The tech industry is expanding rapidly as advances in chips and artificial intelligence (AI) unlock the potential for countless other sectors.
The tech market is known for its wealth of growth stocks, with many companies profiting from consistent innovation. In fact, over the last decade, the Nasdaq-100 Technology Sector index has climbed 325%. Comparatively, the Nasdaq Composite increased by 219% in the same period.
With the power of AI and other high-growth areas, the tech market has massive potential over the next 10 years. So it’s not a bad idea to invest in a few of the industry’s key players and benefit from their long-term development.
Here are two of the smartest tech stocks to buy in 2023 and beyond.
1. Alphabet: Home to the world’s two most visited sites
As the fourth most valuable company in the world by market cap, Alphabet (GOOG -0.36%) (GOOGL -0.30%) has a history of offering stockholders reliable growth. It’s the biggest name in the $680 billion digital advertising market, responsible for a leading 25% market share.
Its dominance in the industry is primarily thanks to the immense user bases of Google and YouTube, the first and second most visited websites globally. Alongside Android and the many other services under Google, Alphabet has created endless advertising opportunities.
The company faced challenges last year as macroeconomic headwinds caused reductions in ad spending. However, Alphabet has come back strong this year, hitting revenue growth of 11% year over year in its third quarter of 2023. The rise was mainly driven by increased sales in Google Search and YouTube.
Despite the overall positive results, misses in Google Cloud’s growth have sent Alphabet shares tumbling nearly 12% since Oct. 24. Wall Street has pulled back as the company appears to be losing steam to cloud giants Microsoft and Amazon.
However, the stock dip has only made Alphabet shares more attractive as a long-term investment. The chart above shows that Alphabet’s price-to-earnings ratio is the lowest among the “Big Five” of tech, making its stock a bargain right now.
The company may face challenges in the cloud market, but it’s important to remember that more than 80% of its revenue still comes from advertising, which has flourished this year. As a result, Alphabet could be one of the smartest tech stocks to buy right now.
2. Nvidia: A stellar growth year
In 2023, Nvidia (NVDA -0.93%) easily had one of its best years in business since its founding 30 years ago. The company’s stock has skyrocketed about 176% year to date, mirroring its climb to the top of the AI market. Nvidia’s years of dominating the graphics processing unit (GPU) market perfectly positioned it to snap up market share in AI, with the chips a critical part of developing AI models.
The tech giant’s success this year delivered a stellar Q2 2024 (ending July). Revenue soared 101% year over year during the quarter after a 171% rise in its data center segment.
Meanwhile, operating income increased more than 1,200%, hitting close to $7 billion. Nvidia significantly profited from a spike in demand for GPUs as countless companies pivoted their businesses to AI.
Nvidia might not deliver the same growth next year as competing chipmakers like Advanced Micro Devices and Intel release new GPUs. However, Nvidia’s head start in the industry has seen it gain an estimated 90% market share in AI chips, which will make it challenging to dethrone.
The tech giant’s recent quarter has proven how profitable AI can be. Nvidia likely has a lucrative future ahead, and Wall Street seems to agree. The company’s average 12-month price target is $641, which would deliver stock growth of nearly 60%.
Nvidia still has a lot to offer new investors, making it an excellent option this year.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2023 $57.50 calls on Intel and long January 2025 $45 calls on Intel. The Motley Fool has a disclosure policy.