Last year witnessed a resounding victory for many tech stocks, with a remarkable turnaround from the downturn experienced in 2022. The tech-centric Nasdaq Composite closed the year with a 43% surge, outperforming both the S&P 500 and Dow Jones indices.
Despite the overall success of tech stocks in 2023, there are specific stocks that remain appealing for investment. The following three tech stocks have the potential to be long-term gems in investors’ portfolios.
The Powerhouse: Taiwan Semiconductor Manufacturing Company
Taiwan Semiconductor Manufacturing (NYSE: TSM) may not enjoy household-name status like other tech giants, but it plays a pivotal and, underrated, I’d argue, role in the tech ecosystem. TSMC is the globe’s largest semiconductor (chip) foundry.
Semiconductor chips serve as the brains of many modern electronics. TSMC’s chips are integral to smartphones, car infotainment systems, GPUs, and numerous other consumer electronics. Companies such as Apple, Tesla, and Nvidia rely on TSMC for their top-of-the-line chips.
TSMC’s 2023 stock rebound can be partly attributed to the surge in artificial intelligence (AI) excitement. While TSMC itself may not directly engage in AI, many of the companies that rely on its chips (such as Nvidia and Advanced Micro Devices) do.
Setting the AI hype aside, there is promising news that the smartphone and PC markets are expected to rebound in 2024 after facing a slump in the past couple of years. TSMC’s chips for AI-related companies have garnered recent attention, but smartphones and other high-performance computing needs still constitute the majority of its revenue. A resurgence in these sales is expected to pave the way for renewed revenue growth.
There are numerous prominent semiconductor companies, however, none possess the technological prowess to rival TSMC’s chipmaking expertise. It’s a company that exudes long-term staying power.
Microsoft: A Force to be Reckoned With
After a staggering surge of nearly 62% in 2023 and boasting the leading market cap of over $2.9 trillion (as of Jan. 18, 2024), Microsoft (NASDAQ: MSFT) recently overtook Apple as the world’s most valuable public company. Microsoft, arguably the original tech company powerhouse, has recently positioned itself once again at the forefront of market dominance.
Microsoft’s diversified portfolio spans enterprise and consumer software, cloud computing, gaming, and AI, making it a major player in multiple industries, as is evident from its financial performance.
All three of Microsoft’s broad business segments experienced revenue growth year over year in the first quarter of its fiscal year 2024 (ended Sept. 30, 2023). Its Intelligent Cloud segment, encompassing revenue from its cloud platform Azure, led the charge, with a 19% year-over-year growth to $24.3 billion.
Azure has witnessed a consistent expansion of its market share over the years. Although it still has ground to cover to catch up with leader Amazon Web Services (AWS), the growth thus far has been highly encouraging.
Investors will find solace in the fact that Microsoft’s reliance on any single segment is well balanced, making it a well-rounded tech behemoth poised to yield substantial value for shareholders.
CrowdStrike: Riding the Cybersecurity Wave
Cybersecurity company CrowdStrike (NASDAQ: CRWD) has taken investors on a rollercoaster ride since its initial public offering in June 2019. After debuting at $34 per share and soaring to over $280 by August 2021, the stock slumped to $94 in January 2023 and experienced a spectacular 142% surge in 2023, currently hovering near its all-time peak.
CrowdStrike has been at the forefront of AI-native cybersecurity solutions, and its 2023 gains align with the overall performance of other AI-focused industry leaders. However, the success of CrowdStrike’s business transcends mere hype. In the third quarter of its fiscal 2024 (ended Oct. 31, 2023), it raked in $786 million in revenue, marking a 35% year-over-year increase.
Of notable importance, CrowdStrike’s annual recurring revenue (ARR) exhibited a similar 35% year-over-year growth to $3.1 billion, with an additional $223.1 million accrued in the quarter. For a subscription-based enterprise like CrowdStrike, ARR serves as a better indicator of long-term financial stability as it reflects predictable income and provides insights into customer retention.
Despite anticipated volatility, CrowdStrike appears to be positioned as a long-term champion in the cybersecurity arena perpetually withstanding the shifting tides of the industry.