In this article, we’re going to talk about the 10 best-emerging tech stocks to buy now.
Tech Industry’s Dominance is Here to Stay
Despite the recent market volatility of September, tech stocks remain a promising investment opportunity due to their strong earnings, potential for growth driven by AI capex investments, and solid financial fundamentals.
While quite a few analysts think it’s essential to diversify your portfolio away from tech to manage risks, especially in the middle of such a fluctuating market, the sector offers significant potential for long-term sustainable returns.
We recently covered UBS Global Wealth Management head of Americas Asset Allocation Jason Draho’s opinion in another article, 10 Best Tech Stocks To Buy Right Now Under $10. He thinks that while a balanced portfolio is essential for consistent long-term gains, tech stocks should not be shied away from for the rest of 2024. Here’s an excerpt from that article:
“While he’s optimistic about the technology sector, he acknowledged that the volatility will likely persist due to concerns about export controls and AI monetization. However, several factors make this sector attractive for the rest of the year. First, companies reported strong earnings results, although they may not be as spectacular as desired. Second, the AI capex investment story has potential upside for next year. Third, from a portfolio perspective, these companies are high-quality with solid earnings and balance sheets.
He thinks that this market volatility is acyclical. The recent sell-off in the tech sector was not primarily due to economic concerns but rather to sector-specific issues. Despite this, tech giants will continue to benefit from the AI capex investment story. While there may be short-term challenges, the long-term outlook for these companies remains positive. Focusing on the tech sector, rather than the broader MAG 7, is a better strategy for investors seeking to capitalize on the AI boom.”
Just last week, Mad Money host and former hedge fund manager Jim Cramer discussed his perspective on investing in Big Tech stocks during market downturns.
He believes that major technology firms, which are integral to ongoing robust trends like data centers and accelerated computing, should be viewed as attractive buying opportunities when the market weakens, instead of the opposite sentiment. So, when markets face a pronounced slow growth, tech stocks, particularly the large-cap leaders, are something to invest in, not divest from.
Cramer pointed out that September is historically the weakest month for the market, with consistent profit-taking. But, he sees this as a circular argument rather than a sign of an economic downturn. He believes the broader selling pressure in September is due to tech stocks meeting but not exceeding expectations.
On Wednesday, Chris Verrone, a strategist at Macquarie, in a discussion about buying financial stocks when they enter an oversold condition, also talked about the underperformance of the tech sector, especially the larger, established companies due to their perceived status as bond substitutes.
Verrone suggested that rate cuts could boost cyclical sectors, but experience shows mixed results. While tech has been a leader, other sectors like consumer discretionary and staples have also shown strength.
He believes that the market’s leadership changes are due to long-term planning. He notes that larger tech companies might be struggling because they are perceived as safer investments, similar to bonds. According to him, financials have performed well this year and are a potential investment opportunity, especially given their current oversold state. However, the financial sector typically performs better in the late fall.
As experts continue to view tech as a buying opportunity during market weakness, we are here with a list of 10 best-emerging tech stocks to buy now.
Methodology
To compile our list, we used the Finviz stock screener to screen for technology companies with a market cap between $250 million and $1 billion. We then selected 10 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q2 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
10 Best Emerging Tech Stocks to Buy Now
10. A10 Networks Inc. (NYSE:ATEN)
Market Capitalization as of September 11: $962.53 million
Number of Hedge Fund Holders: 23
A10 Networks Inc. (NYSE:ATEN) is a leading provider of cybersecurity and infrastructure solutions for enterprises and service providers, specializing in the manufacturing of application delivery controllers for on-premises, multi-cloud, and edge-cloud environments. It helps businesses protect their networks, applications, and data from cyber threats while ensuring optimal performance and availability.
Management reported that the North American market for service providers has been and is still uncertain. However, the quarter-to-quarter volatility in the North American service provider sector continued to be high offset by improvements in the Enterprise segment. Revenue from enterprise customers increased by 25%, which offset the 25% decline in revenue from service providers.
The second quarter revenue was $60.10 million, a decrease of 8.69% year-over-year. Product revenue was $29.5 million (49% of total revenue, and services revenue was $30.6 million (51% of total revenue). Recurring revenue for Q2 increased 11% year-over-year and deferred revenue increased 6%. The revenue from service providers outside of North America was up 20% in Q2.
On July 30, the company disclosed that it had recently won a large deal with a major digital communications technology company. Such expansions are great for building investor trust. 23 hedge funds are long in the company, with the highest stake amounting to $31,614,467 by Renaissance Technologies.
As bad actors are increasingly using AI now, A10 Networks Inc. (NYSE:ATEN) is developing a new technology (AI-based solutions) to protect against these threats, including predicting network performance and addressing new threats from AI network traffic.
The company has a strong competitive position and is well-positioned for long-term growth. Despite short-term challenges in the North American Service Provider market, it is making progress in the Enterprise segment. It is one of the top emerging stocks to look into.
Richie Capital Group made the following comment about A10 Networks, Inc. (NYSE:ATEN) in its Q1 2023 investor letter:
“A10 Networks, Inc. (NYSE:ATEN)(ATEN down -11.1%) – The provider of cybersecurity and infrastructure solutions for on-premises, cloud and edge environments traded down during the quarter despite recording a record fourth quarter and full year revenue. The company still faces some challenges as they transition from a hardware focus to becoming software centric. Investors were likely concerned with ATEN’s negative growth in their enterprise segment. Despite near term headwinds, we view the company as an attractively priced cybersecurity market leader with attractive margins and high returns on capital. The company continues to outpace their peers in the Application Delivery Controller (ADC) market and expects double digit earnings growth for the full year 2023.”
9. Unisys Corp. (NYSE:UIS)
Market Capitalization as of September 11: $359.87 million
Number of Hedge Fund Holders: 23
Unisys Corp. (NYSE:UIS) is a global information technology services and consulting company that specializes in helping businesses modernize their IT infrastructure, improve their operations, and enhance their customer experiences. It offers solutions in cybersecurity, cloud computing, application modernization, and digital transformation.
A lot of customers are turning to Unisys Corp. (NYSE:UIS) for help with their IT needs. There was a recent large deal with a public sector client in Australia to provide IT support, manage their infrastructure, and provide security and network services for ~6000 end users.
For the first half of 2024, the new business pipeline with existing clients, which consists of new scope and expansion, was up 7% sequentially. Clients are becoming more and more interested in AI, and the company is helping them use AI effectively. There’s also an increased demand for data services, which are essential for AI.
The company had strong sales in Q2 2024, with total TCV increasing by 19% year-over-year, driven by new business signings, which increased by 64% year-over-year. It signed more new deals in both CA&I (cloud and infrastructure) and DWS (digital workplace solutions) segments. Many deals include a combination of traditional and modern workplace solutions.
The overall second-quarter revenue was $478.20 million, an increase of 0.29% year-over-year. DWS revenue was $132 million, a 2.2% decline compared to the prior year period. CA&I revenue was $134 million, an increase of 1.3% compared to the prior year period.
The company has demonstrated strong financial performance, thanks to CA&I and DWS segments, and is well-positioned for continued growth. The recent signings of new logos and framework agreements indicate a promising future. It is held by 23 hedge funds. The largest stake is valued at $7,344,066 by D E Shaw.
Miller Value Partners made the following comment about Unisys Corp (NYSE:UIS) in its Q1 2020 investor letter:
“During the quarter, we only had one holding Unisys (UIS), generate positive returns. Unisys successfully completed the sale of their Federal business for $1.2B in cash, a very accretive valuation level compared to the overall business (1.75x revenue and 13x EBITDA). Proceeds from the transaction are being used to retire outstanding unsecured debt and $600M will be deployed against pension obligations, allowing the U.S. pension to be more than 80% funded providing greater flexibility for future contributions. Unisys’s enterprise business remains attractively positioned and below normalized margins. Management is successfully growing the business and achieving its 12% long-term operating margin target over the next couple of years would support normalized earnings in excess of $2.50/share. Significant upside remains in the shares and we believe Unisys market price has the potential to exceed $25/share over the next couple of years.”
8. Xperi Inc. (NYSE:XPER)
Market Capitalization as of September 11: $396.26 million
Number of Hedge Fund Holders: 23
Xperi Inc. (NYSE:XPER) is a multinational technology company that develops software for consumer electronics and connected cars, as well as media platforms for video service over broadband. It offers solutions in areas such as audio, video, and imaging technologies.
The company has 3 key growth areas: connected TV advertising, in-car entertainment, and video-over-broadband. Management believes that these markets will double in size over the next 5-7 years. The goal is to have 20 million monetizable endpoints by the end of 2025.
This includes 7 million devices connected to the platform by that time, 3 million IPTV households using the video-over-broadband solution, and DTS AutoStage in 10 million cars. These 20 million devices could generate nearly $200 million in additional revenue by 2026.
Total revenue for the second quarter of 2024 was approximately $119.59 million, down 5.74% from last year’s reported revenue. Pay TV, the largest revenue category, was up 5%. The Q2 increase was primarily driven by IPTV growth, which was up 45% year-over-year.
The loss per share was $0.67 and consumer electronics revenue declined by 40% due to large deals last year. Connected Car revenue increased by 41% due to a multi-year deal with an Asian automotive supplier. Media platform revenue declined by 25% due to a decline in advertising revenue.
Panasonic announced that they are Xperi Inc.’s (NYSE:XPER) sixth TiVo OS partner. Panasonic smart TVs powered by TiVo are now available in Europe. The company also signed a deal with a top 5 supplier of smart TVs in the US market (launch in next spring). Today, smart TVs powered by TiVo are available in 15 countries across Europe, including the largest economies under 17 different brands.
Xperi Inc. (NYSE:XPER) has successfully transformed its business, streamlining its product portfolio and improving its operations. These strategic initiatives have positioned the company for long-term growth and profitability. It is held by 23 hedge funds currently.
7. Adtran Holdings Inc. (NASDAQ:ADTN)
Market Capitalization as of September 11: $410.41 million
Number of Hedge Fund Holders: 24
Adtran Holdings Inc. (NASDAQ:ADTN) is a fiber networking and telecommunications company that provides networking solutions, primarily focused on serving the needs of broadband access networks. Products and services include broadband access equipment, customer premises equipment (CPE), and software solutions.
Q2 2024 revenues of $225.99 million were similar to that of Q1 2024 revenues and slightly above the midpoint of the company’s guidance, but overall, it was down 30.97% year-over-year. The loss per share was $0.24. This was despite the reduction of $34.2 million in inventories compared to Q1.
International revenues made up 52.4% of total revenues and domestic revenues contributed 47.6%. The company’s network solutions segment accounted for 79.3% of revenues in Q2 2024, but overall revenue was well-balanced across 3 segments: Subscriber Solutions (36.5%), Access and Aggregation solutions (30.9%), and Optical networking solutions (32.6%).
While Subscriber Solutions was up 0.9% year-over-year, Access & Aggregation revenue was down 31.9% year-over-year, and the optical networking solutions were down 48.5%. Growth in the US was offset by declines in shipments to large European customers.
In Europe, the company sees opportunities with large operators. In the US, it’s focusing on small to mid-size operators. It added 12 new Fiber-to-the-Prem customers and 16 new customers for its SDG in-home platforms. Adtran Holdings Inc. (NASDAQ:ADTN) has also invested in WiFi 6 and WiFi 7 platforms, along with Intellifi cloud-managed WiFi solutions, and won 11 new deals with existing customers for optical transport and networking solutions.
The company won 11 new deals with existing customers for optical transport and networking solutions and is growing enterprise and ICP customers. It recently launched new products and made enhancements to the Optical network automation capabilities, positioning it to take advantage of the growing fiber networks in Europe. 24 hedge funds hold long positions in Adtran Holdings Inc. (NASDAQ:ADTN).
6. Methode Electronics Inc. (NYSE:MEI)
Market Capitalization as of September 11: $349.33 million
Number of Hedge Fund Holders: 24
Methode Electronics Inc. (NYSE:MEI) is a global manufacturer of electronic components and interconnect systems with engineering, manufacturing, and sales operations in more than 35 locations in 14 countries, employing ~4,566 people worldwide. It designs, manufactures, and distributes a range of products, like connectors, switches, and sensors, across industries like automotive, medical, consumer electronics, and industrial.
The company focuses greatly on meaningful expansions. In fiscal 2025, it has over 30 program launches planned. And in fiscal 2026, there are another 20 programs to launch. Such moves improve investor sentiments as well. 24 hedge funds hold a total of 1,548,283 shares in the company as of June 30. The largest stake amounted to $16,024,729 by D E Shaw.
The first quarter of the new fiscal year 2025 recorded $258.50 million in revenue. This represents a 10.77% year-over-year decline. The loss per share was $0.31. This drop was mainly due to the roll-off of a previously disclosed EV lighting program in the company’s Auto segment. EV related sales still made up 18% of the total revenue.
The company is focused on launching several new EV programs with Stellantis, which will help offset the decline from other programs. Management expects sales to remain flat in 2025 but grow in 2026.
Despite challenges, the new CEO, Jon DeGaynor, is confident in Methode Electronics Inc.’s (NYSE:MEI) ability to improve its operations and capture value-creation opportunities, positioning it for long-term success.
Here is what Heartland Value Plus Fund has to say about Methode Electronics, Inc. in its Q1 2021 investor letter:
“The portfolio’s IT holdings boosted results and we continue to find opportunities in a variety of industries in the space. Methode Electronics, Inc. (MEI) is a manufacturer of electronic controls and components primarily for the automobile and industrial end markets and is an example of the type of business we favor.
Shares of Methode advanced nearly 10% during the period following management reporting solid quarterly results and a robust sales forecast for 2022 along with improving margins.
The company offers an attractive mix of steady revenue from an established core business and rapid growth from its electric/hybrid vehicle, which may see sales double within the next year. Additionally, Methode’s management team has been aggressive in paying down debt and has optimized costs following recent acquisitions.
With Methode shares trading at 7.5x estimates of 2022 EV/EBITDA, we believe the company is an attractive opportunity to capture growing cash flows at a price that could mitigate downside risk.”
5. Applied Optoelectronics Inc. (NASDAQ:AAOI)
Market Capitalization as of September 11: $532.93 million
Number of Hedge Fund Holders: 25
Applied Optoelectronics Inc. (NASDAQ:AAOI) is a leading provider of optical components and modules for high-speed optical communications networks (telecom, FTTH, sensing, data center, wireless, and cable access industries). It manufactures a range of products, including transceivers, lasers, and optical subassemblies for various applications like in metro networks, and long-haul communications.
Applied Optoelectronics Inc. (NASDAQ:AAOI) generated $43.27 million in revenue for the second quarter of 2024, a 3.98% year-over-year improvement. The revenue for data center products of $34.4 million was up 25% compared to the same quarter in the prior year. Revenue for the 100G products increased 21%, and that for 400G products doubled in the same period.
However, revenue in the CATV segment was $5.8 million, which was down 38% year-over-year, driven by continued slow sales of DOCSIS 3.1 equipment.
The company just recently started receiving orders for 400G products from a large hyper-scale customer, shipping these products to 3 of the 5 largest hyper-scale data center customers in the US. There are positive results from the VCSEL-based 400G active optical cables, which Microsoft funded last year. Based on continued improvements, management expects better growth for the latter part of 2024.
25 hedge funds are long in Applied Optoelectronics Inc. (NASDAQ:AAOI), of which the largest shareholder is Point72 Asset Management. This stake has a position of $11,071,192. The company is well-positioned to meet the growing demand for 400G product orders and DOCSIS 4.0 solutions.
4. Eventbrite Inc. (NYSE:EB)
Market Capitalization as of September 11: $292.14 million
Number of Hedge Fund Holders: 25
Eventbrite Inc. (NYSE:EB) is an online ticketing platform that allows users to browse, create, and promote local events. It’s a tool for event organizers to sell tickets, track registrations, and communicate with attendees for events like concerts, conferences, festivals, and workshops.
In Q2 2024, the company recorded a total free and paid ticket volume of 66.8 million tickets across 1.4 million events. The resultant net revenue was $84.55 million, up 7.15% year-over-year. Marketplace-related revenue from organizer fees and Eventbrite Ads contributed ~13% to the total revenue.
The company has updated its 2024 outlook for the latter part of this year due to lower-than-anticipated paid ticket volume and planned changes to pricing and packaging plans for creators, which impacted creator acquisition and retention. The full-year revenue estimate is now between $318 million to $325 million.
Recently, Eventbrite Inc. (NYSE:EB) eliminated about 100 positions and is taking other steps to reduce costs. This will save it $30 million per year, although there is an estimated $7 million spending on severance and other related costs in Q3.
As of June 30, 25 hedge funds were long in the company, of which the highest stake amounted to $31,204,602 by Deepcurrents Investment Group. The total shares held by all the hedge funds are 31,808,000.
On August 21, the company announced that it would repurchase $120 million of its existing 5% Convertible Senior Notes due 2025, to reduce the outstanding principal amount of these notes to $30 million. Based on such steps, the company demonstrates strong growth and financial performance, all of which improve investor sentiments, and make it a top emerging stock.
3. Bumble Inc. (NASDAQ:BMBL)
Market Capitalization as of September 11: $797.20 million
Number of Hedge Fund Holders: 26
Bumble Inc. (NASDAQ:BMBL) is essentially a dating app with additional features (for friendship and networking) that enable people to build healthy and equitable relationships, through kind connections. It primarily focuses on women making the first move for female empowerment and safety reasons.
In July, it acquired Geneva, a group and community app. The company is working on launching it more broadly later this fall.
The company is also working on introducing new AI-driven features, including an AI-assisted photo picker and conversation support. Cracking down bad actors and adding government ID verification is going to impact monthly active users for the short term is but a great safety and support strategy for the long term.
Total revenue for Q2 2024 was $268.62 million, up 3.42% year-over-year. Total paying users grew 14% to $4.1 million, offset by an 8% year-over-year decrease. Bumble app revenue grew 5%, while the Badoo app and other revenue declined 2%. As of August 7, the company also repurchased $84 million of its shares year-to-date.
Bumble Inc. (NASDAQ:BMBL) has taken several steps over time to improve the Bumble App experience for women. They have launched new features, refreshed the look and feel, and improved onboarding and profile creation. These changes have led to increased engagement and better experiences for users.
By focusing on key areas like ecosystem health, customer experience, and revenue strategy, the company is well-positioned to achieve its goal of becoming the leading choice for dating, friendship, and community. As of June 30, 26 hedge funds held long positions in the company, of which the highest stake is valued at $26,595,450 by Citadel Investment Group.
Polen Global SMID Company Growth Strategy stated the following regarding Bumble Inc. (NASDAQ:BMBL) in its Q2 2024 investor letter:
“We exited our position in Bumble Inc. (NASDAQ:BMBL), a global leader in the mobile dating app space, due to several Flywheel violations. We initially entered this position roughly two years ago due to the founder-led management team, the robust brand of their key Bumble asset, the opportunity to expand Bumble globally, and the attractive margin and free cash flow profile. Over the last year, the founder has taken a step back from the business into an Executive Chairman role; the COO left to become CEO of another tech start-up, and a new CEO has made several material changes to the general management structure and will be introducing significant changes to the company’s core products. According to management and third-party data, the “swipe” dating apps are struggling to grow downloads in key markets and need a product refresh to reinvigorate growth, perhaps leveraging new Al technologies to enhance user experience and matching capabilities. Together, the new management team and the app “refresh” introduce a level of execution and reinvestment risk that violates our Flywheel. The company remains a leader in the dating space and highly profitable, but we believe it prudent to watch how this business evolves from the sidelines.”
2. Vimeo Inc. (NASDAQ:VMEO)
Market Capitalization as of September 11: $830.66 million
Number of Hedge Fund Holders: 27
Vimeo Inc. (NASDAQ:VMEO) is a video-sharing platform trusted by 287 million creatives, entrepreneurs, and businesses for creating, managing, sharing, and viewing stunning videos. It offers features like video hosting, streaming, and analytics.
In the second quarter of 2024, Vimeo Inc. (NASDAQ:VMEO) grew its revenue by 2.50%, driven by strength in Vimeo Enterprise, which posted 55% revenue growth. Total revenue recorded was $104.38 million, which was $4.93 million higher than Street estimates.
The company’s Self-Serve business, while showing marginal improvement, had a 9% year-over-year decline. To address this, it reduced paid marketing spending by half and is focusing on improving automation and AI integration within the platform.
Despite a 50% marketing budget cut, the Self-Serve business saw only a minor decline. The user base includes growing segments: creators (~20%), digital marketers (~40%), e-learning professionals (~17%), and OTT/SVOD enthusiasts (~20%).
The company also repurchased approximately 4 million shares, utilizing $15 million in capital in Q2. 27 hedge funds are long in Vimeo Inc. (NASDAQ:VMEO) as of June 30, with a total number of 15,731,386 shares. The highest stake is held by Lynrock Lake, with a position of $58,678,070.
Philip Moyer, the company’s Chief, emphasized the company’s advantageous position in the rapidly expanding video market (~82% of the internet is video), noting the substantial growth in video formats, content volume, and the number of creators. The company’s Self-Serve business caters to a thriving demographic of individual creators, marketers, and learners. Such enhancements position the company for substantial growth.
Longleaf Partners Small-Cap Fund made the following comment about Vimeo, Inc. (NASDAQ:VMEO) in its Q2 2023 investor letter:
“We exited Vimeo, Inc. (NASDAQ:VMEO) and long-term position Lumen in the quarter, both of which were disappointing investments that resulted in a permanent capital loss in the portfolio. At Vimeo we initially misjudged how much of a COVID beneficiary the business had been, and our sum of the parts valuation proved to be too generous for some of the underlying assets that were less differentiated than we originally believed.”
1. Applied Digital Corp. (NASDAQ:APLD)
Market Capitalization as of September 11: $924.17 million
Number of Hedge Fund Holders: 29
Applied Digital Corp. (NASDAQ:APLD) is a technology company that specializes in providing digital infrastructure solutions and cloud services, focused on building and operating data centers. It aims to use its expertise in data center infrastructure and energy management to support the growing demand for digital assets and HPC services.
There were 29 hedge funds long in Applied Digital Corp. (NASDAQ:APLD) in the second quarter, with a total stake value of $176.2 million.
Revenue for fiscal Q4 2024 surged to $43.7 million from $22 million in fiscal Q4 2023, driven by increased data center capacity and cloud services. This revenue was up 98.29% year-over-year. Data center hosting generated $26.9 million, while cloud services contributed $16.8 million. However, there was still a loss per share of $0.52.
The cost of revenue rose to $46.3 million from $15.9 million due to higher energy costs (from increased megawatt usage), depreciation/amortization, and personnel expenses related to business growth.
Applied Digital Corp. (NASDAQ:APLD) has made substantial progress towards securing a lease agreement with a Fortune 500 company which will stretch over a decade for its Ellendale campus. HPC data centers are expanding, with 400 megawatts under development and a new 100-megawatt facility in Ellendale nearing completion. It’s marketing additional campuses totaling 1.4 gigawatts, all with power available in 2026.
There were, however, challenges due to power outages at our Ellendale facility, which caused the loss per share mentioned earlier. The company has replaced transformers and now has 286 megawatts of capacity for blockchain clients across North Dakota locations.
Despite recent challenges, the company remains optimistic, while focusing on long-term growth. It made strides in cloud services secured a major hyperscaler partnership for its Ellendale data center and has a clear vision for expanding its HPC data center portfolio. With ongoing development, it’s well-positioned for success.
While we acknowledge the growth potential of Applied Digital Corp. (NASDAQ:APLD), our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than NVIDIA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.
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