The tech sector is filled with companies that have outperformed the S&P 500. In fact, more than a quarter of the S&P 500 consist of tech companies. The preference toward tech stocks is even more apparent in the Nasdaq 100. Part of that distribution is due to the outsized presence of the Magnificent Seven stocks. This is a group of some of the best tech stocks, as almost all of the companies have delivered impressive long-term gains.
Many Magnificent Seven stocks continue to innovate. They’re investing heavily into initiatives like artificial intelligence while strengthening their product lines. However, there are other tech companies that continue to innovate in their industries. Investing in companies that continue to tackle innovative projects can result in long-term returns. However, some corporations are doing a better job than others.
If you are looking for the best tech stocks that can charge higher due to their promising pipelines, you may want to monitor these three promising opportunities.
Amazon (AMZN)
Amazon (NASDAQ:AMZN) has been innovating in multiple industries for decades. The company popularized free 2-day shipping, Prime Day and other trends. Shares continue to perform well, logging an 8% year-to-date gain while increasing by 79% over the past five years. The tech conglomerate is in the middle of a correction that presents a buy the dip opportunity.
The e-commerce giant reported 10% YOY revenue growth in the second quarter. It was a bit lower than expected, and third quarter guidance didn’t please analysts. Any long-term stock will go through ebbs and flows, especially innovative companies that tend to have high valuations.
Amazon is the leader in the cloud computing industry which is poised to benefit from the AI boom. The tech firm is also investing heavily into artificial intelligence to expand its market share in multiple industries. Amazon Web Services was a bright spot, as that segment grew by 19% YOY.
Microsoft (MSFT)
Microsoft (NASDAQ:MSFT) is the second largest cloud provider, and cloud computing makes up more than half of the company’s total revenue. The tech giant reported 15% YOY revenue growth and 10% YOY net income growth in the fourth quarter of fiscal 2024. Those results were largely fueled by Microsoft Cloud’s 21% YOY revenue growth. Cloud revenue made up $36.8 billion of the firm’s $64.7 billion in Q4 FY24 revenue.
AI investments have positioned Microsoft to expand its market share in various industries. The technology also presents Microsoft with several opportunities to innovate. Copilot has been the catalyst for Microsoft’s AI expansion, and investors saw a glimpse of its possibilities with Copilot for Security. This generative AI-powered assistant helps cybersecurity professionals keep data safe, and it simplifies mundane, repetitive tasks.
Microsoft has been a reliable long-term winner in the stock market. Shares are up by 8% year-to-date and have gained 190% over the past five years. The stock is in the middle of a correction which presents a greater margin of safety for investors.
SoFi (SOFI)
SoFi (NASDAQ:SOFI) is a digital bank that continues to report significant increases in total members. The fintech firm has attracted members due to its competitive financial products. Since SoFi doesn’t have physical branches, the bank has less overhead and passes the savings onto consumers.
SoFi’s stock gains haven’t been stellar or worth mentioning for several years. It’s an underdog story, to be quick and concise about the 5-year returns. However, some underdogs go big with time, and financials support the bullish thesis. Revenue increased by 20% YOY in the first quarter while net income came in at $17.4 million. SoFi reported a net loss of $47.5 million in the same quarter last year.
Rising profit margins with continued revenue growth indicate an opportunity is emerging for the innovative fintech firm. Analysts are mixed and have rated the stock as a “hold.” The average price target implies a 27% gain from current levels.
On this date of publication, Marc Guberti held long positions in AMZN, MSFT and SOFI. 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 held a LONG positions in SOFI.