We recently published a list of the 8 Best Long Term Tech Stocks To Invest In Now. In this article, we are going to take a look at where STMicroelectronics N.V. (NYSE:STM) stands against the other best long term tech stocks to invest in.
The technology sector came to the market’s rescue in 2023 after the disastrous macroeconomic conditions of 2022. Investments in advanced technologies like generative AI continue to show strong potential for future business growth.
According to CNBC’s Q3 CFO Council survey, 48% of the CFOs said that the tech industry’s growth will outperform all other sectors over the next six months. Moreover, in a September 23 interview with CNBC, Investment Management Partner at Callan Family Office, RaeAnn Mitrione highlighted that the tech sector has been a major beneficiary of the recent Fed rate cut. Lower interest rates are favorable for tech companies, which often thrive in such environments.
The ongoing AI theme has also been a key driver of tech’s strong performance. Additionally, she mentioned that mega-cap tech stocks were previously seen as a safe haven during economic uncertainty, but as the rate environment shifts, the focus may broaden to include smaller, more economically sensitive sectors. Nonetheless, tech’s strong momentum, fueled by AI, is likely to persist for some time.
Optimism in Global Tech Spending for 2024
According to Deloitte’s 2024 technology industry outlook, global tech spending slowed due to high interest rates, economic concerns, and geopolitical issues in 2023. However, optimism is growing for 2024, with projected global IT spending growth of 5.7% to 8%. Some of the growth areas include software, IT services, and AI investments, with AI spending potentially reaching $200 billion by 2025. Cloud computing and cybersecurity are also expected to see strong demand.
The report states that Gen AI is gaining traction but it is expected to grow modestly in 2024, yet more strongly in 2025, with its integration into software and business processes driving productivity and efficiency. AI hardware demand is set to exceed $50 billion next year, while companies continue exploring AI monetization strategies.
Harnessing AI for Greater Energy Efficiency
Additionally, the growing influence of big tech companies and the increasing reliance on AI have led to a significant rise in energy demand. We discussed this in our article about the 13 Best Big Tech Stocks To Buy Now. Here is an excerpt from the article:
“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.”
While concerns about the electricity needed to power AI are justified, according to industry pioneers like Nvidia CEO Jensen Huang, the technology itself will help solve that problem.
Our Methodology
For this article, we used the Finviz stock screener to identify 27 tech stocks with market caps of above $10 billion, Buy or Buy-equivalent ratings from analysts, and over 20% average price target upside. We narrowed our list to 8 stocks with the highest average analyst price target upside as of September 26. The best long term tech stocks are listed in ascending order of their average analyst price target upside.
We also mentioned the hedge fund sentiment around each stock which was taken from Insider Monkey’s database of over 900 elite hedge funds.
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).
Is STMicroelectronics N.V. (NYSE:STM) the Best Long Term Tech Stock To Invest In Now?
STMicroelectronics N.V. (NYSE:STM)
Average Analyst Price Target Upside: 39.93%
Number of Hedge Fund Holders: 16
STMicroelectronics N.V. (NYSE:STM) is a prominent global semiconductor manufacturer that designs, develops, and markets a diverse range of semiconductor integrated circuits and discrete devices.
It is among our best long term tech stocks to invest in now. The stock has a consensus Buy rating from 26 analysts and the average price target of $41.25 represents an upside of 39.93% from the present levels, as of September 26.
Its products are utilized in a wide range of applications, including automotive, telecommunications, industrial automation, and consumer electronics. With a customer base exceeding 200,000 and a network of thousands of partners, the company is dedicated to creating solutions that address the evolving challenges and opportunities within the microelectronics landscape.
STMicroelectronics’ (NYSE:STM) product portfolio is extensive as it includes key components such as microcontrollers, advanced analog integrated circuits, sensors, and power management devices.
The diversification allows it to serve various sectors, including automotive, industrial, personal electronics, communications, and computing. A significant focus on sustainability is evident in the company’s commitment to becoming carbon neutral in scope 1 and 2 emissions by 2027, with partial efforts targeting scope 3 emissions.
Recently, on September 24, the company unveiled its fourth generation of STPOWER silicon carbide (SiC) MOSFET technology. The latest development sets new standards in power efficiency, density, and strength, which cater specifically to the demands of both the automotive and industrial sectors.
The technology is especially well-suited for traction inverters, which are essential components in electric vehicle (EV) powertrains. The company plans to introduce further advancements in SiC technology through 2027, which is a sign of its dedication to innovation in the semiconductor field.
STMicroelectronics (NYSE:STM) has taken significant steps to improve shareholder value. In the second quarter, the company distributed $73 million in cash dividends and executed an $88 million share buyback as part of a broader initiative that concluded a $1.040 billion repurchase program initiated in July 2021.
In June, the company announced an even more ambitious new share buyback plan with two programs totaling up to $1.1 billion to be implemented over the next three years. Such actions signal a strong commitment to returning capital to shareholders while maintaining a focus on growth.
STMicroelectronics (NYSE:STM) was part of 16 hedge funds’ portfolios that are tracked by Insider Monkey in the second quarter with a total stake value of $231.780 million. D E Shaw is the biggest shareholder in the company and has a position worth $96.072 million as of Q2.
Overall, STM ranks 5th on our list of the best long term tech stocks to invest in. While we acknowledge the potential of STM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than STM 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.