In this article, we discuss the 10 tech stocks to monitor amid market volatility according to Bernstein.
In the past few weeks, a major selloff in the technology sector, mostly over concerns about return on investments amid ballooning capital expenditures on artificial intelligence (AI), has hit the stock market, sending valuations crashing and igniting fears of an AI bubble at the marketplace that might be about to burst. However, Stacy Rasgon, who has covered semiconductor stocks, one of the most prominent sectors in the AI world, for over fifteen years, has advised investors to stay the course, terming fears of a bubble as overblown. Rasgon claims that even though chances of an air pocket, used to refer to stock plunges, are 100%, he is confident the time for them is not now. He pointed to the very real and massive AI data center build as an example, predicting it would go on for a few years, helping push AI stocks higher.
In a recent interview with IBD, Rasgon zeroed in on semi stocks, highlighting that they had been massively outperforming, mostly on AI. However, he cautioned investors about potential upside to these firms outside of AI, like in the PCs or smartphones business, noting that even though they might be better than last year, it was evident they would not be growing at a rapid pace anytime soon. He also added that outside of AI, data center, server CPU, and networking demand remained weak. Bernstein, the investment advisory where Rasgon practices his trade, recently revealed a basket of prominent stocks in the tech, media, and communications domain that had upside potential of almost 26% to price targets by the advisory.
This list comes amid worries over the state of the job market and consumer spending in the United States, as well as a potential artificial intelligence air pocket. Bernstein analysts have advised investors to put their money to work in this period of heightened market volatility. Several AI-related tech names are trading at huge discounts due to the selloff, with some of these names discussed in detail below. More information about these firms can be found by accessing 33 Most Important AI Companies You Should Pay Attention To and 17 Trending AI Stocks According to Latest News And Analyst Ratings.
Our Methodology
For this article, we selected companies who operate in the tech domain and have been on the radar of Wall Street analysts. An important investor note by investment bank Bernstein formed the basis for this list. These stocks are also popular among hedge funds. 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).
An executive in a suit checking a bank of computers symbolizing the technology of the financial services industry.
Tech Stocks to Monitor Amid Market Volatility According to Bernstein
10. Grab Holdings Limited (NASDAQ:GRAB)
Number of Hedge Fund Holders: 34
Grab Holdings Limited (NASDAQ:GRAB) provides superapps that allows access to mobility, delivery, financial services, and enterprise offerings through its mobile application. The company is often called the Uber of Southeast Asia. In earnings results for the second quarter of 2024, the firm posted a revenue of $664 million, up more than 17% year-on-year. Anthony Tan, the CEO of the firm, revealed during the earnings call that the firm had achieved a new milestone during the quarter, serving more users than ever at a record high of 41 million MTUs (monthly unique users who transact via Grab products) while delivering continued profitable growth at scale. He added that he saw continued strength in the Southeast Asian economy and his firm would continue to leverage key product initiatives to serve more users in the region, while also driving cost discipline across the business.
The growth trajectory of Grab Holdings (NVM:GRAB) has caught the attention of analysts on Wall Street. Investment advisory Bernstein recently maintained an Outperform rating on the shares with a price target of $4.10, noting in an investor note that despite market placeholders like market structure or free cash generation potential, the true indicators of the performance of the firm were in strategic scaling and diversification. Per the analysts, the ability to adapt and grow in these areas could be pivotal for the long-term success of the superapp.
9. Marvell Technology, Inc. (NASDAQ:MRVL)
Number of Hedge Fund Holders: 74
Marvell Technology, Inc. (NASDAQ:MRVL) makes and sells semiconductors. The company is much more exposed to the AI trade than peers, with estimates placing the revenue mix from AI products to be 40% of the overall earnings of the firm within the next two years. The company has key partnerships for chips in several industries heavily reliant on AI for future business, including computing, optics, networking, storage, security, cloud, telecom, auto, and industrial. In the upcoming earnings report, investors are eagerly awaiting the release of information on AI sales related to electro-optics and custom compute chips. Analysts have forecast revenue of $1.25 billion, with adjusted EPS of $0.29.
AI tailwinds have forced the generally skeptical analysts on Wall Street to turn bullish on Marvell Technology, Inc. (NASDAQ:MRVL) stock. For example, investment advisory KeyBanc has an Overweight rating on the shares with a price target of $95. In a recent investor note, the advisory pointed out that feedback indicates that the demand for optical networking was robust across all segments for the firm, including 800G/400G/200G, and the AI outlook stood to benefit from a meaningful ramp of AWS Trainium/Inferentia and Google Axion.
8. Intel Corporation (NASDAQ:INTC)
Number of Hedge Fund Holders: 75
Intel Corporation (NASDAQ:INTC) markets key technologies for smart devices. The company has had a tough time this year as export license restrictions impact business with China. In the second quarter, the firm delivered disappointing earnings results, falling short of market estimates on nearly all financial metrics. It also initiated a 15% reduction of the workforce and plans to suspend dividends. Stacy Rasgon, a senior analyst at investment advisory Berstein, warned investors about the firm back in April. During an appearance on CNBC, the analyst conceded he did not really know what to do with the stock as the firm did not have an AI accelerator story that was driving all the other names. He said his biggest takeaway from a foundry day organized by the firm was to come back in 2030.
This skepticism is perhaps one reason why Bernstein has a Market Perform rating on Intel Corporation (NASDAQ:INTC) stock and recently lowered the price target to $25 from $35. In an investor note, the advisory noted that the Q2 results of the firm were challenged and Q3 outlook was awful as the company saw the second half of 2024 recovery more muted than prior expectations amid weaker macro and some client inventory channel adjustments.