In 2022, the cryptocurrency market left many investors who had high hopes of prolonged, dynamic returns feeling dejected and seriously questioning its potential. While certain segments of this market may eventually recover, investing in cryptocurrency is clearly not for everyone (and it doesn't need to be).
If you're looking to build your portfolio and are wary of the promised potential of cryptocurrencies, you might want to instead consider some strong businesses with robust future growth potential. Thankfully, you don't have to look far to find companies that fit that bill, and many of them are trading at a discount right now.
Here are three powerhouse tech stocks you don't want to overlook as you build your portfolio heading into the new year.
1. Amazon
Amazon (AMZN 1.41%) has endured more than few market storms in its time, and not only survived but thrived well beyond them. Unlike some established companies that may have their heydays behind them, Amazon continues to show investors that it possesses an uncanny ability to not only sustain, but also build upon its momentum within the array of massive markets in which it operates, while also tapping into new means of growth as a disruptor of existing and emerging markets.
Whether it's the $904 billion U.S. e-commerce market, of which Amazon controls a 40% share, the $474 billion streaming space, where the company has grown its share to 19% in the U.S. alone, or the $217 billion global cloud computing industry, where it remains the market leader with a total share of 34%, the tech behemoth has proven time and again that it's not to be underestimated.
NASDAQ: AMZN
Key Data Points
Over the trailing five years, the company's annual revenue, earnings, and cash flow from operations have risen by 164%, 1,000%, and 152%, respectively. Certainly, the immediate market environment has posed challenges for businesses across virtually every industry, and Amazon is no exception to this pattern. While growth has slowed in recent quarters, Amazon continues to steadily grow its top line and remains profitable, all while adding to a strong cash position. The company closed the most recent quarter with cash on its balance sheet to the tune of $35 billion.
Amazon's strong core collection of businesses, its robust underlying financials, and undeniable footprints in markets that have significant addressable opportunities left bode well for its ability to grow beyond this challenging period. Long-term investors currently have a rare opportunity to scoop up shares at a seriously discounted price, and it may be too good to pass up.
2. Microsoft
Microsoft (MSFT 1.60%) built its business around office productivity software, a market in which it still remains an indomitable leader. Currently, Microsoft controls an incredible 50% of this market. Of course, in the nearly five decades since its founding, Microsoft has grown into one of the largest tech companies in the world, with a suite of products and services that few can rival.
From its software offerings relied on by individuals and businesses around the world to its PCs, computers, laptops, and gaming devices, Microsoft's technology solutions are synonymous with the advancements of the digital age. The company is second only to Amazon in its leadership within the cloud computing industry, controlling an incredible 21% market share globally with its Azure platform. Bear in mind, the cloud computing market is set to achieve a compound annual growth rate of 16% between 2022 and 2030, to reach a valuation of $1.6 trillion by the beginning of the next decade.
NASDAQ: MSFT
Key Data Points
All this has boiled down to year after year of steady growth and profits for the company, for which long-term investors are consistently rewarded. In the trailing decade, Microsoft grew its annual revenue and earnings by 155% and 233%, respectively, while delivering a total return of nearly 1,000% for shareholders. And its dividend, which yields 1% based on current share prices, has risen by roughly 200% over that 10-year period.
While consumers and businesses are cutting back on costs in the current environment, which impacts tech-centric companies across all sectors, Microsoft continues to see steady, albeit more moderated, growth. The most recent quarter saw its revenue rise 11% year over year to $50 billion, led by a 24% spike in Microsoft Cloud revenue. While earnings were down year over year, partly due to foreign currency weaknesses, it still generated a net income of $18 billion for the three-month period. Beyond the imminent headwinds facing stocks spanning nearly every industry, Microsoft's diverse portfolio of businesses can continue to deliver wins for the company and its shareholders for many years to come.
3. Alphabet
Alphabet (GOOGL 2.35%)(GOOG 2.29%) is another name that needs no introduction. The tech giant, most known for being the parent company of the world's most-used search engine, Google, isn't immune to the fluctuations of market sentiment and the larger deflection of investor capital away from growth-oriented businesses. Even so, this is a tech stock that investors can feel confident buying and holding.
Alphabet controls more than 90% of the global search engine market. The company makes most of its money through advertising. Alphabet generated $55 billion in advertising revenue in the third quarter of 2022 alone and controls roughly 30% of all digital ad spend globally. The company's other key source of revenue is its cloud business, Google Cloud. The company currently controls the third-largest share of the global cloud computing market behind Amazon and Microsoft, at 11%.
NASDAQ: GOOGL
Key Data Points
To give you an idea of the magnitude of its Google advertising and Google Cloud segments, these two businesses brought in combined revenue of $61 billion in the third quarter, out of its total revenue of $69 billion. Growth has slowed in recent quarters. Still, Alphabet's third-quarter revenue was up 6% year over year, while net income totaled $14 billion for the three-month period. It closed the quarter with a whopping $116 billion in cash and investments on its balance sheet.
Spending on advertising and cloud services may slow in the near term amid the tough macro environment. However, these aren't negotiable expenses for most companies over the long term. Alphabet is coming from a place of strength, both in terms of its dominant positions in its key markets and its rock-solid core financials. In short, now looks like a great time to buy this stock at a discount and hold on to it forever.
