Imagine this scenario: You open your mailbox and find a check for $50,000. There's only one catch: You have to invest it in three technology stocks.
It may not be all that realistic a scenario -- and not in keeping with The Fool's suggestion to buy 25 or more stocks -- but it's fun to ponder.
So, let's take the thought experiment one step further. If I was building a hypothetical $50,000 portfolio of only three tech stocks, here's how I would do it.
Image source: Getty Images.
Nvidia
In my hypothetical $50,000 portfolio, I'm allocating half my money -- $25,000 -- to Nvidia (NVDA 3.34%).
In case you hadn't noticed, artificial intelligence (AI) is having a moment. The world has been captivated by OpenAI's ChatGPT, and we're all waiting to see what's next.
However, the demand for faster, more complex AI systems comes at a cost: The world needs more complex -- and expensive -- chips to run the next generation of AI. And that's fantastic news for Nvidia.
The company's complex processors can be found in everything from gaming PCs to automobiles. But the enormous servers that run today's cutting-edge AI also need the computing power Nvidia's chips bring to the table.
Wall Street now expects Nvidia's revenue to shoot up 10% this fiscal year (the 12 months ending on Jan. 29, 2024) to $29.8 billion. However, the real fireworks start the following year. Analysts are now projecting the company's revenue to skyrocket to $37 billion, led by advances in data center, automotive, and a rebound in gaming.
Duolingo
Every portfolio needs some spice -- a stock that isn't a sure thing but has some potential. That's why in my hypothetical portfolio, I'm putting 10% -- $5,000 -- into Duolingo (DUOL 2.63%).
If you've never tried Duolingo, give it a shot. It's a fun app that you can download and play for free. What's more, it's actually useful.
As the app often reminds me, "You can learn a new language with 15 minutes a day; what can 15 minutes of social media do?" It's a powerful message and one that can resonate with anyone sick of doomscrolling.
Financially, Duolingo is early in its growth cycle. The company has a market cap of only $5.5 billion -- putting it on the low end of tech stocks most people know. Duolingo generated $370 million in revenue over the last 12 months, with quarterly revenue growing 42% year over year, thanks to growing subscriber numbers and increased ad revenue.
Nevertheless, owning shares of Duolingo isn't without risk. The company isn't profitable and likely won't be anytime soon. Rather, management is focused on growing its user base and increasing subscribers.
So while I love Duolingo's app -- and its volatile stock, which is up about 100% year to date -- it's not a name for everyone.
Microsoft
To round out my hypothetical $50,000 portfolio, I'm turning to one of the big guns: Microsoft (MSFT 0.73%). Sure, it's not the most original stock pick out there, but when putting together a portfolio -- hypothetical or not -- I want some stability. And Microsoft brings that in spades. So, I'll allocate 40% -- $20,000 -- of my hypothetical portfolio to the tech mega-cap.
Why? Well, Microsoft's diverse business operations will help me sleep at night. The company has a variety of disparate business segments:
- Cloud computing (Azure)
- Gaming (Xbox)
- Social network (LinkedIn)
- Client (Windows, Office)
- Search (Bing)
By having several revenue streams, Microsoft benefits from spreading its risk. At the same time, innovations in one area, such as the company's partnership with ChatGPT-maker OpenAI, can benefit all its segments. The company has already integrated ChatGPT into its Bing search engine and some Office products like Word and Excel.
Moreover, Microsoft has one of the top chief executive officers around, Satya Nadella. Since Nadella took the helm of Microsoft in 2014, shares of the company have returned more than 800%. Strong management makes for happy investors.
Microsoft's strong, diverse business segments, combined with excellent leadership, make it a top stock pick today, tomorrow, and for years to come.
