Three Strong Tech Stocks to Consider Buying Now

Even in a thriving market, there are quality technology stocks available at reasonable prices.

The Nasdaq Composite, which is largely made up of technology firms, is close to reaching the all-time highs it set in December. The recent enthusiasm for artificial intelligence (AI) has fueled growth throughout the tech sector, sparking a rally that began at the start of 2023. As a result, finding quality tech stocks at appealing prices has become increasingly difficult.

However, it’s vital to remember that Wall Street represents a market of stocks, rather than a single stock market. This means there are always good investment opportunities out there.

Various high-growth sectors within technology, including AI, cloud computing, semiconductors, and cybersecurity, provide excellent options for investors looking to maximize their returns. Here are three top tech stocks worth considering right now:

1. Alphabet (Google)

Alphabet (GOOGL -2.65%) (GOOG -2.71%), the parent company of Google, stands out as one of the few major tech stocks not trading near its peak prices. This stock has seen a decline since its latest earnings announcement when it revealed plans to invest significantly in AI data centers, surpassing analysts' expectations. Historically, Alphabet has earned substantial profits through advertising on platforms like Google and YouTube. These new AI investments, however, will impact cash flow in the short term without immediate returns.

During the Q4 2024 earnings call, management explained that these investments are crucial to meet the demand for cloud services, which is currently greater than its available capacity. Importantly, these investments do not compromise Alphabet's solid financial position. The company reported over $72 billion in free cash flow in 2024, while boasting around $95 billion in cash against less than $11 billion in debt.

Furthermore, Alphabet's core ad business increased by over 10% in 2024. This indicates that the main business remains robust and is capable of supporting long-term growth investments. Analysts project that Alphabet will increase its earnings by an average of over 16% annually in the future, yet the stock currently has a price-to-earnings ratio of only 23. Its PEG ratio (1.4) is among the best values in the sector today.

2. SentinelOne

Next up is SentinelOne (S -2.90%), a next-generation cybersecurity firm that seems to be undervalued on Wall Street. The company’s price-to-sales ratio (10) is significantly lower than that of competitors such as CrowdStrike (30), Palo Alto Networks (17), and Zscaler (14), despite SentinelOne's consistent revenue growth matching that of its rivals. The lack of profitability may explain why the stock is viewed as less appealing; however, this issue could be overstated since the company is rapidly enhancing its operating margins and has sufficient cash to balance between achieving profitability and investing in business growth.

SentinelOne is well-positioned for long-term success in an increasingly competitive security landscape due to its high-performance, AI-driven security technology. It receives consistent praise from industry experts and analysis. The management team has also expanded beyond its primary focus on endpoint security by introducing new products, such as Singularity Data Lake for data security and Purple AI, which creates generative AI capabilities for users.

The company’s lower valuation may present an opportunity for shareholders to benefit more from SentinelOne's organic growth. If investor sentiment towards the stock improves, a potential increase in valuation could further enhance long-term returns. Though SentinelOne may not yet be as large or profitable as its competitors, its ability to carve out a significant market share in a large and fragmented security sector may reward patient investors handsomely.

3. Taiwan Semiconductor Manufacturing

The semiconductor industry has become essential during this AI boom. Semiconductors are the core components that enable AI technologies, supporting data centers that train and deploy AI models. While several companies design AI chips, Taiwan Semiconductor Manufacturing (TSM -0.93%) is the world's leading manufacturer of these chips. In Q3 2024, it accounted for about 64% of global semiconductor production. Its superior capacity and advanced technological capabilities position it as the preferred manufacturer for cutting-edge chips critical for AI advancements.

A key concern regarding Taiwan Semiconductor is its location in Taiwan, which is embroiled in a long-standing geopolitical conflict with China over its sovereignty. The risk of diplomatic tensions or military conflict has understandably limited the stock's growth. Consequently, despite the company's potential for earnings growth projected at an average of 33% annually in the long term, it trades at only 29 times its earnings — resulting in a PEG ratio below 1.

In response to geopolitical risks, Taiwan Semiconductor has begun establishing foundries in countries like the United States to diversify its operations. Nevertheless, this strategy does not entirely eliminate geopolitical risks, so investors need to carefully consider these factors when deciding whether to invest in the stock. Despite these challenges, Taiwan Semiconductor remains a dominant player in its sector and a vital part of the ongoing AI revolution, making it an enticing option at its current valuation.

stocks, investment, technology