Volatility on Wall Street can make investors more focused on the short term. With markets making big moves powered by sentiment swings right now, it's only natural to look at a portfolio's returns over the last few weeks or months.
But the real returns accrue to investors who think in terms of years and decades.
With that broader outlook in mind, let's look at tech stocks that should be setting sales records in 10 or more years. Read on for some good reasons to buy Nvidia (NVDA 1.74%) and Adobe (ADBE -0.95%).
1. Nvidia
The semiconductor industry is famously cyclical, meaning it goes through frequent large demand swings. Nvidia's latest earnings results demonstrate this process at work. The chip giant reported a painful 33% decline in its gaming division in the second quarter, which ended in late July. Earnings fell even faster, down 72% as gross profit margin dived to 44% of sales from 65% a year ago.
This isn't Nvidia's first time experiencing such a pullback, and it has emerged from all previous downturns with a stronger business. There's every reason to assume the company will be serving more data-center, gaming, and autonomous-driving platforms in a few years. "We will get through this," CEO Jensen Huang told investors back in late August.
Buying the stock at a volatile time like this makes it a bit more likely that you'll see short-term declines. But you can be confident that Nvidia is pouring cash into its innovation pipeline today so that it can be ready to lead through the next cyclical upswing. That's the absolute right approach to support long-term growth.
2. Adobe
Adobe hasn't been facing the sharp growth slowdown or profitability plunge that have affected Nvidia in 2022. Yet the software specialist's stock is still underperforming the market, down by nearly 45% so far in 2022. That sell-off seems like an overreaction.
Sure, Adobe isn't growing as quickly as it did in earlier phases of the pandemic, when work was flooding into the online world. Its creative cloud platform is expanding at a roughly 20% pace today compared to over 30% a year ago. Investors are also worried that the company's $20 billion acquisition of Figma will pressure earnings in 2023 and cause integration challenges.
That purchase is a bold long-term bet, though, that will help Adobe fill out its product portfolio so that it becomes a more essential service platform to enterprises and consumers. It isn't pushing the company into debt, either.
ADBE cash from operations (TTM). Data by YCharts. TTM = trailing 12 months.
Adobe's next few quarters might feature rocky sales and earnings results, but long-term investors can keep a closer eye on annual cash flow. That metric has been on a steady upswing since 2015 thanks to the company's successfully software-as-a-service selling model.
This cash is helping fund aggressive growth initiatives, but it also gives management lots of flexibility to navigate through a period of potentially weak demand.
Long-term investors don't have to worry about those inevitable ups and downs that occur in any given year. With an eye toward 2030 and beyond, you have a great shot at earning market-beating returns with tech giants like Nvidia and Adobe.
