rose due to the strong adoption of Office 365 Commercial solutions.
Continued momentum in small and medium businesses, frontline worker offerings and a gain in revenue per user drove the top line of MSFT. Steady growth in Dynamics products and cloud services aided LinkedIn revenues.
Zacks Rank #2 Microsoft has an expected revenue and earnings growth rate of 14.1% and 13.3%, respectively, for the current year (ending June 2024). The Zacks Consensus Estimate for current-year earnings has improved 1.9% over the last 30 days. The stock price of MSFT has appreciated 50.3% year to date.