The technology sector is one of the most popular sectors among investors, as it should be. Technological innovation has changed the way we live our lives. It has given us medical innovation, communication like we’ve never had before, a new shopping experience, and extreme investor profits along the way. Technology has even been the force behind changes to the stock market itself.
Without technological innovation, we wouldn’t be where we are today. There’s little chance that it’s going to stop anytime soon. As technological innovation continues, new opportunities are popping up for investors every day.
Also, with all of the interest in the tech sector as a whole, the most successful in the space tend to be high-quality growth stocks with plenty of volatility for day traders to take advantage of. So, it’s no surprise to see such heavy investor interest in the category.
Top Tech Stocks to Buy Now
As with any sector, stocks in the technology sector are not all created equal. The best stocks to buy in the tech space represent well-established companies that have a strong history of both revenue and earnings growth. Some of the top tech stocks to consider investing in as 2021 picks up steam include:
1. Amazon.com (NASDAQ: AMZN)
The brainchild of billionaire Jeff Bezos, Amazon.com has become a household name in the United States. If you haven’t heard the name, you’re likely living under a rock. Amazon.com is an e-commerce giant that has become a one-stop shop for the latest cellphones, hottest styles, and most flavorful foods on the market. Moreover, that “stop” is your home.
Over the years, Amazon.com has invested massive amounts of money into infrastructure and technology. These investments have paid off greatly by providing a highly user-friendly e-commerce solution with shipping times that are unmatched in the industry.
This has given the company a tremendous advantage over competitors during the COVID-19 pandemic. After all, consumers across the nation and around the globe were told to stay home. People were told that to leave the house was to risk your life and the lives of your loved ones. Consumers staying home had dire consequences for most in retail.
Amazon.com picked up the slack.
The company was already the leader among those who were used to shopping online. However, with lockdowns in place and many afraid to leave their homes, new growth prospects quickly emerged as the coronavirus pandemic took hold.
Those who never would have considered buying groceries or anything else online were suddenly exposed to online shopping by force. With Amazon.com being the leader in the space, this proved to greatly expand the company’s target market, creating strong revenue opportunities.
Now, many experts are arguing that coronavirus-related fears will continue following the end of the shutdown, leading to a continuation of shopping online for much of this newfound audience. Moreover, even if consumers aren’t fearful of going outside, the simplicity associated with online shopping will likely remain appealing to those who may have never considered it before the pandemic. As a result, experts expect a continuation of the growth seen last year throughout this year and beyond.
Most Recent Earnings Report Data
Any time you invest, it’s important to pay attention to earnings. However, when investing in the technology sector the level of importance is even higher. To be successful in technology requires innovation to maintain growth. If growth slows, it’s a major red flag, suggesting that a lack of innovation will soon lead to declines.
When it comes to Amazon.com, the company’s most recent earnings report was released in early February, covering the company’s fourth quarter performance, and it was indeed a strong one.
- EPS. Earnings per share for the second quarter came in at $14.09. That figure nearly doubled the analyst expectations for EPS to come in at $7.23.
- Revenue. The company reported record revenue of $125.56 billion. This figure also blew away analyst expectations of $119.7 billion of revenue, further adding to analysts’ optimism for Amazon to continue to outperform its competitors.
- Guidance. Finally, Amazon.com expects that it will generate revenue in the range between $100 and $106 billion in the first quarter, continuing its strong track record of growth.
Pro tip: Earn a $30 bonus when you open and fund a new trading account from M1 Finance. With M1 Finance, you can customize your portfolio with stocks and ETFs, plus you can invest in fractional shares.
2. NVIDIA (NASDAQ: NVDA)
NVIDIA is no mom-and-pop tech shop by any means. If you’re into PC gaming, there’s a good chance you’ve heard the name before. NVIDIA is a chip maker best known for its gaming graphics processing units (GPUs).
Most recently, the company claimed the top spot on PC Gamer’s list of The Best Graphics Cards in 2020. NVIDIA earned this spot by offering the fastest graphics card that can be used in a PC gaming system, giving players a competitive edge no other product can match.
As its core business, PC gaming chips from NVIDIA are impressive, and revenue from these chips continues to grow. But the larger opportunity for the company may be in the artificial intelligence space.
In recent years, NVIDIA has been producing high-end GPUs for data centers. These GPUs are designed to process artificial intelligence tasks faster than stand-alone CPUs, giving data centers deploying the technology a competitive advantage. Moreover, NVIDIA GPUs are widely used in the mining of Bitcoin and other cryptocurrencies.
One of the most compelling GPU products to hit the market in the data center space is the new A100 data center GPU by NVIDIA. It’s up to 20 times more powerful than other GPUs the company has produced in the past, and data centers are loving it. It started to generate meaningful revenue for the company shortly after its launch and continues to lead to revenue growth.
Of course, NVIDIA knows where its strengths are. Knowing that there’s tremendous forward-looking value in the data-center space, the company recently acquired the networking company Mellanox to continue its expansion into this subsector of technology.
NVIDIA is already enjoying the fruits of its data-center labor. In the first quarter, revenue in the space rose 80% year over year, coming in at $1.14 billion and representing about 37% of the company’s top line. The tremendous growth was directly attributed to the use of its GPUs for AI and high-performance computing applications among its hyperscale and vertical industry customers like Amazon, Microsoft, and Alphabet.
The company is also making a splash in the auto market. It offers ARM-based Tegra CPUs that are commonly used to power vehicle entertainment consoles. Its tech is also being used in the research surrounding driverless cars.
Finally, NVIDIA is entering the health care market as a result of the COVID-19 pandemic. The company recently announced that it is developing a new AI supercomputer designed for and dedicated to medical research, and NVIDIA promises that it will be the most powerful supercomputer on Earth.
With a strong history and continued growth in the gaming industry, continued innovation and uptake of its products in the data-center space and other areas of tech — including driver entertainment and autonomous vehicles benefiting from the company’s products — NVIDIA is one of the top semiconductor growth plays on the market today.
Most Recent Earnings Report Data
The most recent earnings report from NVIDIA was released in late February, representing the results generated in the fourth quarter of the 2020 fiscal year. Not only did the company beat revenue and earnings expectations, but it also set the stage for continued strong growth with compelling guidance.
- EPS. In the second quarter, NVIDIA produced earnings of $3.10 per share. Analysts only expected that earnings per share would come in at $2.81.
- Revenue. Topline revenue also beat estimates. While analysts expected the company to generate revenue of $4.82 billion in the fourth quarter, NVIDIA reported revenue of $5.00 billion.
- Guidance. Not only did the company beat analyst expectations for the fourth quarter, but it also released guidance that suggests more compelling growth ahead. For the next quarter, NVIDIA is projecting that it will generate revenue of $5.3 billion.
3. Apple (NASDAQ: AAPL)
Apple is a household name in the United States. Although the company is generally tied to the iPhone, it offers a wide array of high-tech products, including smartphones, tablets, and computers.
With a market cap of more than $2 trillion, Apple is one of the largest companies in the world, and if the past is any indication of the future, continued innovation will only further serve to solidify that position.
Many Wall Street experts argue that 2021 is the year to dive head first into Apple stock. Why? Well, many have suggested that 2021 will be the year of a supercycle for the company, centered around its iPhone product.
Each year Apple releases a new iPhone, offering up a few unique features that the previous model of the smartphone didn’t offer. However, with price tags nearing and above $1,000, most iPhone owners don’t update their phone every year. Instead, many wait until the feature differences are so big between the version they currently own and the latest version that it’s worth the big price tag for them to upgrade.
A supercycle takes place every few years, when a large percentage of those who didn’t upgrade to the latest version over the past couple of years decide that it’s time. This leads to a big spike in sales for Apple, coupled with strong earnings growth and big movement in the stock market.
While the COVID-19 pandemic may have delayed the supercycle that was expected in 2020, it may lead to even stronger sales than expected in 2021.
If Apple is gearing up for a supercycle, big gains could be ahead. This combined with a strong record of innovation and compelling historic growth in sales of smartphones, tablets, and computers suggests that Apple is headed for more gains ahead.
Most Recent Earnings Report Data
As was the case with both NVIDIA and Amazon.com, Apple’s most recent earnings report shattered expectations and set the stage for tremendous growth ahead. The company’s most recent report was released in late January, representing the company’s performance in the first quarter of its 2021 fiscal year.
- EPS. In the fiscal first quarter, Apple generated earnings of $1.68 per share. Analysts projected that the company would produce earnings of $1.41 per share.
- Revenue. Analysts expected revenues to come in around $103.28 billion. However, Apple actually produced first quarter revenue of $111.44 billion, shattering analyst expectations and representing 21% year-over-year growth.
- Guidance. For the fourth quarter in a row, Apple declined to produce guidance. The company cited uncertainties surrounding the COVID-19 pandemic as the reason guidance was not available.
Pro tip: Before you add any stocks to your portfolio, make sure you’re choosing the best possible companies. Stock screeners like Stock Rover can help you narrow down the choices to companies that meet your individual requirements. Learn more about our favorite stock screeners.
4. Alibaba (NYSE: BABA)
Even in the United States, the name Alibaba has a fair share of brand recognition. The Chinese tech company was founded in 1999 as a business-to-business website. Through the platform, small Chinese manufacturers gained access to resellers and exporters in major cities. This original core business led to the conglomerate that is Alibaba today.
As Amazon is the e-commerce giant of the United States, Alibaba holds the crown in China. However, the company is far from a one-trick pony.
Seeing an opportunity in not only online retail, but also brick-and-mortar retail, Alibaba drew from its success in the e-commerce space to build out a network of brick-and-mortar shopping centers and grocery stores across China. Seeing success in this new venture, it branched out even further.
One of the fastest-growing businesses within Alibaba is its film, television, and video streaming service, sold under the name Youku. Youku is one of the most popular streaming platforms in China and is often considered to be the YouTube of the region. At the moment, there are more than 500 million monthly active users that produce more than 800 million video views on the platform daily.
Alibaba intends to further expand its Youku property too. The company recently signed a partnership deal with the Premier League’s Manchester United Soccer Club, the most popular sports team in the world according to Kiplinger.
As if all of this wasn’t enough to excite investors about Alibaba, it’s also the largest cloud-computing company in China. The company offers cloud-computing infrastructure, an intuitive platform, and a full suite of financial and database applications.
Tech investors know the cloud-computing space can become a margin-making machine, as investors saw with Amazon Web Services. Should Alibaba’s cloud-computing business follow along the same lines, it has the potential to drum up serious profits very quickly.
Even with tremendous growth in the company’s share price year to date, Alibaba remains highly undervalued. Headwinds associated with the trade war between the United States and China are believed to have had a negative effect on the recent price of the stock. However, these headwinds may be coming to an end with Joe Biden in the White House and Democrats in control over Congress and the Senate.
Most Recent Earnings Report Data
Alibaba’s most recent earnings report was also impressive, beating analyst earnings expectations. The report reflected the company’s performance in the company’s fiscal third quarter.
- EPS. Earnings per share came in at 22.03 yuan (about $3.39), beating analyst expectations of 21.07 yuan.
- Revenue. Revenue came in at 16.11 billion yuan for the third fiscal quarter. Analysts expected that the company would produce 16.69 billion yuan. While revenue missed expectations, year-over-year growth came in at an impressive 50%.
- Guidance. Alibaba did not make guidance available on its most recent earnings report.
5. Alphabet (NASDAQ: GOOG | GOOGL)
Alphabet has seen impressive growth over the last year and is expected to continue on the upward trend. You may know the company as Google, a name that has become synonymous with tech. Like many digital conglomerates, Alphabet started with cutting-edge technology. It’s search engine made the answer to any question available at the tips of consumers’ fingers. The technology took off.
Soon, Google wasn’t just the name of a company, it was a verb; if you don’t know the answer to a question, you “Google it.” Not only was Google the pioneer in search, it remains the leader of the online search industry. According to Statista, Google controlled 86.86% of the global online search market share as of July 2020.
Although Alphabet is best known for its Google search engine, it’s far from a one-trick pony. In fact, the company changed its name from Google to Alphabet because the term Google no longer described everything the company did. Over the years, the company has purchased so many subsidiaries that it had to change its name to describe its work.
With all-but-complete control over the search industry and several revenue generating subsidiaries covering nearly every corner of the technology industry from medicine tech to robotics, Alphabet is a high-quality stock that’s hard to ignore.
Most Recent Earnings Report Data
In its fourth quarter earnings report issued in early February, Alphabet beat analysts expectations on both the top and bottom line.
- EPS. Analysts expected that the company would generate earnings of $15.90 per share. The company actually reported earnings of $22.30 per share.
- Revenue. Revenue came in at $56.90 billion. Analysts only expected the company to generate revenue of $53.13 billion.
- Guidance. Unfortunately, Alphabet didn’t issue guidance. However, management pointed to continued growth in their earnings report.
6. Microsoft (NASDAQ: MSFT)
Microsoft is one of the world’s most widely recognized software companies. The company’s flagship product, Microsoft Windows, is a dominant player in the operating system space, controlling 76.56% of the market, according to Statista.
But Windows is not the only blockbuster product out of Microsoft. If you do just about anything on computers, you likely know about Microsoft Word, PowerPoint, Excel, Outlook, and a long list of other products under the company’s Office suite.
The fact that Microsoft’s products are market-leading offerings is impressive, but what’s more impressive is the pivot the company made when Satya Nadella took over as CEO in 2014.
Previously, Microsoft’s software was available on discs. Today, Microsoft has made the shift to software as a service (SaaS). Using its own cloud computing technology, these market-leading products are now available as web-based applications by subscription.
This was a major shift for two reasons:
- Cost. There’s a cost involved in manufacturing discs, packaging, and educational materials in the physical world. However, offering software through the cloud greatly expands margins because there’s no need to run a factory to manufacture disks, booklets, and boxes. Ultimately, moving to the SaaS model led to substantially increased profitability on its flagship products.
- Residual Income. Previously, a consumer could purchase the Microsoft Office suite and use the program for years. Sure, Microsoft offers an updated version of its software annually, but most consumers didn’t see a need to upgrade until their suite was years behind the curve. Now, Microsoft earns monthly residual income from subscriptions, which automatically renew and keep users on the latest version.
While software is a huge part of what Microsoft does, it’s not the only offering the company has. Microsoft Azure, the company’s cloud service, is taking off like a rocket, driving substantial revenues with high margins. According to Kinsta, Microsoft Azure controls about 15.5% of the cloud computing market, and its market share is growing.
All told, when it comes to software as a service and cloud computing, Microsoft is leading the charge. Considering the company’s dominance throughout its history and continued innovation to maintain its lead, Microsoft will likely continue to grow, making it one of the best tech stocks to watch.
Most Recent Earnings Report Data
Microsoft’s most recent quarterly earnings report surrounded the company’s performance during the second fiscal quarter of 2021, a quarter in which the company was firing on all cylinders. Here’s the data:
- EPS. Microsoft reported second quarter earnings of $2.03 per share, beating analyst expectations of $1.64 per share by a wide margin.
- Revenue. Revenue for the quarter came in at $43.08 billion. Analysts expected that Microsoft would only generate revenue in the amount of $40.13 billion.
- Guidance. Microsoft offered guidance for the third quarter on its conference call, breaking revenue down by sector. In productivity and business processes, the company expects to generate between $13.5 and $13.6 billion; in dynamics, revenue is expected to be between $14.7 and $14.95 billion; and personal computing is expected to drive between $12.3 and $12.7 billion. While Microsoft didn’t provide guidance for Azure or Office for Consumers, the company did say that it expects for growth in these segments to continue.
Consider Tech ETFs
Investing in individual stocks can be a daunting task. The most successful investments are made after thorough research, which takes time and a detailed understanding of the industry in which you’re investing.
However, there is a way to gain diversified exposure to the tech sector as a whole. Simply invest in tech-focused exchange-traded funds (ETFs). Tech ETFs are a great option for a novice investor or if you simply don’t have the time to do adequate research on multiple individual stocks.
When looking for the best technology stocks to buy, it’s important to look for stocks that represent companies at the forefront of innovation in their sector. As technology continues to make lives easier for everyone, those who continuously stay ahead of the curve will also continue to produce tremendous profits for investors.
Of course, investing is anything but an exact science. In this world, your opinion is just as valuable as mine, as neither one of us can see into the future. As such, it’s important to keep in mind that investing always comes with risk. Always do your research before risking your hard-earned money.
Disclosure: The author currently has no positions in any stock mentioned herein nor any intention to hold any positions within the next 72 hours. The views expressed are those of the author of the article and not necessarily those of other members of the Money Crashers Team or Money Crashers as a whole. This article was written by Joshua Rodriguez, who shared his honest opinion of the companies mentioned. However, this article should not be viewed as a solicitation to purchase shares in any security and should only be used for entertainment and informational purposes. Investors should consult a financial advisor or do their own due diligence before making any investment decision.