13 Tech Stocks with Biggest Upside

Published on September 16, 2023 at 4:45 pm by Fahad Saleem in Hedge Funds, News

In this article, we will take a look at the 13 tech stocks with biggest upside. To see more such companies, go directly to 5 Tech Stocks with Biggest Upside.

Technology stocks are really keeping their rally alive this year, defying all expectations. The AI-led rally that started in 2023 shows no signs of abating. But this massive rebound in tech stocks was not totally unexpected. A few analysts on Wall Street had foreseen the rebound of tech stocks after the bloodbath seen in 2022. For example, in December 2022, Dan Ives of Wedbush had said that after the “carnage” of 2022 he was seeing opportunities in the tech sector. He said at the time that the tech stocks were poised to grow by 20% in 2023. Ives had specifically said that tech stocks from software, semiconductor and other mainstream sectors would gain value despite the tough interest rate and macro environment.

Ives had said that 2022 was a “horror show” for tech investors as major tech stocks remained under huge pressure and even top companies like Meta and Amazon saw their shares decimated in the year. But Ives was hopeful for 2023:

“This is as under-owned we have seen tech stocks going back to the 2009/2010 timeframe and in our opinion represents great entry levels for long-term investors.”

In this backdrop it would make sense to pay attention to what Wall Street analysts and mainstream news media has been saying about tech stocks, especially the tech stocks they believe will rise in the coming months and years. That’s why in this article we have decided to listen to the experts and overall media and see which tech stocks they are betting on.

Before we move forward, it’s important to mention that a latest report by UBS mentions some really interesting points about the AI-led boom and warned that AI stocks could see some correction as investors would move to other parts of the broader tech industry:

For technology investors overall, we continue to see opportunities in tech laggards and mid-cycle industries like software and internet, as investors continue to reposition portfolios away from early cyclicals like semiconductors. We would not be surprised to see a 10–15% reset lower in AI-related stocks in the near term, given regulatory headwinds, supply bottlenecks, and elevated valuations. Investors with significant concentration in US technology should also consider opportunities in Europe and emerging market tech stocks. Many companies outside the US enjoy similar, if not better, medium- to longer-term growth profiles. And some trade at attractive valuations, in our view. We therefore think growth-based investors with a significant concentration in US tech stocks should rebalance their portfolios by diversifying into global tech stocks with solid business models.

source: pixabay

Our Methodology

This article is about tech stocks which the financial news media believes has huge upside. We first scoured the internet and listed down at least 30 technology stocks with major and mainstream finance websites believe have huge upside potential in 2023 and beyond. These websites include Barron’s, InvestorPlace, The Street, Seeking Alpha, Investing.com, CNBC, among other sources. From the top 30 stocks, we picked 13 tech stocks with the highest number of hedge fund investors. To gauge hedge fund sentiment for each stock we used Insider Monkey’s database of 910 hedge funds.

Tech Stocks with Biggest Upside According to Mainstream Financial News Media

13. The Trade Desk, Inc. (NASDAQ:TTD)

Number of Hedge Fund Holders: 37

Media buying platform company The Trade Desk, Inc. (NASDAQ:TTD) ranks 13th in our list of tech stocks with upside potential. Earlier this month The Trade Desk, Inc. (NASDAQ:TTD) jumped after William Blair started covering the stock with an Outperform rating. William Blair’s analyst Ralph Schackart believes The Trade Desk, Inc. (NASDAQ:TTD) is expected to increase its revenue by 23% in fiscal 2023 to $1.9 billion.

As of the end of the second quarter of 2023, 37 hedge funds tracked by Insider Monkey had stakes in The Trade Desk, Inc. (NASDAQ:TTD). The biggest stakeholder of The Trade Desk, Inc. (NASDAQ:TTD) was Nancy Zevenbergen’s Zevenbergen Capital Investments which owns a $223 million stake in the company.

Baron Small Cap Fund made the following comment about The Trade Desk, Inc. (NASDAQ:TTD) in its second quarter 2023 investor letter:

“We have had some extraordinary winners over time. For instance, we bought DexCom, Inc. at a $950 million market cap in 2012, and it is now valued at $50 billion (the stock has appreciated 41% annually since the Fund’s initial purchase). TransDigm Group Incorporated has grown from $1.1 billion at purchase to $49 billion presently (and the stock has appreciated 29% annually since the Fund’s initial purchase 17 years ago). IDEXX Laboratories, Inc. has gone from $2 billion at purchase to $42 billion over almost 15 years and the stock has appreciated 26% annually during that time frame. The Trade Desk, Inc. (NASDAQ:TTD) is now valued at $38 billion and was $433 million when we first purchased shares over 6 years ago. The stock has appreciated almost 60% annually since our initial purchase. Pretty amazing. All four stocks have been solid performers this year, contributing nicely to the Fund’s returns.

Since we run a small-cap fund but want to hold on to these great investments as they continue to compound and perform, we reduce the positions sizes over the holding period so that the overall market capitalization of the Fund is palatable. For each of the four stocks mentioned above, we presently own 11% or less of our peak positions. We take the proceeds from the trimming of these positions to fund new small-cap investments, with the hopes of somehow replicating these results.”

12. Pure Storage, Inc. (NYSE:PSTG)

Number of Hedge Fund Holders: 41

Data storage solutions company Pure Storage, Inc. (NYSE:PSTG) ranks 12th in our list of the tech stocks with the biggest upside. Pure Storage, Inc. (NYSE:PSTG) has gained about 40% year to date. Pure Storage, Inc. (NYSE:PSTG) recently posted second quarter results.

Adjusted EPS in the period came in at $0.34 beating estimates by $0.06. Revenue in the quarter jumped 6.5% year over year to $688.7 million, beating estimates by $8.7 million.

As of the end of the second quarter of 2023, 41 out of the 910 hedge funds tracked by Insider Monkey were long Pure Storage, Inc. (NYSE:PSTG). The biggest stakeholder of Pure Storage, Inc. (NYSE:PSTG) was Gavin Baker’s Atreides Management which owns a $291 million stake in the company.

11. DocuSign, Inc. (NASDAQ:DOCU)

Number of Hedge Fund Holders: 42

DocuSign, Inc. (NASDAQ:DOCU) in June posted Q1 results that easily beat Street’s estimates. Revenue in the period jumped 12%, while core subscription revenue rose 12%. DocuSign, Inc. (NASDAQ:DOCU) was trading at around $52 as of September 6. According to CNN Business, DocuSign, Inc. (NASDAQ:DOCU) has a median analyst price target of $67.

A total of 42 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in DocuSign, Inc. (NASDAQ:DOCU). The biggest stakeholder of DocuSign, Inc. (NASDAQ:DOCU) was John Overdeck and David Siegel’s Two Sigma Advisors which owns a $196 million stake in the company.

In June, DocuSign, Inc. (NASDAQ:DOCU)’s CEO talked about DocuSign’s AI plans in an earnings call and said:

“As the leader in agreement workflows, we can use AI to deliver important value to customers by leveraging the world’s largest set of agreement data, our proprietary agreement models and deep integrations with best-in-class third-party models. We’re excited to showcase new products and enhancements at our — on our intelligent agreement roadmap, including significant AI-powered innovations at our user conference Momentum. The event will kick off next week in Santa Clara with virtual and in-person events in eight cities around the globe over the next few months. Turning to our initiatives around our omnichannel go-to-market. We are continuing to drive deep relationships within our partner ecosystem and enhancing our AI capabilities.

We were honored to be showcased in the main keynote of Microsoft’s Build Conference as one of the first companies using Microsoft Azure OpenAI. This further underscores our growing relationship with Microsoft and the opportunities we’re seeing to enhance our AI capabilities. During the quarter, we also joined the SAP Endorsed Apps program. E-signature has been rigorously tested and validated by SAP to ensure that it seamlessly integrates with SAP solutions and meets their high standards for quality and performance. We’re pleased with the progress we’re seeing across our partner ecosystem, which will continue to drive further adoption of our products globally. Last quarter, I shared how we are investing in product-led growth and self-serve capabilities in order to drive more go-to-market efficiency and deliver a better experience for our customers.”

Rowan Street Capital made the following comment about DocuSign, Inc. (NASDAQ:DOCU) in its second quarter 2023 investor letter:

“Now, the bottom 3 performers from all the companies that we’d sold were DocuSign, Inc. (NASDAQ:DOCU) -76%, TripAdvisor (TRIP) -59% and Under Armour (UA) -57%. These represent the losses we would have incurred had we held on to these positions until now. We must note that all 3 of these were sold for purely fundamental reasons and we ended up being correct on all of them.”

10. Fortinet Inc. (NASDAQ:FTNT)

Number of Hedge Fund Holders: 49

Cybersecurity solutions company Fortinet Inc. (NASDAQ:FTNT) is one of the tech stocks with the biggest upside potential. Last month Fortinet Inc. (NASDAQ:FTNT) fell after the company cut its full-year guidance. However, Guggenheim analyst Raymond McDonough upgraded Fortinet Inc. (NASDAQ:FTNT) despite the guidance cut and said that while the company is facing headwinds it is not “structurally impaired.” The analyst also said that Fortinet Inc. (NASDAQ:FTNT)’s competitive position has not taken a hit. He set a price target of $70 on Fortinet Inc. (NASDAQ:FTNT), which shows a healthy upside from its levels on September 6 ($61.9).

As of the end of the second quarter of 2023, 49 hedge funds out of the 910 funds tracked by Insider Monkey had stakes in Fortinet Inc. (NASDAQ:FTNT). The biggest stakeholder of Fortinet Inc. (NASDAQ:FTNT) was Andreas Halvorsen’s Viking Global which owns a $581 million stake in the company.

9. Cadence Design Systems Inc. (NASDAQ:CDNS)

Number of Hedge Fund Holders: 68

Software company Cadence Design Systems Inc. (NASDAQ:CDNS) ranks 9th in our list of tech stocks with the biggest upside. In July Cadence Design Systems Inc. (NASDAQ:CDNS) posted Q2 results. Adjusted EPS in the period came in at $1.22 beating estimates by $0.03. Revenue in the quarter jumped 13.9% year over year to 4976.58 million.

Cadence Design Systems Inc. (NASDAQ:CDNS) was trading at around $245 as of September 6, while its median analyst price target is $264.

As of the end of the second quarter of 2023, 68 hedge funds in Insider Monkey’s database had stakes in Cadence Design Systems Inc. (NASDAQ:CDNS).

Renaissance Investment made the following comment about Cadence Design Systems, Inc. (NASDAQ:CDNS) in its Q3 2022 investor letter:

“Cadence Design Systems, Inc. (NASDAQ:CDNS) was another contributor. The company reported strong operating results with broad-based strength from its semiconductor customers who are migrating to next-generation manufacturing nodes. We believe the multi-year investment cycle for semiconductor design spending should drive sustainable double-digit growth well into next year.”

8. ServiceNow Inc. (NYSE:NOW)

Number of Hedge Fund Holders: 93

ServiceNow Inc. (NYSE:NOW) is making moves after the company recently posted strong Q2 results and talked about its partnerships with NVIDIA Corporation (NASDAQ:NVDA). The company has a huge growth potential in AI and Cloud. Recently Stifel, after cutting its rating for Datadog, said it prefers companies such as ServiceNow Inc. (NYSE:NOW), MongoDB (NASDAQ:MDB), Snowflake (NYSE:SNOW) and Dynatrace (NYSE:DT) in the infrastructure space.

L1 Long Short Fund made the following comment about ServiceNow, Inc. (NYSE:NOW) in its July 2023 investor letter:

“US-based software company ServiceNow, Inc. (NYSE:NOW) delivered another impressive quarterly result that came in ahead of analysts expectations. Subscription revenues grew 25% year-on-year in constant currency terms to $2.1 billion and operating margins came in at 23.4%. Despite ongoing variability in the macro backdrop, ServiceNow continues to benefit from spend prioritisation within the IT tech stack as vendors look to consolidate back-office apps onto an integrated platform. The company’s operational metrics held firm, with remaining performance obligations growing 24% year-on-year to $14.2 billion and renewal rates ticking up to 99%. As we have mentioned before, the company’s renewal rates are noteworthy as not only are they best-in-class but they are also remarkably consistent, typically in the range of 97% to 99%. They speak to the mission critical nature of the platform and are a key driver of long term annuity value.

Investors were also excited to hear management speak to the burgeoning artificial intelligence (AI) opportunity. Things are moving fast and the company plans to release new premium offerings of their workflow products – across IT, customer service and human resources – towards the back end of 2023 that will have new Generative AI capabilities embedded into them. Management also mentioned that they anticipate these new offerings could deliver a “minimum” 60%-plus list price uplift relative to its current Pro versions as they provide meaningful productivity improvements for end users. Whilst it’s still early days, ServiceNow appears well placed to capitalise on the Generative-AI opportunity and we believe it could be a meaningful driver for the company’s next phase of growth.”

7. Alibaba Group Holding Limited (NYSE:BABA)

Number of Hedge Fund Holders: 112

Chinese ecommerce giant Alibaba Group Holding Limited (NYSE:BABA) ranks 7th in our list of the tech stocks with the highest upside potential.

Last month, after Alibaba Group Holding Limited (NYSE:BABA)’s Q1 results, Baird said that Alibaba’s e-commerce segment is showing stabilization amid “aggressive” competition. Baird’s analyst Colin Sebastian upped his price target on BABA to $120 from $115.

As of the end of the second quarter of 2023, 112 hedge funds out of the 910 funds tracked by Insider Monkey were long Alibaba Group Holding Limited (NYSE:BABA). The biggest stakeholder of Alibaba Group Holding Limited (NYSE:BABA) was David Tepper’s Appaloosa Management LP.

L1 Long Short Fund made the following comment about Alibaba Group Holding Limited (NYSE:BABA) in its second quarter 2023 investor letter:

“Alibaba Group Holding Limited (NYSE:BABA) (Long -18%) shares weakened in recent months as Chinese reopening strength faded and macro-economic datapoints began sequentially declining. Nevertheless, we believe the Chinese government will use consumption as a key lever to reinvigorate the economy post-COVID lockdowns. Alibaba remains a high-quality business with leading positions in both eCommerce and Public Cloud, and management is taking proactive steps to unlock shareholder value. It has announced plans to split into six major business groups – Cloud Intelligence, Taobao Tmall, Local Services, Global Digital, Cainiao Smart Logistics and Digital Media, and Entertainment Group. Each group will be managed independently, with a separate CEO and board, have the flexibility to raise external capital and potentially pursue separate IPOs. We believe this restructure will be a strong positive catalyst to unlock the sum-of-the-parts valuation upside in the company.”

6. Advanced Micro Devices, Inc. (NASDAQ:AMD)

Number of Hedge Fund Holders: 112

Advanced Micro Devices, Inc. (NASDAQ:AMD) shares can grow in the future amid AI-related boom. After all, NVIDIA Corporation (NASDAQ:NVDA) won’t be the only player in the AI chips market.

Advanced Micro Devices, Inc. (NASDAQ:AMD) recently gave data guidance for the upcoming quarter according to which it expects a 35% increase in revenue. Analyst are hopeful that the MI300X processor could be a much-needed catalyst for Advanced Micro Devices, Inc. (NASDAQ:AMD). Advanced Micro Devices, Inc. (NASDAQ:AMD) is also expected to gain from the revival in the PC market.

L1 Capital International Fund made the following comment about Advanced Micro Devices, Inc. (NASDAQ:AMD) in its second quarter 2023 investor letter:

“During the June 2023 quarter the AI bubble continued to inflate. Advanced Micro Devices, Inc. (NASDAQ:AMD), as a key challenger to Nvidia, will benefit from increased demand for its next generation semiconductor chips. AMD’s share price is reflecting very bullish sentiment and the share price has run ahead of a reasonable base case valuation. Accordingly, we divested our entire position and moved AMD to our Bench.”

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