In this article, we will discuss the 8 Best Information Technology Services Stocks to Invest in Now.
As per AXA Investment Managers, the US appears to be well-placed to continue to dominate the technology space. The frenzy related to generative artificial intelligence topped in June and tech stocks have underperformed the overall market since then. From the end of June to the end of October, the NASDAQ-100 Technology Sector saw a fall of over ~2% while the broader market (S&P 500) went up by over ~5%. AXA Investment Managers highlighted that the guidance from tech companies concerning new products and services demonstrates that earnings growth is expected to remain healthy moving forward.
Even though AI technologies are more prevalent in the consumer products category, many experts believe that we are in the early stages of this tech revolution.
Generative AI and Hyperautomation – Well-placed for a Next Revolution
Over the past few years, tech industry veterans have been amazed by the potential of generative AI. Moving forward, in 2025, Forbes believes that market players will begin seeing organizations move beyond this hype. This means that companies are expected to integrate generative AI into their business strategy. In the earlier wave of the AI revolution, experts saw leading tech companies rethink and transform their existing business models like online advertising, retail, and media streaming.
Forbes highlighted that 2025 can be a year of change. This is because more strategic use cases – such as realigning business models concerning the potential of generative AI – are expected to come forward. Therefore, there can be generative tools and applications enabling entirely new possibilities throughout different industries such as healthcare, manufacturing, education, and several other industries.
As per ConnectWise, one of the most important emerging technological trends is hyperautomation. It revolves around the end-to-end unification of automated functions powering efficiency at scale. Several organizations have been leveraging AI, ML, and robotic process automation (RPA) in a bid to automate independent business functions in a highly integrated way.
While several technologies leveraged AI in automation, the strong dynamics of hyperautomation should not be overlooked. One of the biggest trends is increased productivity and accessibility of the technology. The secondary impacts of this expansion should be seen across every industry as full-scale digital transformation becomes feasible. Talking about the industry-specific applications, in manufacturing, hyperautomation should help in enhancing production efficiency in factories and in healthcare, this technology will help in automating sensitive data processing and gain insights into patient care.
READ ALSO: 7 Best Stocks to Buy For Long-Term and 8 Cheap Jim Cramer Stocks to Invest In.
Intelligent Enterprise- An Idea or a Reality
A trend that is likely to revolutionize the broader technology industry is the idea of intelligent enterprise. As per SAP, this concept revolves around using data assets in a bid to achieve the desired outcomes faster with lesser risk and anticipating and proactively responding to customer needs. As per Future Market Insights, the intelligent enterprise data capture software market could see a CAGR of ~12.70%. By 2034, this market could soar to a strong valuation of US$37,189.90 million. The increased adoption of automation technologies across businesses should result in increased demand for intelligent enterprise data capture software.
With the help of automating data extraction and processing tasks, the technology supports businesses seeking to streamline workflows.
Source: Pixabay
Our Methodology
To list the 8 Best Information Technology Services Stocks to Invest in Now, we used the Finviz screener to extract the relevant stocks. Finally, the stocks having the highest hedge fund holdings were considered. The list has been arranged in the ascending order of their hedge fund sentiment, as of Q2 2024.
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).
8 Best Information Technology Services Stocks to Invest in Now
8) Wipro Limited (NYSE:WIT)
Number of Hedge Fund Holders: 11
Wipro Limited (NYSE:WIT) operates as an IT, consulting, and business process services company.
Wipro Limited (NYSE:WIT) has now been focusing on share buybacks over dividends. Moreover, it plans to pursue strategic acquisitions in specific market areas instead of large-scale deals. The adoption of generative AI, along with plans to integrate AI in several service areas, should drive topline growth in the near term. The company remains focused on strategic priorities in BFSI, healthcare, and technology sectors.
Wipro Limited (NYSE:WIT)’s plans for strategic acquisitions in specific market areas and integration of GenAI throughout service areas are some of the measures likely to support the company. Thanks to the strong execution during the quarter ended September 30, 2024, the company met its expectations for revenue growth, bookings, and margins. Also, it expanded its top accounts and large deal bookings exceeded $1 billion once again. Moving forward, it will continue to invest in its clients, strategic priorities, and building a strong AI-powered Wipro Limited (NYSE:WIT).
Wipro Limited (NYSE:WIT) also continued to secure large and strategic deals throughout industries. The company has been chosen by Hanesbrands Inc., which is a global leader in iconic apparel brands, to further drive digital transformation, business growth, and enhance profitability. Also, in partnership with NHS Scotland and Wipro UK Limited, Rhapsody (global leader in digital health enablement) developed a custom EMPI (Enterprise Master Person Index) solution to replace the existing legacy application. This should result in effective updates and scalability in NHS Scotland’s expanding digital healthcare infrastructure.
The company also highlighted that a US-based wholesale food distributor selected it to reimagine the business operations. Through leveraging AI and process transformation tools, Wipro Limited (NYSE:WIT) is expected to create a centralized system across key support functions such as HR, Financial Planning & Analysis, and Data Management.
7) Infosys Limited (NYSE:INFY)
Number of Hedge Fund Holders: 19
Infosys Limited (NYSE:INFY) offers consulting, technology, outsourcing, and next-gen digital services in North America, and internationally.
Wall Street analysts are optimistic about Infosys Limited (NYSE:INFY)’s long-term growth trajectory, courtesy of its ability to secure large deals. Project Maximus should continue to contribute positively and generative Al is being implemented across service lines. The company maintained its emphasis on the financial services sector and the implementation of generative Al. Infosys Limited (NYSE:INFY)’s ability to integrate AI solutions in its service offerings and support clients in leveraging technology should aid its future growth trajectory and competitive positioning.
Infosys Limited (NYSE:INFY) has opportunities to exploit its healthy market position and technological expertise. The anticipated ramp-up in growth, mainly in digital services and consulting, should fuel its performance. Wall Street analysts opine that strong deal wins and high conversion rates might boost its performance over the coming year.
The analysts expect that a healthy pipeline of new contracts, mainly in high-growth areas like digital transformation and cloud services, can offer a solid foundation for revenue growth. Furthermore, a strong deal flow might give Infosys Limited (NYSE:INFY) greater pricing power. The focus on generative AI initiatives is expected to enhance productivity and operational efficiency. Moreover, Project Maximus targets to offset wage hikes with the help of pricing optimization and operational efficiencies.
For FY 2025, Infosys Limited (NYSE:INFY) expects revenue growth of 3.75%-4.50% in constant currency and an operating margin of between 20%-22%. The company continues to focus on accelerating revenue growth with a strong emphasis on margin performance. BMO Capital Markets increased the target price on the shares of Infosys Limited (NYSE:INFY) from $23.00 to $25.00, giving a “Market Perform” rating on 18th October.
6) CDW Corporation (NASDAQ:CDW)
Number of Hedge Fund Holders: 32
CDW Corporation (NASDAQ:CDW) offers information technology (IT) solutions in the US, the United Kingdom, and Canada.
CDW Corporation (NASDAQ:CDW) has been deepening its customer relationships and is a trusted adviser on cloud, cybersecurity, networking, and devices. The company continues to gain market share. The strong performance of the company’s client devices segment, mainly in PCs and storage, offers a potential avenue for offsetting weaknesses in other areas. As companies continue to invest in digital transformation, the demand for personal computing devices and data storage solutions should remain strong.
CDW Corporation (NASDAQ:CDW) can leverage its success in this segment to tap a larger market share and expand offerings and include complementary products and services. As a result of its focus on cross-selling opportunities and bundling solutions, CDW Corporation (NASDAQ:CDW) should be able to drive growth in adjacent areas. The company’s established market position and diverse portfolio offer a strong foundation for future growth.
CDW Corporation (NASDAQ:CDW) has been focusing on areas like workload and data growth, security threats, and AI adoption. The company has been investing in AI initiatives as it views them as a long-term growth opportunity.
Stifel Nicolaus increased its price objective on the company’s shares from $250.00 to $260.00, giving a “Buy” rating on 17th July. Aoris Investment Management, a specialist international equity manager, released its Q2 2024 investor letter. Here is what the fund said:
“The largest detractors for the quarter were Accenture and CDW Corporation (NASDAQ:CDW), which both fell by around 14%. Accenture and CDW are currently experiencing flattish years in terms of revenue and earnings growth. This follows a period of post-pandemic elevated demand. We believe both companies continue to gain market share.
CDW is the largest value-added IT reseller in the US. After a strong post-pandemic period of demand for hardware such as laptops, CDW’s customers are currently in a period of more restrained spending. This is normal and we expect demand to recover as these devices age in the next couple of years. CDW continues to deepen its customer relationships, serving as a trusted adviser on cloud, cybersecurity, networking and devices, and continues to gain market share.”
5) Gartner, Inc. (NYSE:IT)
Number of Hedge Fund Holders: 35
Gartner, Inc. (NYSE:IT) operates as a research and advisory company in the US and internationally.
Wall Street analysts remain optimistic about the supply chain research, which should be Gartner, Inc. (NYSE:IT)’s fastest-growing vertical. This segment remains important for companies in the manufacturing and distribution sectors, demonstrating its strategic positioning in a critical area of business intelligence. This unique position enables Gartner, Inc. (NYSE:IT) to capitalize on the increasing demand for supply chain intelligence.
Some of the potential expansion opportunities for Gartner, Inc. (NYSE:IT) stem from the growing demand for supply chain intelligence and optimization services. Moreover, the company has been guiding clients through a wide range of topics, such as generative AI, supply chain optimization, leader and manager development, cost optimization, cybersecurity, and the recent CrowdStrike outage.
Gartner, Inc. (NYSE:IT)’s business model, which stems from high-value research and advisory services, offers significant opportunities for margin expansion. As it scales its operations and uses existing infrastructure to cater to a growing client base, the company can realize economies of scale, resulting in improved profitability.
Analysts at UBS Group increased their target price on the shares of Gartner, Inc. (NYSE:IT) from $510.00 to $580.00, giving a “Buy” rating on 31st July. Baron Funds, an investment management company, released its Q1 2024 investor letter. Here is what the fund said:
“Shares of Gartner, Inc. (NYSE:IT), the leading provider of syndicated research to the IT sector, contributed to performance. Fourth quarter financial results were mixed, with declines in net income and EPS. However, solid increases in contract value and strong full-year performance, including a 9% increase in net income and an 11% rise in diluted EPS, helped boost the company’s share price. In addition, a 19% increase in free cash flow for the quarter and 6% for the full year underscored Gartner’s operational efficiency. Gartner’s core subscription research businesses compounded at attractive rates, and we believe growth is poised to accelerate. We think Gartner will emerge as a key decision support resource for every company evaluating the opportunities and risks of AI on its business, providing a tailwind to volume growth and pricing realization. We expect Gartner’s sustained revenue growth and focus on cost control to drive continued margin expansion and enhanced free-cash-flow generation. The company’s balance sheet is in excellent shape and can support aggressive repurchases and bolt-on acquisitions, in our view.”
4) Cognizant Technology Solutions Corporation (NASDAQ:CTSH)
Number of Hedge Fund Holders: 39
Cognizant Technology Solutions Corporation (NASDAQ:CTSH) is a professional services company, that offers consulting and technology, and outsourcing services in North America, Europe, and internationally.
Wall Street remains optimistic about Cognizant Technology Solutions Corporation (NASDAQ:CTSH)’s recent acquisition of Belcan. This strategic move is being seen as a long-term investment in high-quality engineering talent. The Belcan acquisition should enhance the company’s service offerings and diversify the client base, which will help in reducing reliance on the healthcare and financial services sectors. This acquisition should strengthen Cognizant Technology Solutions Corporation (NASDAQ:CTSH)’s market position and contribute to revenue growth.
The adoption of GenAI should increase in fiscal year 2025, potentially aiding its growth strategy. Its expansion in aerospace and defense sectors, with the help of the Belcan acquisition, offers new opportunities for revenue diversification. Cognizant Technology Solutions Corporation (NASDAQ:CTSH)’s expertise in IT services and consulting enables it to support clients in implementing and leveraging GenAI solutions. This will fuel new business and increase the value of existing contracts.
The integration of GenAI capabilities throughout the company’s service portfolio should result in enhanced productivity, innovative solutions, and differentiation amidst strong competition. JPMorgan Chase & Co. upped its price target on the shares of Cognizant Technology Solutions Corporation (NASDAQ:CTSH) from $82.00 to $89.00, giving a “Neutral” rating on 6th September.
3) International Business Machines Corporation (NYSE:IBM)
Number of Hedge Fund Holders: 54
International Business Machines Corporation (NYSE:IBM) provides integrated solutions and services worldwide.
Amidst the evolving technology landscape, International Business Machines Corporation (NYSE:IBM)’s strategic focus on AI and hybrid cloud services placed the company well to capitalize on emerging trends while, at the same time, navigating challenges in the IT services sector. The company’s dual focus on AI and hybrid cloud services should act as a primary growth enabler. International Business Machines Corporation (NYSE:IBM) has been investing heavily in such areas and is leveraging its extensive enterprise client relationships in a bid to drive the adoption of its AI and cloud solutions.
The company’s progress in the field of Generative AI has been lauded by analysts and industry experts. International Business Machines Corporation (NYSE:IBM) has been positioning itself to help customers with managing and optimizing LLMs both on-premises and off-premises. While there was a temporary pause in Red Hat’s growth acceleration, industry experts remain optimistic about its prospects moving forward.
International Business Machines Corporation (NYSE:IBM)’s focus on AI, mainly in the enterprise space, places the company well to tap significant growth opportunities. The company’s approach to AI, which focuses on responsible and explainable AI, aligns well with the requirements of large organizations requiring transparency and governance in AI implementations.
Bank of America upped its price objective on the shares of International Business Machines Corporation (NYSE:IBM) from $209.00 to $250.00, giving a “Buy” rating on 9th October. Diamond Hill Capital, an investment management company, released its Q1 2024 investor letter. Here is what the fund said:
“Among our bottom Q1 contributors short positions in Dick’s Sporting Goods, International Business Machines Corporation (NYSE:IBM) and Palomar Holdings. Though we believe the quality and durability of IBM’s free cash flow-generating capabilities remain questionable, investor sentiment has improved amid optimism for the company’s still-nascent AI product suite.”
2) Accenture plc (NYSE:ACN)
Number of Hedge Fund Holders: 68
Accenture plc (NYSE:ACN) is engaged in providing management and technology consulting services and solutions.
Over the long term, Accenture plc (NYSE:ACN) should benefit from sticky clientele. The high switching costs reflect that its clients, mainly those with larger contracts, will not switch providers. This provides healthy revenue visibility. Moreover, it has focused on inorganic growth opportunities and has a history of growth via acquisitions. Recently, it purchased Excelmax Technologies in India, which should fuel its silicon design and engineering capabilities.
Wall Street believes that Accenture plc (NYSE:ACN) is well-placed to benefit from the current AI wave. It can help in the development and implementation of LLMs for generative AI and the identification of business data. This rapid monetization of AI opportunities reflects its ability to capitalize on emerging trends.
Accenture plc (NYSE:ACN)’s growth strategy relies on strategic acquisitions to enhance its capabilities and expand its market reach. It announced the acquisitions of Axis Corporate, which is a management and technology consulting firm specializing in financial services. It acquired CLIMB, an IT services provider based out of Japan. Wall Street expects that GenAI might add significant net annual growth to Accenture plc (NYSE:ACN)’s revenue. Its strong relationships with renowned technology partners and record of integrating new technologies in its service offerings place it favorably to leverage the GenAI revolution.
ClearBridge Investments, an investment management company, released its Q3 2024 investor letter. Here is what the fund said:
“One of the keys to recent results and to delivering consistent, long-term performance through market cycles is how we think about risk. During our investment diligence process and ongoing work on portfolio holdings, we focus attention on how our thesis could be wrong and what the implications for stock valuation would be under these scenarios. Being sensitive to valuation is at the core of our portfolio construction efforts and prevents us from owning a particular stock or theme where we are not comfortable with the price. Accenture plc (NYSE:ACN), a new addition in the second quarter, is a good example. The stock was on our whiteboard for several years, and we remained patient until volatility created an attractive entry point. We further added to the position in the third quarter.”
1) Fiserv, Inc. (NYSE:FI)
Number of Hedge Fund Holders: 73
Fiserv, Inc. (NYSE:FI) provides payments and financial services technology services.
While Fiserv, Inc. (NYSE:FI) has positioned itself as a critical player in the digital transformation of financial services, the company’s growth trajectory is expected to be aided by its global presence and diverse portfolio of products and services. By increasing its reach, the company plans to capture more market share and penetrate new markets. It has been focusing on software and value-added services, highlighting that the shift towards higher-margin offerings should help drive profitability and enhance the value proposition.
Fiserv, Inc. (NYSE:FI) plans to take its Clover platform international, which should help open up new growth avenues. The increased penetration of Value-Added Services (VAS) and expansion of verticalized software offerings are expected to fuel its long-term growth. Such initiatives, together with its unique advantage in distribution channels, place the company well.
By providing additional services beyond core payment processing, the company can deepen its relationships with current clients and onboard new ones. UBS Group increased its price objective on the shares of Fiserv, Inc. (NYSE:FI) from $185.00 to $240.00, giving a “Buy” rating on 23rd October.
Madison Investments, an investment advisor, released its third-quarter 2024 investor letter. Here is what the fund said:
“In the third quarter, the top five individual contributors to performance relative to the benchmark were Parker-Hannifin Corporation, Fiserv, Inc. (NYSE:FI), Lowe’s Companies, Brookfield Corporation, and Progressive Corporation. At payment processor Fiserv, revenue and profits continue to grow nicely, in part driven by the strong performance of its Clover payment platform for small-and-medium sized businesses. In our assessment, Clover’s broad adoption by merchants across a wide variety of verticals is due to its superior functionality compared to legacy point-of-sale payment platforms, coupled with Fiserv’s extensive distribution scale across financial institutions and independent sales organizations. This latter advantage is especially difficult for emerging fintech competitors to replicate, reinforcing our confidence in the company’s long-term prospects.”
While we acknowledge the potential of FI as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than FI but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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