We recently compiled a list of the 14 Best New Tech Stocks To Buy Now. In this article, we are going to take a look at where Kyndryl Holdings Inc. (NYSE:KD) stands against the best new tech stocks to buy.
Tech Stocks Should Not Be Divested From
Tech stocks have long gained the attention of investors, with tech giants helping the S&P 500 climb a staggering 400% from 2009 to 2022. The Nasdaq 100 index did even better, surging over 700% in the same period.
However, the first half of 2022 saw a brutal market correction, the worst in 50 years for Wall Street. Geopolitical tensions, skyrocketing energy prices, and rising interest rates all played a part. Tech stocks took a heavy hit, with large tech companies dropping as high as 39% at one point.
Tech stocks are risky investments. When money was cheap during the pandemic, people borrowed a lot and invested in tech and crypto. This made the prices go up very high, overvaluing the tech sector. But when central banks raised interest rates, people started selling tech, which made the prices go down.
Earlier this week, we posted an article 10 Best Emerging Tech Stocks to Buy Now, where Mad Money host and former hedge fund manager Jim Cramer said that tech stocks should not be divested from. Here’s an excerpt from that article:
“He (Cramer) believes that major technology firms, which are integral to ongoing robust trends like data centers and accelerated computing, should be viewed as attractive buying opportunities when the market weakens, instead of the opposite sentiment…. September is historically the weakest month for the market, with consistent profit-taking. But, he sees this as a circular argument rather than a sign of an economic downturn. He believes the broader selling pressure in September is due to tech stocks meeting but not exceeding expectations.”
This is especially important to absorb as we see more and more analysts move away from the anticipation of a recession. Anastasia Amoroso, iCapital chief investment strategist, says that despite signs of a weakening labor market, such as rising unemployment and increased layoffs, she does not foresee an imminent recession. The market is expecting a 25-basis point rate cut from the Fed, possibly a larger 50-basis point cut if economic indicators worsen.
The economy is still growing at a rate of 2%, although it’s slower than before. Amoroso noted that key economic indicators do not suggest a high probability of a recession. While the market is cautious, there is potential for a positive outlook. Rate cuts and a slowing economy could lead to a more favorable market environment.
IPO Outlook
EY Global IPO Trends Q2 2024 reported that in the first half of 2024, global IPO activity experienced a downturn, with volumes declining by 12% (551 listings raising a total of $52.2 billion in capital) and proceeds declining by 16% compared to the previous year.
For the first time in 16 years, the EMEIA region reclaimed the top spot in terms of global IPO market share by number of deals. Industrials emerged as the leading sector in terms of the number of IPOs, while the technology sector raised the most capital through IPOs.
Earlier this year in May, Goldman Sachs Chair and CEO, David Solomon, at a Summit in France, said he is concerned that fewer companies are going public but expects IPO activity to pick up in the second half of 2024.
Solomon provided insights into the recent volatility in equity markets and noted that trillion-dollar companies were experiencing significant swings of up to 10% post-earnings. He acknowledged that such volatility could stimulate business activity, but expressed concerns about the potential narrowing of public markets.
He believes hyper-scalers have grown due to their competitive edge and recent tech advancements. Despite market volatility, he trusts in its efficiency and the importance of public markets for capital allocation and transparency.
Solomon expressed concern over the declining number of public companies due to abundant private market capital and emphasized the need for open, inclusive public markets. While the IPO market has recently revived, he anticipates a gradual increase in activity in the second half of 2024, going into 2025, though less intense than in 2021. However, the trend of companies staying private longer contributes to the overall decline in publicly traded entities.
Recently, CNBC’s Deidre Bosa talked about the significant energy demands of AI and the efforts of tech giants to address this growing need. She highlighted some recent big-tech investments in data centers and nuclear power facilities to back up her claim.
Jensen Huang admitted the related high energy costs but noted AI’s potential to develop energy-saving solutions. Bosa and Huang agree that public-private partnerships are crucial for addressing AI’s energy consumption. While training AI models is energy-intensive, the long-term benefits in areas like healthcare, climate, and grid management outweigh the costs. Both believe AI can revolutionize energy efficiency through innovative solutions.
Amoroso’s insights suggest that the overall economic outlook does not indicate a recession, while Bosa and Huang foresee higher tech investments due to growing AI demand. So with caution and strategic adjustments in investment approaches, potential investment risks can be avoided in the tech sector
Methodology
We used stock screeners to look for companies that went public in the past 3 years. We sorted our screen by IPO date and market cap and looked through the top 30 stocks that went public in the last 3 years and are trading over $1 billion. We then selected 14 stocks that were the most popular among elite hedge funds and that analysts were bullish on. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, 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).
Kyndryl Holdings Inc. (NYSE:KD)
Market Capitalization as of September 13: $5.29 billion
Number of Hedge Fund Holders: 36
Kyndryl Holdings Inc. (NYSE:KD) is an American multinational information technology infrastructure services provider, created from the spin-off of IBM’s infrastructure services business in 2021. It offers a wide range of services, including infrastructure management, application services, cloud migration, and cybersecurity.
The company, with strong infrastructure services established under IBM GTS, aims to return to revenue growth earlier than expected. It anticipates positive revenue growth in Q4 2025, driven by optimism about AI adoption.
As of FQ1 2025, the revenue was $3.74 billion, which recorded a 10.83% year-over-year decline. The earnings per share were $0.13. The decline in revenue was primarily driven by the intentional exit from negative and low-margin revenue streams within ongoing customer relationships.
Kyndryl Bridge delivers over 110 million automation monthly, yielding nearly $3 billion in annual productivity benefits. Kyndryl Consult, which accounts for 17% of the revenue and is a $2.5 billion revenue stream, is growing by double digits.
Kyndryl Consult revenues grew 14% year-over-year. Kyndryl Consult signings grew even faster, up 49%. Total signings grew 14% year-over-year in the fiscal first quarter of 2025.
Kyndryl Holdings Inc. (NYSE:KD) is using GenAI technologies to enhance business outcomes for customers in travel, healthcare, and manufacturing. The recent partnership with NVIDIA will further accelerate AI adoption. 36 hedge funds are long in the company right now, with the largest stake at $116,706,398, held by Greenlight Capital.
The company is positioned for strong growth with its Kyndryl Bridge and Kyndryl Consult platforms. Expertise in AI, cloud migration, and cybersecurity enhances customer outcomes, while partnerships with hyper scalers like SAP and NVIDIA open new opportunities, making this a top new stock.
Greenlight Capital stated the following regarding Kyndryl Holdings, Inc. (NYSE:KD) in its Q2 2024 investor letter:
“In addition to gold, we had four material winners in our long portfolio this quarter. Kyndryl Holdings, Inc. (NYSE:KD) rose from $21.76 to $26.31. The company had another good report, with results and guidance exceeding expectations on all key metrics. KD also pulled forward its target to achieve constant currency revenue growth, now starting in the fourth quarter of the current fiscal year.”
Overall KD ranks 6th on our list of the best new tech stocks to buy. While we acknowledge the potential of KD 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 the stocks on our list 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.
