May is earnings season, when countless companies are revealing how recent economic challenges affected their financial performance over the last three months.
Inflation has eased for the last nine months in a row. However, it continues to be high, with prices rising 5% in March. As a result, many companies continue to suffer from reduced spending by consumers and businesses.
While the economic strain is tough on companies, it has also created an excellent time to invest in bargain-priced tech stocks. Macroeconomic headwinds won't last forever, with shares in the market's leaders likely to soar as the situation improves.
Here are three of the best tech stocks to buy in May.
1. Amazon
On April 27, Amazon (AMZN -1.64%) reported revenue of $127 billion for its first quarter of 2023, rising 9.5% year over year and beating Wall Street expectations by $2.8 billion. The positive results caused an immediate rally. However, stunted cloud growth in Amazon Web Services (AWS) brought the stock back down as investors grew wary of the company's immediate future.
Economic hurdles have been particularly tough on Amazon's business, with high inflation leading consumers to spend less on its e-commerce site and businesses to slash cloud service budgets. However, Amazon's position as the leader in both markets will likely see it come back strong over the long term.
The e-commerce market alone was valued at $9 trillion in 2019 and is nowhere near its ceiling, with online sales making up 15% of all retail sales in 2022. Meanwhile, the cloud industry is projected to expand at a compound annual growth rate of 20% through 2029.
Amazon has a mountain to climb to get past recent challenges. However, its average 12-month price target of $139 accounts for 33% stock growth, reflecting the company's encouraging potential once economic headwinds subside.
2. Advanced Micro Devices
Advanced Micro Devices (AMD -0.35%) is a no-brainer buy thanks to its potent hardware. The company penetrated multiple high-profit industries with its powerful chips, now crucial to the production of many devices. For example, AMD exclusively supplies the graphics/processing chips to Sony's PlayStation 5 and Microsoft's Xbox Series X|S, giving AMD an 83% market share in game console processors.
Meanwhile, the tech giant's server chips power data centers worldwide, hosting cloud platforms like Microsoft's Azure and Alphabet's Google Cloud. Recent advances in artificial intelligence suggest the industry is only just getting started and expected to boost cloud growth and countless other markets that could increase demand for AMD's chips.
AMD suffered from PC market declines last year, but its pivot as a leading chip supplier across the tech industry led it to partner with behemoths of the sector, diversifying and strengthening its business. The company's forward price/earnings-to-growth ratio (PEG) of 0.1 makes AMD an attractive buy this month, as the figure indicates its projected growth is not currently priced into its stock.
3. Intel
Intel (INTC 0.64%) has taken hit after hit over the years, consistently losing processor market share to AMD and other competitors. Then, last year's PC market declines led its stock to plunge nearly 50% throughout 2022. However, challenges seem to have lit a fire under the company, which is determined to retain its leading position in tech.
Intel's consumer central processing units (CPUs) released toward the end of last year are finally giving AMD a run for its money, outperforming the company across multiple areas. Meanwhile, Intel's recent venture into graphics processing units (GPUs) has seen it consistently gain market share in the industry.
In Q1 2023, Intel's revenue hit $11.7 billion. While the number represents a year-over-year decline of 36%, it still beat analysts' expectations by $570 million. The company has a long fight ahead to return to quarterly growth, but recent changes seem to have it on a promising path.
Tumbles over the last few years have brought Intel's stock to a price-to-earnings ratio currently at 16. As a result, Intel shares are a no-brainer buy this May.
