Tech leaders with long-term buy and hold potential offer investors incredible opportunities
Investing in the technology sector continues to be an excellent choice overall. This chart shows the sector-by-sector returns from the S&P 500 between 2009 and 2023. It indicates that the tech and information technology sector has been the best performer on an annual basis during that period. That alone speaks to the logic for investing in the tech sector for the long haul.
Admittedly, purchasing buy and hold stocks within the tech sector can feel daunting. The volatility over the past few years does raise concerns for some. And, 2022 was a particularly strong example of such fears. However, it’s necessary to keep the long-term picture in mind. The tech sector remains the best performer during that 14-year period even with the inclusion of dramatic tech downturns of 2022.
Today, long haul tech stocks are likely to be driven by artificial intelligence (AI), semiconductors, cybersecurity, blockchain and a host of new innovations. Growth will be high and investing in strong companies is your best bet. Let’s delve into the top performers.
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Taiwan Semiconductor Manufacturing (NYSE:TSM) provides the digital oil that fuels a lot of the innovation in tech. The company is the foundry to the world. It provides chip manufacturing services to just about everyone in the rapidly growing chip market. Also known as TSMC, it produces 60% of chips globally and 90% of the world’s most advanced chips. It’s entirely reasonable to consider TSMC as the keystone firm in the tech supply chain.
That position and its location have made investing in TSMC undeniably risky. Few other firms carry the political risk that TSMC does due to its location in Taiwan. It is front and center in the ongoing battle between the U.S. and China.
Also, the company could face new tariffs if Donald Trump is re-elected in November. The risks are clear and several. However, no other company is capable of doing that which TSMC does. The U.S. is trying to subsidize chip production back to American soil but that will favor TSMC as it is building foundries in Arizona. Intel (NASDAQ:INTC) is trying to get onto the same playing field as TSMC, but that seems like a pipe dream at this point. This all suggests that TSMC continues to be an excellent choice for the long haul.
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Apple (NASDAQ:AAPL) stock is wavering as I write this article. Fresh concerns about AI profitability and antitrust probes are big factors in that.
Although this piece is about buy and hold factors related to Apple, I’d like to briefly point out an opportunity. Apple’s Q3 results are coming out August 1. Revenues and earnings are expected to increase by 10% and 13%, respectively, year-over-year (YOY). Mac sales and Apple’s services segments continue to improve. Further, iPhone sales – which truly drive the stock – are also improving. That should be a strong positive signal to the market that Apple is truly coming back.
A lot has been written about the AI opportunity for Apple. I’ll skip that because all there really is to know at this point is that the company has launched AI. The other exciting piece of news for the long term is that Apple is on the cusp of producing in-house wireless chips. That will move it away from Qualcomm (NASDAQ:QCOM) in the near future. It should make Apple a more complete tech giant once it has a firmer grasp on chip production. The long term looks very promising for Apple.
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Tesla (NASDAQ:TSLA) disappointed with its Q2 earnings report released July 23. This snippet explains the trouble for the stock well: “the electric vehicle maker reported a 45% year-over-year decline in profits for the second quarter, missing analysts’ expectations.”
There’s no doubt that demand for Tesla’s EVs is sagging at the moment. As a result, prices are falling. So, Tesla has to lower production costs while introducing cheaper vehicles. That task creates an opportunity for investors as share prices hit a lull.
We know Tesla is highly likely to be a long-term beneficiary of the AI boom. The company continues to develop autonomous driving capabilities as well as its AI-enabled humanoid robot known as Optimus. Recently, the company debuted the second generation model of Optimus at a tech conference in Shanghai.
Tesla is positioning itself as one of the leaders in the AI robot space. Not only could that drastically reduce internal labor costs in the future, but also it could create a huge external revenue stream in the process. Tesla isn’t the clear-cut EV winner it once was as China rises, and that doubt creates a strong entry point for long-term thinkers.
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Salesforce (NYSE:CRM) dominates the customer relationship marketing space with a market share exceeding that of the next four biggest firms combined. That makes it the king of customer connections for the 11th consecutive year. Further, customer relationship management is forecast to grow at a compound annual rate of nearly 14% through 2030.
That combination of factors alone makes Salesforce a stock to consider for the long term. In the short term, rate cuts are on the horizon. Salesforce is one of a select group of growth stocks that many are fixating on in relation to that opportunity.
Additionally, Salesforce offers a comprehensive platform that goes beyond CRM alone. It was also one of the first CRMs to utilize a standalone cloud platform.
AI will be a big part of Salesforce’s future. The company is working to address the unreliability of generative AI that has played the tech in its early developmental stages. The company clearly hopes to stand out as a reliable AI service that enterprises can count on. AI hallucinations are relatively inconsequential for individual users. The stakes for enterprises, however, are much higher.
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Microsoft (NASDAQ:MSFT) is one of the best buy and hold stocks of the past decade. It has provided annualized returns of 29.35% over the past 10 years. Per the rule of 72, an investment in Microsoft would have doubled in value roughly every two and a half years during that time frame. And, $10,000 invested in MSFT shares and left untouched over that time would have grown to a value exceeding $131,000 today.
In short, the precedent for buying Microsoft and holding it over the long haul is sturdy.
The near future and long-term future for Microsoft will be heavily dependent upon artificial intelligence. in the near term, the markets will be looking for signs that Microsoft’s cloud platform continues to grow due to AI. Customers continue to run and train their respective modelsUsing Microsoft’s Azure platform. The AI Cloud platform, along with the data center opportunity overall, make Microsoft a clear long-term choice worth taking.
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NextEra Energy (NYSE:NEE) is an extremely well-positioned stock overall, one that makes a lot of sense for the long term.
The company is part utilities firm and part renewable energy leader. It has a unique mix of revenue generation that truly sets it apart. It offers the growth of renewables with the steady nature of utilities stocks.
The utilities business makes NextEra Energy attractive when concerns about the tech sector arise, as they recently have. The defensive nature of utilities stocks is the reason for that truth. Also, NextEra Energy is attractive because the text sector is increasing renewable energy demand. The company’s Chief Executive Officer expects renewable energy demand to triple by 2030. A lot of that growth will be driven by AI data center demand for clean energy. Those companies simultaneously reduce their carbon footprint while consuming more energy overall.
NextEra Energy remains a uniquely positioned stock with multiple positive factors in its favor.
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ASML (NASDAQ:ASML) is another long haul stock to buy for investors who believe in the power of AI and chips in general.
The Dutch firm is the only company in the world capable of producing extreme ultraviolet (EUV) lithography machines. Those EUV machines are capable of producing the world’s most advanced chips that drive innovation. That makes ASML, along with TSMC, linchpins of the technology sector.
And, multiple signs show that ASML will continue to dominate. First, the company enjoys strong gross margins indicative of durable competitive advantage. That is one of many metrics which indicate that ASML is a highly profitable firm overall.
Those powerful margins provide ASML with the cash necessary to invest in R&D that allows it to keep its competitive edge. The company invested four billion Euros in R&D in 2023, up from 3.3 billion in 2022. Also, it’s front and center in relation to geopolitical tensions and has been for quite some time. Investors must consider ASML as among the best long haul tech stocks as chips drive innovation, and the company has an unassailable position in that regard.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
