Best tech stocks of April 2024

Wayne Duggan

BLUEPRINT

Updated 9:02 a.m. UTC April 26, 2024

Editorial Note: Blueprint may earn a commission from affiliate partner links featured here on our site. This commission does not influence our editors' opinions or evaluations. Please view our full advertiser disclosure policy.

The best tech stocks provide long-term growth without the risks typically associated with Silicon Valley startups. They have reasonable valuations and generate consistent profits.

“Big Tech should not be lumped together and investors would be wise to separate the sector by industry group and focus on those that can deliver consistent earnings into a contracting economy,” said James Demmert, chief investment officer at Main Street Research.

We selected the best tech stocks of 2024 based on earnings expectations, positive net income in at least four of the past five years, large market capitalization and a “buy” consensus among analysts.

What you should know

Broadcom is a diversified semiconductor company that designs, develops and supplies a range of analog semiconductor devices. Broadcom supplies chips for data centers, broadband, wireless, networking, storage, and industrial markets.

Broadcom is highly exposed to the smartphone market, and Apple (AAPL) accounted for about 20% of the company’s revenue in fiscal 2022. However, Broadcom has been investing in diversifying its business in recent years, including acquiring network gear maker Brocade in 2017, software company CA Technologies in 2018 and the enterprise security business of Symantec in 2019. Broadcom is also in the process of acquiring cloud software company VMware (VMW) for $61 billion, but that deal has faced intense regulatory scrutiny. Broadcom reported 8% net revenue growth in the fiscal second quarter.

Pros and cons

Pros

A ramp-up of global 5G networks should generate higher demand for radio frequency device content.
It is highly exposed to large, high-growth data centers and cloud computing markets.
An aggressive acquisition strategy has diversified the business away from core semiconductor sales.

Cons

Significant revenue loss potential if Apple pursues its plan to drop Broadcom as a supplier.
Apple and other large customers can exert pricing leverage, compressing margins.
Optical networking and enterprise storage end markets limit visibility and create financial volatility.

More details

What you should know

ASML produces photolithography systems and other semiconductor processing equipment used in semiconductor fabrication. The company’s extreme ultraviolet lithography machines allow semiconductor companies to produce smaller, more efficient and powerful chips used for advanced applications such as machine learning, artificial intelligence and autonomous vehicles.

As semiconductor designs grow more complex over time, ASML’s EUV lithography technology will become even more essential to customers like Taiwan Semiconductor Manufacturing Company (TSMC), creating an attractive long-term growth opportunity for ASML investors. ASML recently guided more than 30% revenue growth in 2023.

Pros and cons

Pros

Market leader in advanced semiconductor photolithography.
The complexity of lithography tools helps insulate ASML from the competition.
ASML has steadily improved efficiency and profitability throughout semiconductor market cycles.

Cons

Dependence on Taiwan Semiconductor Manufacturing Co. and a handful of other buyers increases the risks of losing customers.
Reliance on key international suppliers exposes ASML to supply chain bottlenecks.
Delays in EUV lithography technology development could lead to wafer fabrication equipment market share loss.

More details

What you should know

Salesforce is the largest provider of customer relationship management software and operates a cloud-based Software-as-a-Service (SaaS) model. Salesforce’s CRM software includes data visualization, automation, analytics, marketing, enterprise communication and e-commerce tools.

In fiscal year 2023, Salesforce reported 18% revenue growth and a record $7.1 billion operating cash flow, up 19% year over year. Salesforce recently announced a restructuring plan to improve operating margins over the next two years, a program that could potentially kick Salesforce’s profitability and stock price to the next level. Salesforce is also doubling down on its share repurchase program increasing it to $20 billion, according to the company’s March announcement.

While Salesforce’s spectacular growth finally seems to be slowing, its pivot to gross margin expansion should maintain impressive earnings growth for years to come.

Pros and cons

Pros

Leading market share in sales management automation, a market that has significant long-term growth potential.
Several noncore growth opportunities, including customer service, e-commerce and marketing automation.
Focus on margin expansion and profitability could accelerate earnings growth even as sales growth slows.

Cons

Increasing competition from Oracle, Microsoft and other tech companies.
Integration and execution risks associated with past and future acquisitions, including its deal for Slack.
Shifting in focus to profitability may suggest the company anticipates further revenue growth slowdowns in coming years.

More details

What you should know

Cisco Systems designs and sells a diversified portfolio of networking, security, collaboration, application and cloud computing technologies. The company’s largest segment is its secure and agile network business, which includes its switches, routers and networking hardware.

In August, Cisco reported 16% year-over-year revenue growth in the fiscal fourth quarter, including 5% growth in total annualized recurring revenue and 10% growth in product ARR. Total software revenue was also up 17% year-over-year, while software subscription revenue was up 20%. Remaining performance obligations also grew 11% from a year ago.

Cisco is a well-established market leader in enterprise networking, and it should continue to benefit from the rise of hybrid cloud and work environments.

Pros and cons

Pros

Forward earnings multiple of 12.6 suggests little downside valuation risk.
Attractive 3% dividend yield.
Shifting toward a higher mix of software and subscription-based revenue improves financial visibility.

Cons

The core networking market has limited growth opportunities.
Cisco has lost networking and security market share over the past decade.
Cisco is trailing Arista Networks in high-speed, public cloud application market share.

More details

What you should know

SAP is a leading provider of enterprise application software for accounting, supply chain management and CRM. SAP is a global market leader in enterprise resource planning software.

In July, SAP reported that second-quarter cloud revenue was up 19% year-over-year, driven by an impressive 74% SAP S/4HANA cloud revenue growth. In addition, the company said its cloud backlog was up 21% from 2022.

SAP divested its large stake in Qualtrics in June for a profit of 3.2 billion euros. SAP has also successfully migrated over 20,000 customers and half a million tenants to its next-generation harmonized cloud infrastructure.

Pros and cons

Pros

Expecting high-visibility cloud revenue.
Opportunity to extract significantly more lifetime value for customers who have transitioned to cloud services.
Growing scale and cloud offerings provide margin expansion opportunities.

Cons

The COVID-19 pandemic may have a lasting impact on intelligence spending offerings, especially those tied to business travel.
The sale of Qualtrics just five years after its initial acquisition highlights SAP’s questionable capital allocation strategy.
Phase-out of on-premise ERP software support creates risk of customer churn.

More details

Compare the best tech companies

Methodology

Our best tech stocks trade on a major U.S. stock exchange and meet the following criteria:

Consensus analyst recommendation of “buy” or better. A high number of analyst “buy” ratings indicates an expectation the stock will outperform the overall market.
Market capitalization of at least $10 billion. A company with a leading market share and competitive advantages in a sizable industry, will have a market cap greater than $10 billion. Small- and mid-cap tech stocks generally either have too much risk associated with their outlooks or are not operating in an industry with significant long-term growth prospects.
An Altimeter overall grade of at least a B as of May 2023. In selecting the best stocks for this list, we applied a screen, considering only stocks rated a B or better by Altimeter. The overall grade takes into account profitability, earning stability, valuation and earning expectations. Grades of B or higher for both are stocks that are ranked in the top percentile of nearly 5,000 stocks in Altimeter’s stock database. This indicates that these companies have strong valuations with the ability to improve returns.
Positive net income in at least four of the past five years. Many high-growth tech stocks are not profitable, which is a reflection of their unproven business models. We screened for profitability in at least four of the past five years. This type of screen among the selected stocks shows whether the business is consistently profitable despite blips, such as the COVID-19 shutdowns in early 2020.
Forward earnings multiple less than 30. Tech stocks generally have higher valuations than the overall market because of their growth opportunities. While it’s okay for investors to pay more for growth, stocks with forward earnings multiples over 30 are at risk of significant downside in the event of a cyclical economic downturn or a slowdown in revenue growth.

Why other stocks didn’t make the cut

Exciting technology also inspires great enthusiasm among investors, making the tech sector prone to bubbles and unrealistic valuations. The dot-com bubble of the late 1990s is one of the most well-known examples of this type of irrational tech sector pricing. Investors should avoid tech stocks priced at sky-high P/E ratios, price-to-sales (P/S) ratios or price-to-free cash flow ratios.

Investors should typically avoid stocks that trade at excessive price-to-earning multiples such as Tesla (TSLA). The stock’s forward P/E is over 70. A forward P/E is a current stock’s price over its predicted earnings per share. All the stocks selected for this list have a forward P/E of 30 or lower. For example, the forward P/E for SAP is close to 20, givin

Final verdict

The technology sector has plenty of stocks with exciting growth potential and the possibility of generating robust long-term gains for investors. But many of the highest-growth technology companies have not yet demonstrated they can consistently turn a profit, relying heavily on debt and share offerings to fund their growth investments.

One of our top recommendations for best tech stocks is Broadcom, which has a reasonable valuation and a high return on assets compared with its peers. In terms of risk, there are no major flags indicated by Altimeter’s risk assessment tool.

Types of tech stocks

Technology impacts virtually every different part of the economy. Some tech companies specialize in consumer electronics, such as Apple (AAPL), Sony (SONY) and GoPro (GPRO). Others specialize in software infrastructure, such as Microsoft (MSFT), Oracle (ORCL) and Adobe (ADBE).

Semiconductor and semiconductor equipment makers are also popular technology stock investments, including Nvidia (NVDA), Advanced Micro Devices (AMD) and Taiwan Semiconductor Manufacturing (TSM). Other tech industries include communication equipment, computer hardware, electronic components, information technology services, scientific and technical instruments, solar technology and others.

How to invest in tech stocks

Investors who are comfortable with their ability to analyze tech stocks can create a personalized portfolio of individual tech stocks by choosing stocks they believe will outperform their peers. For example, an investor may choose to buy shares of our five best tech stocks included above. However, before buying shares of any individual tech stock, ensure you fully understand the company's business and financial metrics and are comfortable using basic fundamental valuation strategies. In addition, individual tech stock investors can reduce risk by diversifying their investments into a large number of stocks rather than concentrating on only a few.

Investors can also invest in tech stocks via technology exchange-traded funds, such as the Technology Select Sector SPDR Fund (XLK). These tech ETFs provide an easy way for investors to add diversified exposure to dozens or even hundreds of tech stocks at a time. But while tech stock ETFs help reduce the risks associated with individual tech stocks, they also limit the upside investors can experience if they focus their investment on a handful of top-performing companies. Tech stock ETFs also charge management fees in the form of expense ratios that can eat into returns over time.

Pros and cons of tech stocks

Tech stocks have a strong track record of outperforming the overall S&P 500 index, but they also come with a unique set of risks.

Tech Stock Pros:

Sector performance. In the past 10 years, the Technology Select Sector SPDR (XLK) exchange-traded fund has generated a higher return than the S&P 500.
Diversification. Because technology is utilized in so many ways, it's possible to construct a portfolio of tech stocks that aren't highly correlated.
Revenue growth. The technology sector is known for its growth stocks, increasing the potential long-term upside for investors.

Tech Stock Cons:

Valuations. Many tech stocks trade at extremely high valuations based on profitability and sales.
Volatility. The tech sector is known for its volatility and is often among the hardest hit during market downturns.
Dividends. While some tech stocks pay generous dividends, they are not typical for stocks in this sector.

Frequently asked questions (FAQs)

Yes, high-quality tech stocks with sound financial fundamentals and reasonable valuations are as safe as any top stocks from any other market sector.

Higher interest rates aren’t inherently bad for all tech stocks. But rising interest rates tend to negatively impact the valuations of high-growth stocks, many of which are in the tech sector.

Analysts often use discounted cash flow models to value growth stocks, and these models assign less value to future cash flows when the discounted interest rate is higher.

The technology sector has produced some of the best-performing stocks in history, including Apple, Microsoft and Nvidia.

To avoid the volatility and risks often associated with tech stocks, long-term investors should maintain a diversified investment portfolio and focus on profitable, high-quality tech stocks with attractive business fundamentals.

The so-called “big seven” tech stocks are Apple (AAPL), Microsoft (MSFT), Nvidia (NVDA), Tesla (TSLA), Alphabet (GOOGL), Amazon (AMZN), and Meta Platforms (META). While these stocks heavily rely on technology at the core of their businesses, Tesla and Amazon are technically classified as consumer discretionary stocks and Meta and Alphabet are included in the communications services sector.

Editor’s Note: This article contains updated information from previously published stories:

Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.

Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.

Wayne Duggan

BLUEPRINT

Wayne Duggan is a regular contributor for Forbes Advisor and U.S. News and World Report and has been a staff writer for Benzinga since 2014. He is an expert in the psychological challenges of investing and frequently reports on breaking market news and analyst commentary related to popular stocks. Some of his prior work includes contributing news and analysis to Seeking Alpha, InvestorPlace.com, Motley Fool, and the Lightspeed Active Trading blog. He’s the author of the book "Beating Wall Street With Common Sense," which focuses on practical investing strategies to outperform the stock market. He resides in Biloxi, Mississippi

Farran Powell

BLUEPRINT

Farran Powell is the lead editor of investing at USA TODAY Blueprint. She was previously the assistant managing editor of investing at U.S. News and World Report. Her work has appeared in numerous publications including TheStreet, Mansion Global, CNN, CNN Money, DNAInfo, Yahoo! Finance, MSN Money and the New York Daily News. She holds a BSc from the London School of Economics and an MA from the University of Texas at Austin. You can follow her on Twitter at @farranpowell.