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.
7. Pinduoduo Inc. (NASDAQ:PDD)
Number of Hedge Fund Holders: 86
Pinduoduo Inc. (NASDAQ:PDD) is a Shanghai-based company that owns and operates an ecommerce platform. The firm has a loyal customer following in China due to a focus on discount deals. Analysts on Wall Street are bullish on the company as it generates significant revenue growth and seems well-positioned to benefit from the expanding ecommerce market in the Asian country. The stock can achieve sustainable growth in the coming months given it has fast EPS growth, positive gross profit trajectory, and sizable free cash flows. The PE Ratio of the firm reflects a high safety margin for investors as well. The market for retail ecommerce sales is set to grow 8% annually over the next four years in China, providing sustained tailwinds for gross profit and EPS growth for PDD.
Expert stock pickers at investment advisory Bernstein share this bullish thesis for Pinduoduo Inc. (NASDAQ:PDD). The advisory has an Outperform rating on the shares with a price target of $235, noting that the first quarter print of the firm looked comically low and the earnings conference call was an exercise in understatements. The advisory added that it expected the profits of the firm to beat Wall Street expectations with active users and gross merchandise value continuing to grow rapidly.
6. Dell Technologies Inc. (NYSE:DELL)
Number of Hedge Fund Holders: 88
Dell Technologies Inc. (NYSE:DELL) designs, develops, manufactures, markets, sells, and supports various comprehensive and integrated solutions, products, and services. The stock has climbed close to 50% in value so far this year as AI tailwinds continue to spark investor interest in the hardware products of the firm. Analysts at investment advisory Bernstein are, however, cautious about the potential for a long term inflection in storage growth, but generally positive about the potential for a near-term cyclical recovery in storage. The advisory has an Outperform rating on the shares with a price target of $155, implying 39% upside.
In a recent investor note, the analysts at Bernstein provided a detailed outlook on Dell Technologies Inc. (NYSE:DELL), forecasting that the AI orders were likely to remain very strong this fiscal year, with revenues of $12 billion compared to $1.4 billion last year. The note further predicted improving profitability in infrastructure solutions amid cost-cutting and improvement in storage margins, as well as benefit from a cyclical rebound and AI offerings in the PC market.
5. Advanced Micro Devices, Inc. (NASDAQ:AMD)
Number of Hedge Fund Holders: 108
Advanced Micro Devices, Inc. (NASDAQ:AMD) operates as a semiconductor manufacturer. It offers AI-enabled chips for several industries, including data center and cloud, personal computers, adaptive and embedded devices, and gaming. The company recently revealed future plans for AI products, including the AMD Instinct MI325X accelerators, with planned availability in Q4 2024, delivering memory capacity with ultra fast speeds for AI computations, as well as the next-generation AMD CDNA 4 architecture, expected in 2025, that will power the AMD Instinct MI350 Series and is expected to drive up to 35x better AI inference performance. AI data center demand will likely help the firm sell these products at high margins.
Bernstein analyst Stacy Rasgon had alluded to the developments earlier this year when he predicted that Advanced Micro Devices, Inc. (NASDAQ:AMD) was turning towards an annual product model, much like smartphones and automotive industries. However, he cautioned that it would be harder for AMD to accomplish this than rival NVIDIA because of the difference in scale between the two firms. Rasgon underlined that AMD probably had no choice in the matter because of the acceleration and roadmaps that NVIDIA had already announced. Rasgon added that the new MI325X accelerators, discussed above, would help AMD compete with the H200 product from NVIDIA but would likely fall short of competing with the new Blackwell chips of the latter. Bernstein has a Hold rating on the shares with a price target of $150.
4. Broadcom Inc. (NASDAQ:AVGO)
Number of Hedge Fund Holders: 130
Broadcom Inc. (NASDAQ:AVGO) supplies semiconductor infrastructure software solutions. The firm is expected to benefit from increased AI capital expenditures by hyperscalers in the coming months, leading to strong revenue growth and margin expansion, and suggesting strong upside potential for the shares. Senior Bernstein analyst Stacy Rasgon claims that the company has the second best story in the space after NVIDIA, mostly due to chip and networking product sales to big tech firms. In a recent appearance on CNBC, the analyst said that the AI business had been good enough this year to cover up some nastiness in the core business of the firm, which was general networking. He added that the AI guidance of the firm seemed conservative and recent acquisition activity, like the VMware purchase, had upside to it. He underlined that the firm had the highest margins and highest free cash flow in the chip space.
Bernstein has an Outperform rating on Broadcom Inc. (NASDAQ:AVGO) stock with a price target of $195. In a recent investor note, the advisory noted that the acquisition of VMware was projected to be a significant growth driver for the chip firm in the next year, with a $4 billion revenue run rate expected in the coming quarters, either by the fourth quarter or the first quarter of the next fiscal year. This implied that revenues could surpass $16 billion next year even as gross margins remain stable, buoyed by the growth of software sales.
3. Uber Technologies, Inc. (NYSE:UBER)
Number of Hedge Fund Holders: 145
Uber Technologies, Inc.(NYSE:UBER) develops and operates proprietary technology applications worldwide. The company has been taking strong measures to improve profitability since it debuted on the market almost five years ago. The company has an expected EBITDA to free cash flow conversion of over 90% and remains on track to generate $10 billion in free cash flow in 2026. This represents an attractive 6.7% yield on the current market cap and would potentially enable significant stock buybacks. These numbers will likely help the firm expand the investor base and drive valuation multiple expansion.
Uber Technologies, Inc.(NYSE:UBER) has invited bullish calls from analysts on Wall Street in recent months. For example, investment advisory Bernstein has a Buy rating on the shares with a price target of $95, implying upside potential of more than 30%. The advisory views the company as a dominant player in the rideshare and delivery space, citing a substantial turning point in EBITDA – at a 40% compound annual growth rate from 2023 to 2026 – and a wave of consumers leaning into convenience as catalysts for the tech company.
2. Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM)
Number of Hedge Fund Holders: 156
Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) makes and sells integrated circuits and semiconductors. The chip revolution that powers the AI boom can be better understood by looking at a few key numbers. For example, consider the first Intel microprocessor. It had about 2,000 transistors. Now, compare this to the latest NVIDIA chips, one of the customers of TSM, that are packed with more than 200 billion transistors. The difference is mind-boggling. Making identical copies of a single chip for an iPhone requires one TSM fab to produce more than a quintillion transistors every few months. Viewed over the course of a year, the entire semiconductor industry produces more transistors than the combined quantity of all goods produced by all other companies, in all other industries, in all human history, researchers contend. TSM is the apex predator in this business.
Bernstein analyst Mark Li has an Outperform rating on Taiwan Semiconductor Manufacturing Company Limited (NYSE:TSM) stock and recently raised the price target to $200 from $150, noting that data center AI revenue was rising for the firm as planned, but there was more data indicating AI driving an upward shift in smartphone. The analyst further added that more CoWoS, earlier Lunar Lake, and possible price hike can drive EPS to grow another 26% in 2026.
1. NVIDIA Corporation (NASDAQ:NVDA)
Number of Hedge Fund Holders: 179
NVIDIA Corporation (NASDAQ:NVDA) provides graphics, computing and networking solutions. Bernstein analyst Stacy Rasgon recently appeared on CNBC to highlight his bullish views on the AI revolution, naming NVIDIA as the top pick in the sector with lots of room to run even with recent worries about capex and ROI, simply because demand remained high. He noted that the company had enormous potential in the AI data center space. He added that the depth in enterprise AI adoption was encouraging, even though it was moving at a pace that was slower than expected. He underlined how large customers comprised more than 40% of the overall revenue of NVIDIA, even as it developed a larger customer base.
Investment advisory Bernstein has an Outperform rating on NVIDIA Corporation (NASDAQ:NVDA) stock with a price target of $130. In a recent investor note, the advisory said it was not panicking yet as media reports suggested a three month delay to the Blackwell roadmap by NVIDIA. Analysts at the advisory suggested that at a minimum, despite recent worries over AI ROI, it remained clear that demand levels were continuing to rise and NVIDIA had other products to sell in the meantime to help backfill.
While we acknowledge the potential of NVIDIA Corporation (NASDAQ:NVDA) as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher 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.
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