Bear markets are never easy to navigate, but history makes one thing clear: They can be the best time to buy stocks for the long term. The Nasdaq-100 technology index plunged by 33% in 2022, and we saw far steeper declines in many individual stocks. While nobody knows for sure what the market will do next in the short term, we do have the benefit of 37 years' worth of data on the Nasdaq-100. It tells us that consecutive annual losses are incredibly rare -- in fact, there has only been one instance, and that was during the dot-com bust from 2000 to 2002.
The index is off to a hot start to 2023 with a 13% gain, so there's every chance a new bull run might be around the corner and it's not too late to buy quality technology stocks at a discount. If you are looking for a couple of tech stocks to consider, here's why Advanced Micro Devices (AMD 2.44%) and Duolingo (DUOL 7.28%) should top your watch list.
1. Advanced Micro Devices is set to dominate the semiconductor industry
The market for advanced computer chips softened in 2022 after a strong growth phase during the pandemic, and many stocks in the sector were clobbered. AMD remains down 49% from its all-time high. But looking back in a few years from now, that might appear to have been nothing more than a short-term blip in an upward trajectory.
AMD provides chips for a slate of consumer products, including both of the world's leading gaming consoles and Tesla's line of electric vehicles. Its hardware is also the go-to for PC enthusiasts worldwide. However, those segments were at the epicenter of the company's slowdown last year as consumer spending was impacted by rising inflation and interest rates.
The data center market carried AMD through the tough period, and it's likely going to be the strongest growth driver in the future. Businesses continued investing in their digital transformations in 2022 through cloud technology. Tapping this market, AMD supplies chips to the world's largest providers of cloud services, including the top two, Amazon Web Services and Microsoft Azure.
And AMD's $49 billion acquisition of adaptive computing leader Xilinx last year could supercharge the company's data center products.
Based on AMD's $3.50 in non-GAAP earnings per share in 2022, its stock trades at a price-to-earnings (P/E) ratio of 23.2. Not only is that 43% cheaper than its P/E ratio at this time last year, but it's also a slight discount to the 23.6 P/E of the Nasdaq-100 index. That spells opportunity for investors, especially if the broader market inches closer to bull territory.
2. Duolingo bucked the economic slowdown
Adding new skills can be a valuable investment whether it's for employment, travel, or even social purposes, so education tends to be pretty sticky even when the economy deteriorates. That's why Duolingo's financial performance was so solid in 2022, with the company consistently increasing its revenue guidance throughout the year while many other tech companies were slashing their estimates.
Duolingo developed the most successful digital language education platform in the world. Its mobile-first approach makes it very accessible. The app has been downloaded more than 500 million times, and in the third quarter of 2022, Duolingo had a record-high 56.5 million monthly active users, up 35% year over year.
Its popularity stems from its gamified user experience, which takes learning out of the typical classroom setting and makes it entertaining. Plus Duolingo connects users with friends and family so that they can monitor each other's progress, adding a social and competitive dimension that drives engagement.
More customers are paying to use Duolingo than ever before. In Q3, it had 3.7 million paid subscribers, a 68% year-over-year increase, leading to a 51% jump in revenue -- the fastest quarterly pace through the first nine months of 2022. This prompted the company to increase its full-year revenue guidance for the third time.
Duolingo is now the highest-grossing mobile app in the education category across both Apple's App Store and Alphabet's Google Play Store. The company will report its full-year 2022 financial results on Feb. 28, and further upside surprises might be in the cards.
Given that Duolingo's stock price is down 54% from its all-time high amid the broader tech sell-off, this might be a great opportunity to buy, especially with a new bull market potentially looming.
