Artificial intelligence was the dominant story in the tech market in 2024, driving significant gains in tech stocks. The rapid advancements in AI have been a catalyst for business value, which has been reflected in the stock market performance of companies directly involved in this technology. Another major driver of the outperformers was the crypto industry. The launch of spot bitcoin exchange-traded funds in January 2024 marked the beginning of a big year for cryptocurrencies, which was further bolstered by Donald Trump’s election victory in November.
However, on January 13, CNBC reported that major tech stocks faced pressure, as the specter of higher inflation drove up Treasury yields and dampened expectations for potential Federal Reserve rate cuts this year. Higher yields increase the cost of capital and can lower both consumer spending and corporate investment. The sell-off in tech stocks extended beyond the megacap tech giants, with quantum computing stocks seeing significant drops. The broader market was also affected, with the S&P 500 and Nasdaq Composite each dropping more than 1%, following a hotter-than-expected jobs report and rising inflation expectations among consumers.
Read Also: 11 Best 3D Printing and Additive Manufacturing Stocks To Buy and 11 Best Potash Stocks to Buy According to Hedge Funds.
In an interview with CNBC on January 13, Daniel Ives, Global Head of Technology Research at Wedbush Securities, discussed the current state and future prospects of the tech sector, particularly in the context of rising interest rates and a strong dollar. Ives highlighted that the bull market in tech is only halfway through. He argued that strong consumer demand and capital expenditures (CapEx) in artificial intelligence (AI) are driving the sector’s growth, making market dips opportunities to invest in tech stocks. Ives believes that the fundamental strength of tech companies, especially in AI, will continue to drive positive performance and suggests a diversified approach to investing in tech. Ives also discussed the broader market dynamics, including the potential for the Federal Reserve to remain hawkish at its next meeting. He views the current environment as an opportunity to own the winners in the tech sector.
The technology sector continues to offer compelling opportunities for investors seeking value and long-term growth. As the market fluctuates, undervalued stocks offer a critical strategy for maximizing returns. With that in context, let’s take a look at the top 10 undervalued tech stocks to buy according to hedge funds.
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Our Methodology
To compile our list of the top 10 undervalued tech stocks to buy according to hedge funds, we used Finviz and Yahoo stock screeners to find the 40 largest technology companies trading below the forward P/E ratio of 15 as of January 13. We then used Insider Monkey’s Hedge Fund database to rank 10 stocks according to the largest number of hedge fund holders, as of Q3 2024. The list is sorted in ascending order of hedge fund sentiment.
Why do we care about what hedge funds do? 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).
Top 10 Undervalued Tech Stocks to Buy According to Hedge Funds
10. Seagate Technology Holdings plc (NASDAQ:STX)
Number of Hedge Fund Investors: 46
Forward P/E Ratio as of January 13: 12.27
Seagate Technology Holdings plc (NASDAQ:STX) is a leading provider of data storage solutions, specializing in hard disk drives (HDDs) and solid-state drives (SSDs). The company serves a diverse range of customers, including cloud service providers, enterprises, and consumers, and delivers high-performance, reliable, and cost-effective storage solutions.
Seagate Technology Holdings plc (NASDAQ:STX) has made significant strides in the qualification of its Heat-Assisted Magnetic Recording (HAMR) technology, a critical advancement in data storage aimed to increase the amount of data that can be stored on a magnetic device by temporarily heating the disk material during writing. The company is now focusing on boosting its HAMR production and sales. HAMR technology is particularly valuable for cloud service providers that require vast amounts of storage. The company has successfully qualified HAMR with a major cloud customer and plans to qualify several additional cloud customers by mid-2025.
Furthermore, Seagate Technology Holdings plc (NASDAQ:STX) is continuously working to optimize its manufacturing processes to meet the strong demand for storage solutions. The company has faced challenges in scaling production, particularly in converting work-in-progress into finished goods. Seagate Technology Holdings plc (NASDAQ:STX) remains committed to improving its manufacturing efficiency by recalibrating and requalifying equipment. The company aims to maintain a high level of production without the need for significant new capacity investments.
9. TD SYNNEX Corporation (NYSE:SNX)
Number of Hedge Fund Investors: 46
Forward P/E Ratio as of January 13: 10.62
TD SYNNEX Corporation (NYSE:SNX) is a global distributor of IT products and solutions, serving a wide range of resellers and system integrators. The company operates in over 100 countries and connects technology vendors with partners.
TD SYNNEX Corporation (NYSE:SNX) is actively investing in high-growth technologies such as cloud, cybersecurity, data and analytics, and artificial intelligence. The company’s cloud platform, StreamOne integrates with vendors and hyperscaler marketplaces by providing customers with access to thousands of vendors and powerful capabilities such as real-time reporting, financial operations, and security operations. TD SYNNEX Corporation (NYSE:SNX) is also expanding its hyperscale infrastructure business, Hyve, to address the growing demand for data center solutions driven by cloud adoption and AI. Hyve is investing in new capabilities such as liquid cooling and power management, which are essential for supporting the next generation of data centers.
TD SYNNEX Corporation (NYSE:SNX) remains intensely focused on achieving profitable growth and maintaining operational excellence. The company is committed to generating consistent free cash flow and making disciplined capital allocation decisions. The company is also building enablement solutions for higher-margin services businesses to help customers meet the increasing demand for specializations and certifications.