The ever-expanding and innovative nature of the tech market makes it an excellent place to find solid long-term investment options. Many tech companies have histories of delivering reliable financial growth, benefiting from consistent demand for upgraded products and software features.
Famous investors like Warren Buffett have massively profited from the sector's growth over the years. The stock portfolio of Buffett's conglomerate, Berkshire Hathaway, now has almost 50% of its value in tech stocks. Meanwhile, that portfolio has enjoyed a 9% compound annual return over the last 30 years, and is now valued at $346 billion.
Macroeconomic headwinds recently triggered a slight sell-off in the tech sector, as Wall Street is again growing increasingly concerned about the possibility that a U.S. recession may be coming. Despite their solid long-term outlooks, shares of Apple (AAPL 2.48%) and Advanced Micro Devices (AMD 1.78%) declined by 9% and 10%, respectively, since the start of August. Those dips present attractive buying opportunities for patient investors.
Apple: Expanding into highly profitable markets
As the world's most valuable company by market cap, Apple has a long history of providing its shareholders with consistent gains. The company's shares have risen by 573% since Berkshire Hathaway first invested in it in 2016. Apple's business has hit record heights, dominating the consumer tech market thanks to the immense success of devices such as the iPhone and iPad.
However, its relatively recent expansion outside of products is diversifying its earnings and strengthening its long-term outlook. Since 2019, the company has made significant pushes into digital services, artificial intelligence (AI), and fintech. Each of these industries has significant growth potential and will decrease Apple's dependency on product sales, which have proven vulnerable to macroeconomic headwinds.
Apple's services segment includes its App Store and subscription-based platforms like Apple TV, Apple Music, and iCloud. That segment has become one of the most lucrative areas for the company, with profit margins regularly hitting 70%. Meanwhile, its revenue grew by 14% in the company's fiscal 2022 and by 8% year over year in its fiscal Q3 2023 (which ended July 1).
Moreover, Apple is steadily expanding in the rapidly growing AI market. The company has reportedly developed its own large language model chatbot, dubbed Apple GPT, to compete with OpenAI's ChatGPT.
The tech giant is using its technology to bring AI upgrades to products across its lineup, enhancing the user experience. Apple might not be the biggest name in AI yet, but its potent brand and history of success when entering new markets suggests it could one day be a major player.
Apple shares have soared by 220% over the last five years. Its solid growth history and expansions into new markets make its stock an attractive option to buy now and hold for many years.
Advanced Micro Devices: Powering the future with its hardware
The tech market is booming after advances in critical areas such as AI, cloud computing, and virtual/augmented reality. All of these technologies have massive potential in the coming years. And all of them are highly dependent on powerful chips. Given that, it wouldn't be a bad idea to add a chip stock like AMD to your portfolio so that you can profit from the increasing demand for its hardware.
The chipmaker has attracted much attention this year with its growing prospects in AI. AMD's stock climbed 62% since Jan. 1 as Wall Street grew increasingly bullish over its potential in that high-growth area.
AMD is gearing up to make a big splash in AI in 2024 with the launch of a new graphics processing unit (GPU). The chip should make it more competitive against market leader Nvidia and help it grow its market share in an industry that Grand View Research projects expand at a compound annual rate of 37% through 2030.
Moreover, the success of AMD's chips allowed it to achieve strong positions in several other areas of tech. Its hardware can be found powering popular game consoles such as Sony's PlayStation 5 and Microsoft's Xbox Series X|S, as well as cloud platforms, laptops, and custom-built PCs.
AMD has faced challenges in 2023 alongside a strained tech market and macroeconomic turbulence. However, it remains a leading chipmaker with an excellent long-term outlook. Its chips give stockholders the opportunity to invest in multiple emerging markets, with AMD shares a compelling buy to hold for the next decade.
