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 Salesforce, Inc. (NYSE:CRM) 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 customer service team in an office setting using the company’s Customer 360 platform to communicate with customers.
Salesforce, Inc. (NYSE:CRM)
Number of Hedge Fund Holders: 117
Salesforce, Inc. (NYSE:CRM) is an information technology company based in San Francisco, California. It offers Customer Relationship Management technology.
Propelled by healthy growth, Salesforce, Inc. (NYSE:CRM) announced its revenue of $9.33 billion in the second quarter, up 8% year-over-year and exceeding analysts’ estimates by $100 million. Since the company is the leading provider of CRM services, it has an immense presence in this market and has been expanding its reach through big acquisitions for years. Despite this, Salesforce, Inc. (NYSE:CRM) is also ensuring that organic expansion is not put on the back burner for too long, so it has been authorizing share buybacks to boost EPS while also initiating a dividend.
The company does not expect generative AI to meaningfully boost its sales just yet since, for fiscal 2025, it forecasts revenue growth of only 8-9%. However, Salesforce, Inc. (NYSE:CRM) is still seeing expanding profit margins since in fiscal 2024, its operating margins have expanded to 30.5%, well above the 22.5% figure reported in fiscal 2023.
At the end of the second quarter, 117 hedge funds were long Salesforce, Inc. (NYSE:CRM), with a total stake value of $11.4 billion.
Mar Vista Investment Partners, LLC mentioned Salesforce, Inc. (NYSE:CRM) in its second-quarter 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.”
Overall CRM ranks 10th on our list of the best big tech stocks to buy. While we acknowledge the potential of CRM 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 CRM 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.
