In this article, we will discuss: 13 Best American Tech Stocks To Buy According to Short Sellers.
Tech stocks have outperformed the stock market for several years and account for over 30% of the market’s overall holdings. With market values estimated at trillions of dollars, the majority of the lauded Magnificent Seven stocks are American tech companies that are still expanding. Technology is constantly evolving, and investors have a lot of opportunities because of this ongoing advancement.
This dynamic progress was reflected in the US stock market when it rose more than 3% in the second quarter of 2024. In terms of the trade in artificial intelligence, technology companies remained at the top, and this trend did not appear to be slowing down throughout the quarter. The largest companies have outperformed the market this year, which has been a remarkable trend. The 500 largest companies’ large-cap market saw gains of 4.4% in Q2 YoY, increasing its 2024 return to above 15%. In contrast, the small-cap market saw a 3.3% drop, translating into a 1.6% 2024 return.
Even though technology companies outperformed in Q2 FY2024, Main Street Research’s James Demmert cautions investors not to treat all of them the same. Instead, they should prioritize those tech firms that can deliver consistent earnings, especially in an uncertain economy.
Investors should also stay informed about the 2024 tech industry statistics. According to the Information Technology and Innovation Foundation, almost one-third of the growth in the US economy is attributed to the IT sector, which is the main driver of the country’s economy. Similarly, the United States accounts for one-third of the world’s information technology market, according to the International Trade Administration, making it the largest tech market in the world. Computer and IT jobs reported a median annual wage of $104,420 in May 2023, while 108,503 college graduates with bachelor’s degrees in computer and information sciences graduated in 2022, a 3.5% increase YoY. The average yearly salary for tech majors is $90,000.
According to a report, tech trends in 2023 were dominated by electrification/renewables and generative AI. Internet searches for generative AI increased by 700%, and the area received significant funding as huge language models processed more data and expanded modalities. Even while global IT investment declined, electrification and renewables continued to draw large amounts of capital. These industries continue to have a high volume of job postings, signifying potential for long-term growth.
Looking forward, according to the Deloitte 2024 technology industry outlook, in the wake of current macroeconomic headwinds such as high inflation and supply chain disruptions, the technology industry confronts a cautious 2024 recovery. As per Deloitte’s Q4 2023 study, 62% of tech executives believe the industry is “healthy,” with growth anticipated in the areas of cybersecurity, cloud computing, and artificial intelligence. By late 2024, generative AI is expected to have a major impact on enterprise software and elevate operational efficiency. Tech companies and startups are investing more in AI, but enterprise adoption is still sluggish. However, this is predicted to change in the second half of 2024. Market expansion is anticipated to be propelled by enterprise expenditure on AI and IT services. Nonetheless, regulations in the EU and the US focusing on data privacy, sustainability, and AI ethics continue to provide challenges, forcing companies to follow regulations while leveraging these for competitive advantage. To reduce geopolitical risks and guarantee uninterrupted growth, supply networks will need to strategically change, and effective operations will need to be prioritized.
With that said, here are the 13 Best American Tech Stocks To Buy According to Short Sellers.
Methodology:
We sifted through holdings of tech ETFs and online rankings to form an initial list of 25 American tech stocks. Then we selected the 13 stocks that had the lowest percentage of their shares shorted. The stocks are ranked in ascending order of the lowest percentage of their shares shorted.
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)
13. Salesforce, Inc. (NYSE:CRM)
% of shares shorted: 1.46%
The US-based Salesforce, Inc. (NYSE:CRM)’s extensive suite of cloud solutions, spearheaded by its Customer 360 platform, enables enterprises to provide tailored customer experiences, hence stimulating significant development prospects.
Service Cloud, Marketing Cloud, and MuleSoft are just a few of the many products it offers, all of which contribute to its dominant position in the CRM technology market.
The US-based tech company leads the market in salesforce automation, but it still only holds 30% of the market share in a highly fragmented industry that is growing by double digits annually, indicating that there is still space for growth.
Notwithstanding recent issues with revenue, the tech company remains a tempting investment due to its solid financial performance, attractive price, and focus on profitability. Though its stock price dropped in Q12024 after the firm missed sales estimates for the first time in 18 years, Salesforce has made significant strides in other areas. Its operating cash flow surged by 39% YoY to $6.25 billion, while its adjusted operating margins climbed to 32.1% YoY.
Mar Vista Focus strategy stated the following regarding Salesforce, Inc. (NYSE:CRM) in its Q2 2024 investor letter:
“Salesforce, Inc.’s (NYSE:CRM) stock came under pressure in Q2 as the company modestly missed Street expectations for software bookings and reduced its FY2025 subscription revenue guidance to “around 10%” year-to-year growth from “greater than 10%.” We believe Salesforce is experiencing cyclical pressures as software demand across the industry is pressured at the margin. This has led to longer sales cycles; smaller deal sizes and budgets being allocated away from enterprise software to emerging areas like generative AI. We continue to believe that Salesforce will see a tailwind to demand from its generative AI offerings as many AI use cases are found in front office software like customer relationship management. This, coupled with Salesforce’s treasure trove of customer data, positions it well to exploit the evolution of next-generation AI offerings.”
Nonetheless, one of the strongest long-term software investment options is Salesforce, especially considering that it continues to offer investors a pleasing mix of revenue growth and increasing profitability. Investors are bullish on the stocks since the renewed emphasis on margin improvement, share buybacks, and dividends is expected to compound solid earnings growth for years to come, even while revenue growth has slowed.
12. ServiceNow, Inc. (NYSE:NOW)
% of shares shorted: 1.43%
Through a SaaS delivery model, ServiceNow, Inc. (NYSE:NOW) offers software solutions to organize and automate a variety of business operations in North America, the Middle East, Europe, Asia Pacific, Africa, and internationally.
Thus far, the US-based tech company has been effective in putting the conventional “land and expand” strategy into practice. Firstly, it developed an industry-leading software as a service (SaaS) solution for IT service management, or ITSM, with a superior, user-friendly interface, modular and flexible architecture, automation capabilities for a wide range of workflow processes, and the ability to function as an enterprise-wide single system of record for the IT department. The company expanded beyond the IT department after making a name for itself in the ITSM and ITOM markets.
The firm was able to apply its process automation strategy to customer support, finance, operations, and HR service delivery using the same set of features and technology from its product design.
Subsequently, the company unveiled upgraded and sector-specific versions of its core services. ServiceNow was among the first software businesses to introduce generative artificial intelligence technologies in September 2023. Each of these products has a higher price to help promote incremental growth and increase margins.
Strong Q2 2024 earnings that revealed the company’s AI potential impressed the market, and as a result, Keith Weiss of Morgan Stanley kept an Overweight rating on the stock with a $900 price target. The revenue from the company’s AI-powered Pro Plus edition contracts doubled, and the high renewal rate and integration capabilities of its NOW platform demonstrate its dominant position in the market.
Lakehouse Global Growth Fund stated the following regarding ServiceNow, Inc. (NYSE:NOW) in its April 2024 investor letter:
“US-based software company,ServiceNow, Inc. (NYSE:NOW), provided another strong result, continuing its long and consistent track record of 20%-plus revenue growth combined with healthy profitability. Subscription revenues grew 25% year-on-year to $2.5 billion and free cash flow grew 47% year-on-year to $1.2 billion. The company’s core operating metrics were also impressive with remaining performance obligations growing 26% year-on-year to $17.7 billion (i.e. roughly 2x 2023 revenue) and renewal rates holding steady at 98%. Performance was evenly spread across segments, products, and geographies, with notable strength in the US federal government. The company now boasts 1,933 customers generating in excess of $1 million in Annual Contract Value (ACV), which is pleasing to see as it implies multiple solutions are involved and that the company’s platform model is increasingly resonating with customers. In our view, ServiceNow is one the highest quality software businesses globally as the combination of consistent growth at scale, robust free cash flow generation and a large addressable market make it a compelling opportunity.”
11. Fiserv, Inc. (NYSE:FI)
% of shares shorted: 1.35%
Based in Milwaukee, Wisconsin, Fiserv, Inc. (NYSE:FI) is a major provider of core processing and supplementary services to US banks and credit unions. It focuses on small and midsize banks. International sales account for about 10% of the company’s total revenue.
It offers technological services domestically in the US, as well as in Latin America, the Asia-Pacific region, Europe, the Middle East, and Africa.
The American tech company also offers merchants payment processing services following Fiserv’s 2019 merger with First Data. Three other mergers of a similar nature were quickly completed. However, Fiserv’s decision did not significantly improve the company’s competitive position as an outcome. Nonetheless, these purchases had a sound strategic basis. The tech company has to maintain numerous core processing facilities because it was formed through acquisitions, which could reduce profits and lower the quality of its products.
However, its bank technology business is highly stable, with large volumes of recurring revenue and long-term agreements.
Here is what Madison Investments analyzed about Fiserv, Inc. (NYSE:FI) in its Q1 2024 investor letter:
“At payment processor Fiserv, Inc. (NYSE:FI), revenue and profits continue to steadily compound. In fact, 2023 marked the 38th consecutive year of double-digit earnings growth for the company, a remarkable accomplishment considering the wide range of economic environments experienced during that long period. It goes without saying that success over such a prolonged timeframe requires a combination of strong competitive advantages, dependable stewardship, and continuous investment in new products and services. In more recent years, Fiserv has rolled out the Clover payment platform for small-and-medium sized businesses. Clover has been very successful in large part, not only due to its superior functionality relative to legacy point-of-sale payment platforms, but also Fiserv’s distribution scale across financial institutions and independent sales organizations, an advantage that is difficult to replicate by upstart fintech competitors. Investments like Clover give us confidence that Fiserv will continue to build upon its impressive long-term track record.”
Fiserv was given a Buy rating by Robert W. Baird analyst David Koning, who cited the company’s track record of being among the fastest-growing EPS climbers with low volatility in EPS growth, which puts it in a favorable position in the market.
10. Meta Platforms, Inc. (NASDAQ:META)
% of shares shorted: 1.25%
Meta’s Facebook is the world’s largest social network, with more than 3 billion monthly active users. Advertisers find American tech giant’s platforms appealing due to their growing user base and engagement, as well as the important data they produce. The company’s top-line growth and cash flow are expected to be positively impacted by these priceless assets, and Morningstar analysts predict that advertisers will continue to spend more online.
Through its Reality Labs branch, META is making significant investments in the metaverse, VR, and AR technologies. However, the company has come under fire for making substantial payments to these new consumer platforms.
The company’s price objective of $550 is maintained by BofA Securities, even though the company intends to reduce Reality Labs’ hardware expenditure by 20% by 2026. The potential budget drop is viewed as a strategic response to falling demand for VR devices, even though consumer interest in AR glasses remains high.
Meta Platforms Inc. (NASDAQ:META) posted a higher-than-expected profit of $13.5 billion in Q2 2024 raising its stock price by over 7%. Revenue for the latest quarter came in at $39 billion, which was 22% more than last year and exceeded market projections. Third-quarter revenue for the tech behemoth with headquarters in California is expected to range from $38.5 billion to $41 billion.
Alger Focus Equity Fund stated the following regarding Meta Platforms, Inc. (NASDAQ:META) in its Q1 2024 investor letter:
“Meta Platforms, Inc. (NASDAQ:META) operates the world’s largest social network, with over 3 billion monthly active users across its platform. The company generates revenue predominantly from advertising. which accounts for over 95% of its total revenue, evenly split between North America and international markets. During the quarter, shares contributed to performance following the release of strong fiscal fourth quarter operating results, with revenues and earnings surpassing analyst estimates. The better-than- expected revenues were attributed to strong advertiser demand and Al-driven ad improvements. Moreover, the company materially raised its fiscal first quarter sales and earnings guidance above analysts’ estimates, buoyed by continued strong advertiser demand trends and enhancements to Reels. Advantage+. Click-to-message, and Shop Ads. Further, management noted that ongoing investment in Al is enhancing user engagement and advertiser returns through improved targeting and measurement. Separately, Meta authorized a new share repurchase plan representing approximately 5% of its market capitalization and announced the initiation of its first dividend, implying an approximate 0.4% yield.”
Insider Monkey monitored that 219 hedge funds out of the 912 hedge funds held a position in the firm as of the end of Q2 of 2024. Ken Griffin’s Citadel Investment Group is the largest shareholder in the company, with 12,428,700 shares worth $6.27 billion.
9. Intuit Inc. (NASDAQ:INTU)
% of shares shorted: 1.23%
Intuit Inc. (NASDAQ:INTU) is the American tech company behind the renowned US small-business accounting software QuickBooks and the do-it-yourself US tax software TurboTax. Since the online sales of TurboTax and QuickBooks have surpassed those of their desktop counterparts, the firm has made the shift to being a cloud-first firm. This has thus made it possible for Intuit to use customer data to natively market its offers and maximize the user experience across various products. Consequently, it also allowed the company to support switching costs and a network effect, which are Intuit’s competitive advantages.
Baron FinTech Fund stated the following regarding Intuit Inc. (NASDAQ:INTU) in its Q2 2024 investor letter:
“GenAI has captured the market’s imagination, but it’s still very early in the user adoption of this new technology, and the financial payoff from investments into GenAI models and infrastructure is still unknown. We are focused on investing in strong businesses that will be improved by AI, even if this improvement takes time to materialize. Intuit Inc. (NASDAQ:INTU) has been rolling out Intuit Assist, a GenAI powered digital assistant, across its product lines to help Credit Karma users select new credit cards, QuickBooks customers forecast cash flow, Mailchimp customers create targeted email marketing campaigns, and TurboTax customers understand changes in their tax returns from the prior year. We consider these GenAI advancements to be evolutionary rather than revolutionary, but we continue to closely monitor the impact of new technologies on the fintech industry.”
Intuit’s latest fiscal year ended strong with revenue exceeding expectations due to the company’s AI-driven advancements, which support its long-term growth.
In spite of short-term changes in Credit Karma and TurboTax, BMO Capital increased Intuit’s price target to $760 from $700 while keeping an Outperform rating. The company cited strong FY25 forecasts and growth prospects.
The tech firm has hedge fund sentiments of 82 in Q2 2024. Ken Fisher’s Fisher Asset Management is the largest shareholder in the company, with 3,720,189 shares worth $2.45 billion.
8. NVIDIA Corporation (NASDAQ:NVDA)
% of shares shorted: 1.20%
Industry-leading parallel processing is provided by NVIDIA Corporation (NASDAQ:NVDA)’s GPUs, which were formerly required for PC gaming applications but are now also needed for cryptocurrency mining, artificial intelligence, and possibly other applications.
The company’s dominant position in the market for graphics processing units, or GPUs, and the hardware and software tools required to support the rapidly expanding artificial intelligence business gives it a competitive advantage. Eventually, analysts predict that the largest tech companies will work to identify alternatives to NVDA or internal resources to broaden their AI offerings. However, these initiatives will probably erode rather than completely replace Nvidia’s leadership in this field, as it is the leading AI chip vendor.
The American tech firm has recently released NIM Agent Blueprints, an AI workflow catalog that can be customized and used by enterprise developers to build and implement generative AI systems.
Nvidia revealed second-quarter 2025 earnings and a third-quarter outlook that exceeded FactSet consensus predictions, demonstrating that the company is still operating at full capacity. The unending demand for graphics processing units, or GPUs, and associated goods used in data centers to power artificial intelligence has kept Morningstar analysts optimistic about Nvidia. Nonetheless, the firm’s earnings beat wasn’t as spectacular as it has been in previous quarters, which is why the shares declined after hours.
Citing solid Q2 2025 performance and ongoing high demand from significant areas like Hyperscalers, Enterprises, and Sovereign nations, Philip Woo of Phillip Securities reaffirmed a Buy rating on NVIDIA Corporation (NASDAQ:NVDA) with a $155 target. Nvidia’s dominance in AI GPUs and a promising outlook for 2025 and 2026 lend credence to his optimism.
The AI chip maker behemoth has hedge fund sentiments of 179 in Q2 2024. Ken Griffin’s Citadel Investment Group is the largest shareholder in the company, with 2,501,400 shares worth $3.85 million.
7. Adobe Inc. (NASDAQ:ADBE)
% of shares shorted: 1.18%
Since Photoshop and Illustrator are now part of the larger Creative Cloud, Adobe Inc. (NASDAQ:ADBE) has become the industry leader in content production tools. Through both organic growth and strategic acquisitions, the company has expanded the array of tools used in the creation of print, digital, and video content by adding new products and features. The company’s pipeline is further expanded with the December 2021 debut of Adobe Express, which offers free and less expensive versions of the popular Creative Cloud capabilities.
Firefly’s launch in 2023 signifies a significant artificial intelligence solution that should attract new consumers. Adobe is concentrating on bringing in new users, and converting these users will become increasingly crucial over time, per analysts.
Following the strong Q2 2024 results, more Wall Street analysts believe the content production tools company can benefit from the generative AI revolution. The firm anticipates $5.38 billion in revenue for the third quarter, which would represent 12.1% year-over-year growth and sequential acceleration.
JPMorgan has increased its price objective for Adobe Inc. (NASDAQ:ADBE) to $580 from $570 and upgraded the company from Neutral to Overweight. According to analysts, the stock is expected to outperform the overall market and has considerable upside potential as it is expected to rebound to its former highs. They believe that investor fears at the moment, especially those related to the Firefly product, may be exaggerated, and that monetization may begin to improve in the second half of this year and the first part of next.
Polen Global Growth Strategy stated the following regarding Adobe Inc. (NASDAQ:ADBE) in its Q2 2024 investor letter:
“With Adobe Inc. (NASDAQ:ADBE), in some ways, we see it as a microcosm of the market’s “shoot first, ask questions later” approach to categorizing AI winners and losers. In the early part of last year, Adobe came under pressure with a perception that generative AI (GenAI) would represent a material headwind to their suite of creative offerings. In short order, the company introduced its GenAI offering, Firefly, which shifted the narrative to Adobe as a beneficiary with a real opportunity to monetize GenAI in the near term. Earlier this year, that narrative was again challenged as the company reported a slight slowdown in revenue growth. Results in the most recent quarter were robust as the company raised its full-year forecast across a number of key metrics and showcased better-than-expected results.”
Although momentum in Creative Cloud is slowing following a period of rapid development, owing partly to the model shift to software as a service, Adobe remains the leader in content creation tools and PDF file editing, which it invented and continues to dominate.
6. Broadcom Inc. (NASDAQ:AVGO)
% of shares shorted: 1.09%
Broadcom Inc. (NASDAQ:AVGO) is the world’s sixth-largest semiconductor company and has expanded into a variety of software companies, with total revenue exceeding $42 billion. It serves the wireless, networking, broadband, storage, and industrial markets with its 17 main semiconductor product lines. Although its primary focus is on fabless design, it also does some internal production, such as producing best-of-breed FBAR filters for the Apple iPhone. It provides infrastructure, security, and virtualization software to governments, banks, and major corporations.
Its operations comprise the merger of past companies, such as software companies Symantec, CA Technologies, and Brocade, and legacy Broadcom and Avago Technologies in chips.
The US-based tech company is an outcome of the combination of several high-end, distinct, and profitable software and chip companies. Broadcom is an excellent platform for combining businesses, both large and small. Strong profits and cash flow are produced by its acquisition and streamlining skills, which also support its substantial dividend. The company’s execution and operational efficiency are noteworthy as they support its substantial organic investment and enable it to outperform its end markets organically.
Mar Vista Focus strategy stated the following regarding Broadcom Inc. (NASDAQ:AVGO) in its Q2 2024 investor letter:
“During the quarter, we established new investments in Broadcom Inc. (NASDAQ:AVGO) and Meta Platforms. We initiated a position in Broadcom in Q2. As a skilled aggregator, Broadcom acquires firms, streamlines their operations, and invests R&D dollars in mission critical products that generate industry leading profit margins, robust cash flows and high returns on invested capital. Its primary markets include AI accelerators targeting generative AI applications, networking & wireless semiconductors, and mission-critical infrastructure software solutions.
Broadcom is well-positioned to benefit from the rapidly expanding demand for custom AI accelerator chips that support the evolution of the generative AI market. The company is the second-largest producer of AI accelerator chips behind Nvidia and leads the market in custom AI ASIC chips. Its customers include leading hyper scalers like Alphabet and Meta who are turning to Broadcom for custom silicon due to its performance and cost advantages. We believe the company is a direct beneficiary of a multi-year capital cycle driven by hyper scalers building out next-generation AI factories.
Broadcom recently acquired VMware, the leader in virtualization software targeting the enterprise market. The integration of VMware is tracking ahead of plan as management has simplified its product bundles, transitioned to a subscription revenue model, and reduced operating costs. We believe this simplified go-to-market structure will result in strong top-line revenue growth and expanding operating margins. We believe Broadcom will compound intrinsic value per share in the mid-20% range over the intermediate term as it benefits from the AI-infrastructure build-out, a cyclical recovery in its legacy semiconductor business, and modestly accelerating growth from its infrastructure software business as VMware is successfully integrated.”
Christopher Rolland of Susquehanna revised a buy rating and has a $200 price target on AVGO, noting growth in artificial intelligence and VMware optimization. Broadcom’s FY24 revenue projection has been revised, and its networking division is projected to deliver strong growth, with AI contributing more than 40% YoY. Another thing that is viewed positively by the analyst is the shift of VMware customers’ usage to subscriptions.
5. Amphenol Corporation (NYSE:APH)
% of shares shorted: 0.87%
The American tech stock Amphenol Corporation (NYSE:APH) is a worldwide provider of connection systems, sensors, and connectors. APH is a global supplier of connectors with the second-largest market share. Its end markets include military, mobile devices, the internet, commercial aviation, industrial, automotive, and IT and data communications. Amphenol operates in 40 countries and has a diverse geographic footprint.
Amphenol is a unique connector supplier, an exceptional operator, and an outstanding custodian of shareholder capital. Amphenol works against an array of competitors in the competitive electrical component market, and its wide variety of end markets enables it to grow its top line even during a market slump.
The company has the best operating margins among its peer group due to its exceptional ability to implement cost cuts, which also enables it to swiftly bring all of its acquisitions up to profitability as per analysts.
Amphenol Corporation’s (NYSE:APH) CEO, Adam Norwitt, noted during the company’s Q2 2024 earnings call that, despite a nominal increase in traditional datacom orders, the company’s bookings between March and June were especially strong from AI-focused IT datacom customers. Norwitt also predicted that sales in the datacom segment would increase in the third quarter as customers flocked to the company’s leading high-speed and power interconnect devices.
Mar Vista Strategic Growth Strategy stated the following regarding Amphenol Corporation (NYSE:APH) in its Q2 2024 investor letter:
“As a leading supplier in the global interconnect and sensor market, Amphenol Corporation (NYSE:APH) benefits from a tailwind of demand as things become smarter and more connected. Amphenol’s unique entrepreneurial culture, savvy capital allocation and diverse end-market exposure have allowed it to deliver market-leading operating margins and strong returns on invested capital. We believe Amphenol should continue to deliver robust returns as it integrates and optimizes its meaningful acquisition of Carlisle Interconnect Technologies, and benefits from the build out of next-generation AI factories providing critical interconnect solutions.”
4. Apple Inc. (NASDAQ:AAPL)
% of shares shorted: 0.80%
Apple Inc. (NASDAQ:AAPL) has solidified its long-term leadership in the consumer electronics market by focusing on a high-end, closely connected ecosystem of products, services, and software. Apple’s flagship iPhone is the central component of this ecosystem, accounting for 46% of the company’s net sales. Hence, providing it with pricing power, switching costs, and network impact. All other Apple products and services get the most value from keeping users within this walled garden. With this strategy, the company has growth potential and makes it unique.
The California-based tech giant introduced Apple Intelligence, an AI-powered personal system for its new smartphones, in fiscal Q3 2024, perhaps sparking an iPhone upgrade super cycle. Sales of iPhones reached $39.3 billion YoY, and Mac revenue increased 2% to $7 billion YoY, contributing to the company’s $85.8 billion in revenue, a 5% YoY gain. AAPL’s economic moat is bolstered by its solid financial history, which includes growth in net income and revenue over the last ten years.
Morningstar analysts upgraded their estimation of the company’s fair value from $170 to $185 due to an improvement in their projection for iPhone revenue. Analysts predict strong iPhone-driven growth in 2025 and 2026, pushed by improvements to Apple’s artificial intelligence technologies. However, they still believe the firm’s stock is expensive, with the present price reflecting an unsustainable 20% iPhone revenue increase in fiscal 2025 amid headwinds in China and slowing upgrade cycles.
Baron Funds said the following about Apple Inc. (NASDAQ:AAPL) in its second-quarter 2024 investor letter:
“This quarter we re-initiated a position in Apple Inc. (NASDAQ:AAPL), a leading technology company known for its innovative consumer electronics products like the iPhone, MacBook, iPad, and Apple Watch. Apple is a leader across its categories and geographies, with a growing installed base that now exceeds 2 billion devices globally. The company’s attached services – including the App Store, iCloud, Apple TV+, Apple Music, and Apple Pay – provide a higher margin, recurring revenue stream that both enhances the value proposition for its hardware products and improves the financial profile. Apple now has well over 1 billion subscribers paying for these services, more than double the number it had just 4 years ago. The increasing services mix has led to healthy operating margin improvement, providing more free cash flow for Apple to reinvest in the business and to distribute to shareholders. Throughout its 48-year history, Apple has successfully navigated and capitalized on major technological shifts, from PCs to mobile to cloud computing. We believe the company’s leading brand and device ecosystem position it to do equally well in the AI age, and this was the driver of our decision to re-invest. “Apple Intelligence” – the AI strategy unveiled at Apple’s recent Worldwide Developer Conference – leverages on[1]device AI and integrations with tools like ChatGPT to enhance user experiences across its ecosystem. The AI suite enables users to create new images, summarize and generate text, and use Siri to perform actions across their mobile applications, all while maintaining user privacy and security. We think Apple Intelligence can drive accelerated product upgrade cycles and higher demand for Apple services. The combination of growth re-acceleration, increasing services contribution, and thoughtful capital allocation should continue driving long-term shareholder value.”
3. Microsoft Corporation (NASDAQ:MSFT)
% of shares shorted: 0.74%
Microsoft Corporation (NASDAQ:MSFT) is one of two public cloud providers capable of delivering a broad range of PaaS/IaaS solutions at scale. The business has become a leader in AI as well, mainly because of its investment in OpenAI. Notably, the American tech company has had remarkable success upselling customers on higher-priced Office 365 subscriptions that come with advanced phone functionality. These elements work together to create a more concentrated business that produces remarkable revenue growth, high and rising margins, and strengthens relationships with clients.
Shares of Microsoft Corp. (NASDAQ:MSFT) recently dropped after the company’s most recent quarterly reports revealed that its Cloud business growth was less than anticipated. The company has revised its revenue estimate for the current quarter to between $63.8B and $64.8B from the $65.07B estimate. Azure revenue for MSFT is anticipated to grow by 28% and 29% annually.
The integration of Copilot AI, according to analysts, is responsible for the firm’s development across several areas in its latest quarter. Office commercial sales grew by 10% YoY $48 billion, while Dynamics software sales have increased by 19% YoY. Bing also experienced a 3% YoY spike in users switching from Google Search because of its AI features.
Alger Spectra Fund stated the following regarding Microsoft Corporation (NASDAQ:MSFT) in its Q2 2024 investor letter:
“Microsoft Corporation (NASDAQ:MSFT) is a beneficiary of corporate America’s transformative digitization. The company operates through three segments: Productivity and Business Processes (Office, LinkedIn, and Dynamics), Intelligent Cloud (Server Products and Cloud Services, Azure, and Enterprise Services), and More Personal Computing (Windows, Devices, Gaming, and Search). During the quarter, shares contributed to performance after the company reported strong fiscal third quarter results, underscoring its leadership position in the cloud and highlighted its role as a primary facilitator and beneficiary of AI adoption. Company revenue growth, operating margin, and earnings growth surpassed consensus expectations. The utility scale Azure cloud business grew 31% in constant currency of which 7% was AI related versus 3% two quarters ago. Further, management noted most of the AI revenue continues to stem from inference rather than training indicating high quality AI applications by Microsoft’s clients. Management also indicated that the significant cost-cutting programs in corporate America are done, suggesting that the cost optimization headwinds previously impacting Azure’s growth are over. Separately, management provided color on their new AI-productivity tool, Copilot, noting that approximately 60% of Fortune 500 companies are already using Copilot, and that the quarter witnessed a 50% increase in Copilot assistance integration within Teams. We continue to believe that Microsoft has the potential to hold a leading position in AI, given its innovative approach and demonstrated high unit volume growth opportunity.”
The tech giant has hedge fund sentiments of 279 in Q2 2024. Michael Larson’s Bill & Melinda Gates Foundation Trust is the largest shareholder in the company, with 34,889,597 shares worth $15.60 billion.
2. Oracle Corporation (NYSE:ORCL)
% of shares shorted: 0.68%
Oracle, a software industry titan, offers enterprise resource planning software and on-premises relational database technologies that are unparalleled in quality. Its profitability is unmatched in the market. However, as more clients skip Oracle’s products and move their workloads to the cloud, growth has been slow. According to analysts, the company might face challenges from cloud competitors even with its efforts to migrate to the cloud.
However, Wedbush’s Dan Ives is optimistic about the stock in the wake of the AI revolution and its knock-on effects. Ives listed Oracle Corp (NYSE:ORCL) as one of the companies he believes will profit from the AI revolution.
Despite reporting weak fiscal Q4 2024 numbers, the American tech firm continued to persist following the announcement of AI agreements with Microsoft and OpenAI to integrate Azure AI with Oracle Cloud. Oracle and Google Cloud have teamed up to provide high-speed network interconnects and OCI database services. In addition, double-digit revenue growth was forecast by management for the fiscal year 2025.
Mar Vista Global Strategy stated the following regarding Oracle Corporation (NYSE:ORCL) in its Q2 2024 investor letter:
“Oracle Corporation (NYSE:ORCL) is seeing revenue acceleration as it benefits from several years of investing in cloud-based solutions that are now driving demand. Oracle’s OCI offering is recognized as a viable hyper scaler offering and is winning mindshare from leading cloud customers including Open AI. This is driving accelerating demand as it offers a strong value proposition to customers due to its favorable performance and cost metrics. This coupled with Oracle’s recently announced partnerships with Microsoft Azure and Google Compute Platform, which could help facilitate the migration of the Oracle Database to the cloud. We believe this should support a third leg of growth for Oracle as its large installed base of database customers shift from on-premise to cloud deployments. As database customers migrate to the cloud, Oracle could increase database software support revenues by two-to-three times. We continue to believe Oracle is well positioned to grow intrinsic value low-double-digits over our investment horizon.”
The 24 analysts have a buy rating and an average target of $146.54, an upside of 4.11%.
1. Alphabet Inc. (NASDAQ:GOOGL)
% of shares shorted: 0.56%
Alphabet is a consolidation of successful businesses. The company has developed into a true technological giant, producing tens of billions of dollars in free cash flow annually, with products ranging from advertising to cloud computing and self-driving automobiles. Even though the US-based tech company’s major search business has been the subject of antitrust worries, investors are still confident in the firm’s overall strength and expect the company to continue leading several markets, including search, artificial intelligence, cloud computing, and video.
According to a UBS research, Alphabet Inc. (NASDAQ) is a major participant in AI, with the Gemini project boosting intelligence and Tensor Processing Units (TPUs) and Google Cloud serving as enablers. As a result, the company will be poised to profit from the anticipated $1.2 trillion AI market by 2027.
To encourage suppliers to source all of their energy from renewable sources by 2029, GOOGL introduced the Google Renewable Energy Addendum. This aligns with Google’s 2030 objective of net-zero emissions and a 50% decrease in Scope 1, 2, and 3 emissions over 2019 levels.
Alphabet Inc. (NASDAQ:GOOGL) reported impressive Q2 2024 results, with diluted EPS growing 31% and revenue rising 15% year over year. Google Cloud Platform (GCP) showed growth of around 29% YoY, solidifying its dominance in the cloud market.
Patient Capital Opportunity Equity Strategy stated the following regarding Alphabet Inc. (NASDAQ:GOOGL) in its Q2 2024 investor letter:
“Alphabet Inc. (NASDAQ:GOOGL) was a top contributor in the second quarter, finally catching up to its peers in the Magnificent 7. The company gained 20.8% in the period following strong first quarter earnings, a new $70B repurchase program (3% of shares outstanding) and the initiation of a cash dividend ($0.20 per share; 0.42% yield). We continue to believe the market underappreciates Google’s exposure to AI with its Gemini model being integrated into search results, YouTube advertising and its cloud offering. We continue to think that the cloud players will be the AI winners in the long-term, with Google being well positioned to take advantage. While the company trades at 24x 2024 earnings, if you remove the money-losing and under-earning businesses, you realize that you are paying below a market multiple for the core Google business. We do not believe there are many other AI winners trading at such an attractive multiple.”
The tech behemoth has hedge fund sentiments of 216 in Q2 2024. Ken Fisher’s Fisher Asset Management is the largest shareholder in the firm, with 48,620,515 shares worth $8.86 billion.
While we acknowledge the potential of the 13 Best American Tech Stocks To Buy According to Short Sellers, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than NVDA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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