Investing in Tech: Two Stocks to Consider for Long-Term Growth

Over the past few decades, the economic landscape has changed considerably. People have begun to realize that technology plays a vital role in our daily lives. This realization has significant implications for how we approach investing.

As you look to position your investment portfolio for the future, focusing on technology and internet-related companies may be a wise strategy.

If you find yourself with $5,000 to invest, here are two tech stocks to consider buying and holding onto for the long term.

Expansive User Bases

Alphabet (GOOGL) and Meta Platforms (META) are two tech giants that should catch the eye of any investor. Their vast user bases are an important factor to consider.

According to CEO Sundar Pichai, Alphabet had "15 products that each serve half a billion people, and six that serve over 2 billion each" as of July 2023. This statistic highlights the integral role Alphabet plays in many people's lives.

On the other hand, Meta also boasts impressive numbers. As of the end of 2022, its suite of social media applications, including Facebook, Instagram, WhatsApp, Messenger, and Threads, had a combined total of 3.35 billion daily active users. These are some of the most frequently visited platforms globally.

The vast number of users each company has contributes to their dominance and provides a unique advantage when it comes to leveraging artificial intelligence (AI). Both Alphabet and Meta are well-positioned to implement new AI features and updates quickly, enhancing user experiences for both individuals and advertisers.

This ability to adapt and pivot quickly based on user feedback and behavior is a competitive advantage that many companies do not possess.

Durable Competitive Advantages

When investing, it is crucial to consider businesses with strong competitive edges, often referred to as an economic moat. This protects them from being easily disrupted by competitors. Alphabet and Meta both benefit from powerful network effects, which enhance their economic moats.

As more information becomes available online, more individuals turn to Google Search, further refining its algorithm and improving search quality. This increased activity also translates into more advertising revenue, benefiting Alphabet.

Similarly, YouTube, owned by Alphabet, thrives on network effects. An increase in the amount of content attracts more viewers, which in turn encourages content creators to produce even more videos.

Meta’s social media platforms operate under the same principle. The more users sign up, the more connections and content are generated, leading to a cycle of increased user engagement. This enhanced engagement is beneficial for advertisers looking to reach more potential customers.

Buying Opportunities

Recent market fluctuations have created a favorable environment for investors. Shares of Alphabet and Meta fell by approximately 20% and 19%, respectively, from their peak prices earlier this year. Despite this, Alphabet's price-to-earnings ratio stands at 20.4, while Meta's is at 25.1, making both stocks relatively affordable compared to their peers.

This valuation presents an attractive investment opportunity. Analysts project that both companies will experience double-digit earnings-per-share growth over the next three years, although these estimates are more conservative than the growth seen in the past decade.

Additionally, both companies demonstrate strong financial health. They are highly profitable, generate substantial free cash flow, and maintain solid balance sheets. This financial strength allows them to navigate economic challenges while investing heavily in AI capabilities to stay ahead of the competition.

For investors looking to make a smart long-term investment, putting $5,000 in Alphabet and Meta stocks could prove to be a wise decision.

investment, technology, stocks