Tech stocks have long been the darlings of growth investors -- and rightfully so, given their returns over the past decade or more. The tech-heavy Nasdaq Composite index is up by around 302% in the past decade. In comparison, the more diversified S&P 500 is up 172% over the same timeframe.
But not all tech stocks are created equal, and for every stock that produces market-beating results, there are several others that disappoint. Also, some of these stocks perform well in the short term, but drop off quickly long-term. Despite the huge returns some tech stocks can provide over short periods, you don't want to lose sight of the long term and you should focus on tech stocks with staying power.
If you have $3,000 available to invest that isn't needed to pay monthly bills, reduce short-term debt, or bolster an emergency fund, you might want to consider investing some portion of it in one or all of these three tech stocks that are great buy-and-hold candidates.
1. CrowdStrike
Cybersecurity company CrowdStrike's (CRWD 2.03%) business has impressed lately, emerging as a clear front-runner in its industry. The enthusiasm for the business is also reflected in the stock price of late. Of course, it's helped that hype around artificial intelligence (AI) in 2023 provided a boost to its stock price (it's up over 47% year to date), but CrowdStrike is far from new to the AI scene.
In fact, CrowdStrike is one of the pioneers of using AI in cybersecurity. Its first solution, released in 2011, the Falcon Platform, is AI-based. Having over a decade of AI experience and data gives it a huge advantage over competitors that have only recently begun incorporating AI into their platforms.
As of Jan. 31 (the end of its fiscal 2023), CrowdStrike had 23,019 subscription customers -- almost 6,700 more than at the end of its fiscal 2022 and more than nine times what it had at the end of its fiscal 2019. This growth boosted CrowdStrike's annual recurring revenue by 42% to $2.73 billion.
The growth should continue as cybersecurity threats continue to grow and get more sophisticated, increasing the demand for CrowdStrike's products. In its 2023 Global Threat Report, CrowdStrike noted emerging new threats, a 95% annual increase in cloud exploitations, a decrease in eCrime breakout time (the speed threats can breach a system after gaining access), and other stats that show the continued fight cybersecurity is up against.
CrowdStrike's long-term potential comes from operating in an increasingly indispensable industry, as well as its commitment to constant innovation and staying ahead of the curve. Since its founding in 2011, it has released nine AI-based/powered products, and it shows no signs of slowing down.
2. Upstart
Fintech company Upstart (UPST 2.76%) is out to give Fair Isaac's FICO score a run for its money. By using AI to analyze thousands of data points regarding potential loan applicants, Upstart helps banks and other financial institutions better assess would-be borrowers' creditworthiness. It seems to be working, too. According to an internal Upstart study, borrowers approved by its platform had 53% fewer defaults than borrowers from large U.S. banks at the same approval rate. That means banks using Upstart could approve 173% more loans with the same rate of defaults as the prior approval method. Either way, banks using the system should benefit.
Since May 1 alone, Upstart's stock price has jumped by over 190%, largely connected with investor interest in anything AI-related as well as a recent agreement with financial firm Castlelake to sell up to $4 billion of consumer installment loans Upstart was carrying on its own balance sheet, giving the company some breathing room financially.
Was this massive jump in such a short period warranted? Probably not. But considering its stock price is still down by more than 90% from its October 2021 peak and almost 30% from its IPO, there is still considerably more upside than downside potential with Upstart at the moment.
In the short term, Upstart created some short-term bullishness with its new focus on efficiency. Layoffs and a reduction in "technical infrastructure costs" will help it return to profitability despite a lower loan volume that resulted from the sharp rise in interest rates. More efficient operations could also work wonders for Upstart's financials long-term as it continues to expand its services.
Upstart currently services auto, personal, and business loans, and its addressable market is close to $1.6 trillion. It eventually hopes to begin offering its services to those seeking home loans, which will add a $2.7 trillion dollar addressable market to pursue share in. That's a recipe for lots of future growth, especially as its AI capabilities should become more effective with time and data.
3. Microsoft
Microsoft (MSFT 1.82%) is long past the days when it was a young growth stock like CrowdStrike and Upstart (it's been around for more years than both companies combined), but it still has plenty of room for growth. Microsoft's stock is up almost 40% year to date, largely due to its ownership stake in ChatGPT's creator, OpenAI, and the potential investors see in this partnership.
AI hype aside, investors can feel confident in Microsoft over the long term because it's as recession-resistant a tech stock as you'll find. This isn't necessarily because Microsoft's offerings are superior to those of its competitors, but more so about how ingrained they are in everyday life, especially for businesses.
From its Office software suite to its operating systems to LinkedIn and more, Microsoft has a massive footprint with a steady stream of recurring (and growing) revenue. As long as it can maintain that, Microsoft remains a good long-term option.
It also helps that Microsoft pays a dividend. Its yield is currently below 1%, which is below average, but it continues to grow at above-average rates and is low partially because of Microsoft's strong stock price performance. For some companies, a dividend helps account for a potential lack in stock price growth, but in Microsoft's case, it's a true added bonus.
