We recently compiled a list of the 12 Best Technology Stocks to Invest In for the Long Term. In this article, we are going to take a look at where Amazon.com Inc. (NASDAQ:AMZN) stands against the other technology stocks.
On January 1, King Lip, BakerAvenue Wealth Management’s chief strategist and partner, joined CNBC’s ‘Closing Bell’ to discuss market outlooks as we enter 2025. His focus was on the impressive performance of tech stocks in 2024, with expectations for a second consecutive year of double-digit gains. Lip was against the prevailing sentiment among investors that big tech has peaked and that funds should rotate into smaller stocks or other themes. He argued that the recent weakness in the tech sector is largely due to technical rebalancing rather than a fundamental downturn. He emphasized that cash is likely to flow back into leading tech stocks, as they are projected to deliver the highest earnings growth in 2025, with an anticipated earnings increase of over 20%.
Discussing high valuations in the tech sector, particularly for large-cap stocks trading at forward earnings multiples between 32 and 35 times, Lip countered that many valuations remain within one standard deviation of their historical norms over the past decade. He pointed out that the MAG7 have consistently provided strong returns and are well-positioned for future growth. Lip identified Broadcom as a top stock, praising its management under Hock Tan and its unique role in the market as a provider of custom AI chips. He noted that the company operates at a lower earnings multiple while benefiting from substantial growth.
Lip also discussed Palantir, which has garnered attention for its profitability and positive cash flow since becoming profitable two years ago; despite its high valuation exceeding 50 times revenue, he believes it is well-positioned to benefit from government spending cuts and AI initiatives. While acknowledging concerns about insider selling and high valuations for the company, Lip remains optimistic about its future potential, suggesting it could be more appealing if it drops to the mid-$60 range.
Lip is bullish on tech stocks in 2025 that will be driven by strong earnings growth and ongoing investments in AI infrastructure. The NASDAQ 100 index has performed remarkably well, achieving a return of 27% in 2024 following a staggering 53.8% return in 2023. This reflects a broader trend where major tech companies have outperformed traditional indices significantly, and with that being acknowledged, we’re here with a list of the 12 best technology stocks to invest in for the long term.
Methodology
To identify the best long-term tech stocks according to media, we sifted through financial media reports and watched Wall Street analysts’ appearances on the news. We compiled a preliminary list of 25 stocks first and then selected 12 stocks that were the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
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 customer entering an internet retail store, illustrating the convenience of online shopping.
Amazon.com Inc. (NASDAQ:AMZN)
Number of Hedge Fund Holders: 286
Amazon.com Inc. (NASDAQ:AMZN) is a technology company that evolved from an online bookstore into a diversified conglomerate. Its core businesses include e-commerce with an online marketplace, along with cloud computing through Amazon Web Services (AWS). It also offers digital streaming services and has expanded into areas like AI, advertising, and physical retail.
During Q3 2024, AWS led the charge in profitability, contributing $10.4 billion to the company’s total operating income of $17.4 billion. Its cloud offerings are improved through customer-centric initiatives. A recent example is the launch of the Oracle Database@AWS service, which enables customers to migrate their Oracle workloads to AWS infrastructure with minimal modifications.
AWS dominates AI due to its unrivaled computing power, essential for training large models. Its user-friendly AI platform and scalable infrastructure, coupled with high switching costs, make it the preferred choice for businesses over managing their own AI infrastructure. The total cloud market is expected to grow from $700 billion in 2024 to ~$2,400 billion in 2032, which positions AWS for further growth.
Montaka Global Investments increased its holdings in Amazon.com Inc. (NASDAQ:AMZN) due to a near -20% stock price decline, believing it offers more upside potential than other holdings like AMD and KD. Here’s what the company’s Q3 2024 investor letter stated:
“Secondly, in August, we sold some of our holdings in two tactical positions in the tail of Montaka’s portfolio – Advanced Micro Devices (AMD) and Kyndryl Holdings (KD) – to take advantage of a near-20% drawdown in the stock price of Amazon.com, Inc. (NASDAQ:AMZN).
We still see plenty of upside in AMD and KD, but Amazon has more substantial and higher-probability upside that demanded we allocate even more of Montaka’s capital to the online retailer.
Investment opportunities always compete for capital. Through this lens, Montaka’s largest investments act as a kind of ‘benchmark’: Any new investment must be more attractive than these holdings to get included in our portfolio.
Because we believe Montaka’s largest investments remain so attractive, our annualized portfolio turnover has been low for many years now – typically around 25%.
We continually identify quality global businesses with upside potential – but few new investment opportunities have greater upside than Montaka’s existing portfolio investments.
While Montaka is focused on investing over the long term, and most days don’t require any action on our part, paradoxically we need to be agile on a daily basis. That is, we must be ready to act if stock price changes throw up attractive investment opportunities.”
Overall AMZN ranks 1st on our list of the best technology stocks to invest in for the long term. As we acknowledge the growth potential of AMZN as an investment, our conviction lies in the belief that AI stocks hold great 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 AMZN but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 8 Best Wide Moat Stocks to Buy Now and 30 Most Important AI Stocks According to BlackRock.
Disclosure: None. This article is originally published at Insider Monkey.
