A stock market sell-off in 2022 affected various industries, effectively putting shares in some of the world's most valuable companies on sale. The tech industry has long been known for its wealth of growth stocks, making the start of 2023 an excellent time to pick some up for a bargain.
Apple (AAPL -0.35%) and Nvidia (NVDA 6.18%) have experienced steep stock declines over the last year. However, they remain compelling investments with increasingly diverse businesses. Even with decreases in their shares in 2022, both Apple and Nvidia have retained triple-digit growth in their stocks since 2018.
Here are two growth stocks to buy hand over fist in 2023 after last year's tech sell-off.
1. Apple
Even after an ugly month when Apple's stock fell 14% since Dec. 4, the iPhone company continues to be easy to recommend. It's home to a potent brand, some of the world's most in-demand products, and a swiftly growing services business to boot.
In Apple's fiscal 2022, revenue grew 8% to $394.3 billion. While iPhone revenue accounted for 52% of the year's revenue and increased by 7%, the company's services provided the most promise for its long-term future. The subscription-based segment earned the second-largest amount of revenue and reported double the iPhone's year-over-year growth at 14%, reaching $78.1 billion. However, the most impressive part of the segment was its 71.7% profit margin, while the same metric for products came to 36.3%.
For a large portion of 2022, Apple shares primarily suffered macroeconomic headwinds affecting the entire market, bringing its stock down roughly 27% over the year. However, over the last month, COVID-19-fueled production issues in China have concerned investors over its dependency on the country.
Apple shares have begun trending upward again since Foxconn -- also known as Hon Hai Technology Group, which manufactures about 70% of all iPhones -- reported production is back to 90% capacity. However, the issues have motivated Apple to move out of China entirely in the coming years to countries such as Taiwan and India, where it already makes a portion of its products.
Although production woes have led the media to paint a doom and gloom picture of Apple in recent months, the company's stock has still risen 182% in the last five years. Additionally, the company's free cash flow as of Sept. 30 came to $111.44 billion, significantly more than its peers in the tech industry, as seen in the table below.
Data by YCharts
Apple's booming services business sees the company leaning less on its products for growth, while its considerable free cash flow proves it is well-equipped to invest in a move out of China. The company's stock may have taken a tumble, but the dip makes it a compelling buy in 2023.
2. Nvidia
In the third quarter of 2022, the graphics processing unit (GPU) market saw worldwide shipments decrease by 25.1%, its biggest quarterly decline since 2009. As the biggest name in discrete GPUs with its 72% market share, Nvidia suffered significant losses in its stock price and revenue.
In its latest quarter, the company's gaming segment, which includes revenue from consumer GPUs, reported a revenue fall of 51% to $1.57 billion. The losses only pushed its stock down further, which has plunged 48% year over year.
Despite significant losses to Nvidia's core business during the quarter, there continue to be areas to rally over. For instance, its highest-earning segment in the quarter was data centers, which reported year-over-year revenue growth of 30.5%, earning $3.8 billion.
The stellar growth was a reflection of the booming cloud-computing industry, which hit a value of $368.97 billion in 2021 and will see a compound annual growth rate (CAGR) of 15.7% until 2030. Data centers and GPUs like Nvidia's are vital to the market's growth, with Nvidia well positioned to profit for the long term.
In fact, Nvidia will take a promising step toward growing its data center business in 2023 by partnering with Microsoft to use its Azure platform to build a massive supercomputer that will utilize Nvidia GPUs. Considering Azure is one of the biggest names in cloud computing, the collaboration could be lucrative for Nvidia's future.
Nvidia had a year to forget in 2022. However, its shares have still risen 156% since 2018 despite declines, proving its worth as a growth stock. Economic headwinds affecting consumer demand for GPUs will not last forever. When they do improve, Nvidia will be home to a dominating GPU business. This will happen all while it plays a crucial role in the growth of cloud computing, making Nvidia's stock a must-buy in 2023.
