We recently compiled a list of the 13 Best Big Tech Stocks To Buy Now. In this article, we are going to take a look at where Adobe Inc. (NASDAQ:ADBE) stands against the other big tech stocks.
The State of Big Tech Right Now
Big tech has long been an immensely popular area to invest in when it comes to US stocks, and for good reason. Tech stocks, particularly those investing in AI and offering AI products, have been generating immense returns in 2024, with the second week of September bearing witness to their immense potential. This week, the S&P 500 and the Nasdaq Composite posted their best returns for the entire year, and many tech stocks were part of the faction that made this possible. As a result, there’s a huge rise in the popularity of AI and tech stocks. This is in stark contrast to market opinions on AI stocks, particularly during the first week of September, when many were very concerned that we are in an AI hypecycle that is bound to wind down soon.
Altimeter Capital’s CEO, Brad Gerstner, recently joined CNBC’s “Closing Bell” to discuss trends shaping big tech right now. He noted that the pace of AI at present is faster than any other tech development seen before. He also added that many investors are starting to lean back into big tech ahead of the election. This development may be coming about because of the historical trend that suggests that stocks perform better in the months directly following a US election – in which case, it makes sense for investors to be piling into big tech and AI right now since that’s a sure shot way to profit in the next few months.
How Is Big Tech Impacting Other Sectors?
A recent notable trend that people have begun to see because of the rise of big tech companies and the growing use of AI is a greater demand for power. Many major tech companies are beginning to require more energy, with the AWS-owner going as far as buying a nuclear-powered data center for $650 million recently.
The primary driving force for this rising demand is the need to develop AI. Many energy-conscious investors may see this new trend as a red flag for big tech. However, Jensen Huang has noted that while AI takes a ton of energy to train, once developed and trained, it will also help save energy. He particularly noted that AI is going to become so advanced through this development that it will eventually end up offering solutions that can change the way we use energy, making our operations endlessly more energy efficient.
With this in mind, big tech seems to be quite an interesting space to follow right now, especially in the days leading up to the US Presidential Elections. As such, we’ve compiled a list of the best big tech stocks to buy right now.
Our Methodology
For our list below, we selected big-tech stocks with the highest numbers of hedge funds holding stakes in them during the second quarter and then ranked them based on this metric in ascending order.
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).
A team of engineers and scientists collaborating at a workstation surrounded by their applications and solutions.
Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 107
Adobe Inc. (NASDAQ:ADBE) is an application software company based in San Jose, California. It offers content-creation products and services, such as Document Cloud, a document services platform, Adobe Photoshop, and Creative Cloud, a service that allows members to access its creativity products.
In the third quarter, Adobe Inc. (NASDAQ:ADBE) saw revenue of $5.41 billion, up 11% year-over-year, and generated $2 billion in cash flows from operations. Revenue growth is a metric that the company has been impressing investors on, since over the past four years, revenue has grown at a CAGR of 15.26%. A huge part of Adobe Inc.’s (NASDAQ:ADBE) growth comes from AI integration across its products since AI-driven enhancements in products like Adobe Firefly have increased customer engagement and retention across Creative Cloud, Document Cloud, and Experience Cloud.
Looking at Document Cloud’s sales of $807 million for the third quarter alone is enough to see the impact of AI on Adobe Inc. (NASDAQ:ADBE) operations since this sales figure has risen by 18% year-over-year. Despite these stellar results, Adobe Inc. (NASDAQ:ADBE) did not perform all that well after the announcement of its results. The primary reason for this is that the company’s near-term outlook disappointed investors. For the fiscal fourth quarter, Adobe Inc. (NASDAQ:ADBE) expects sales of $5.5-$5.55 billion and non-GAAP EPS of $4.36-$4.68, while analyst estimates were for $5.61 billion in sales and $4.67 in EPS respectively.
Considering this disparity, many are wondering whether Adobe Inc. (NASDAQ:ADBE) is really gaining as much traction as they hoped it would from its AI-power software. However, this alone is not enough to write off the stock as a bad investment. Adobe Inc. (NASDAQ:ADBE) continues to be a strong business software player, and generative AI is only cementing this position. Also, despite the somewhat disappointing guidance, the company’s top line is still expected to grow by 20% in fiscal 2024, making this stock one of the best big tech players out there.
There were 107 hedge funds long Adobe Inc. (NASDAQ:ADBE) in the second quarter, with a total stake value of $11.8 billion. Fisher Asset Management was the most prominent shareholder, holding 4,766,441 shares.
Overall ADBE ranks 12th on our list of the best big tech stocks to buy. While we acknowledge the potential of ADBE as an investment, we believe that AI stocks hold promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ADBE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
