After a year to forget for the tech world, in which the Nasdaq-100 Technology Sector index plunged 40%, many stocks have been on the rise in 2023. In fact, the same index has climbed 11% since Jan. 1 as investors grow bullish on the prospects of a new year.
Advanced Micro Devices (AMD +1.15%) and Alphabet (GOOG +1.21%) (GOOGL +1.28%) have each experienced double-digit stock growth since the start of 2023, yet remain down year over year. These tech giants have a lot to offer over the long term and are compelling investments, even with their recent growth. With that said, let's take a closer look at why each of these tech stocks belongs on your radar.
1. AMD can leech more market share from Intel
Since Jan. 1, AMD shares have climbed 12%. After the stock plummeted 55% in the 12 months prior, the swift growth is a promising start to the new year.
Along with many tech companies, AMD has suffered from declining demand in the PC market. Its upcoming earnings release will likely be a mixed bag, with PC chip revenue continuing to disappoint and its data center business reporting another quarter of massive growth.
However, if you're playing the long game, you're in good hands with AMD. Under the leadership of CEO Lisa Su, the semiconductor company has gone from the brink of a possible bankruptcy filing to stealing market share from Intel for multiple consecutive quarters. Since 2017, Intel has gone from over 80% market share in server processing chips to 63%. Meanwhile, AMD's market share has risen from 18.1% to 36.4% in the same period.
Moreover, AMD has taken full advantage of Intel's troubled launch with its Sapphire Rapids data center chip. Intel's chips were released on Jan. 10 after two years of delays. However, AMD's competing Genoa chips were released in November, with recent benchmarks showing they outperform Sapphire Rapids on "general purpose workloads," according to Bernstein analyst Stacy Rasgon.
AMD will have to continue to contend with a downtrodden PC market in 2023. However, its long-term performance, perseverance against fierce competitors, and strong position in the booming data center market make it worth an investment this year.
NASDAQ: AMD
Key Data Points
2. Alphabet's AI focus could bring new growth
Alphabet shares have risen 10% since Jan. 1 as the company prepares to lay off 12,000 employees and revealed it would shift its focus to artificial intelligence (AI).
The Google parent suffered shrinking profits in 2022, with its worker growth outpacing revenue growth. But investors have rallied around the prospects of higher earnings over the next year.
The shift to AI is especially promising for Alphabet's long-term outlook. According to Grand View Research, the AI market was worth $93.5 billion in 2021 and is projected to expand at a compound annual growth rate of 38.1% through 2030. Alphabet's focus on the booming industry is a response to a new threat from OpenAI's ChatGPT, a chatbot that wowed the tech world when it launched in November 2022 and will reportedly incorporate Microsoft's Bing.
An investment in Alphabet at the beginning of its journey into AI could be an investment in a future leader in the industry. Given ChatGPT's proven ability to accurately and naturally mimic human prose in different styles, from poems to news, the technology will likely be crucial in the near future.
Moreover, Alphabet shares are trading at 20 times the company's earnings. The metric is exceedingly low compared to its peers', which can be seen in the table below.
Data by YCharts
The figures illustrate how its stock is offering more value than the competition, and even with a recent stock boost, 2023 could be the perfect time to invest in Alphabet.
Additionally, despite a challenging 2022, Alphabet's consistent long-term growth has proven why it's imperative to invest in strong businesses for five-plus years. The company's revenue rose 132%, from $110.9 billion in 2017 to $257.6 billion in 2021. Meanwhile, operating income increased 200% from $26.2 billion in 2017 to $78.7 billion. As for its five-year stock growth, Alphabet's share price has risen 195%.
With a looming recession, Alphabet may not retain its recent stock growth in the short term. However, its impressive growth over the last five years and plans to venture into AI make it a screaming buy in 2023.
