Say you had invested $10,000 in each of the SPDR select sector ETFs on Jan. 1, 2023. There are 11 such ETFs, and they focus on different industries, such as consumer staples, energy, financials, health care, industrials, and technology.
Which one performed the best? Well, here's a chart showing their year-to-date performance:
As you can see, the Technology Select Sector ETF won. Granted, the Communications Services Select Sector ETF gave technology a run for its money, but more than 37% of that ETF is comprised of Meta Platforms and Alphabet shares. So one could argue those two names belong in the Technology ETF anyway.
At any rate, there's no denying this: Tech stocks were simply on fire in 2023. And for investors looking ahead to 2024 -- particularly those who are underweight tech stocks -- now is the time to think about which tech stocks are worth buying. Here are three names I think can keep the tech rally going in 2024 and beyond.
Image source: Getty Images.
Advanced Micro Devices
Topping my list of tech stocks to buy right now is Advanced Micro Devices (AMD +11.44%). The company designs semiconductors for data centers, personal computers, gaming devices, and embedded uses.
NASDAQ: AMD
Key Data Points
Crucially, AMD recently debuted its new MI300X graphics processing unit (GPU). This chip, designed to train large language models, puts AMD in direct competition with Nvidia, the current market leader in AI chips.
As AMD Chief Executive Officer (CEO) Lisa Su said at the recent rollout event for the MI300X:
"If you look at MI300X, we made a very conscious decision to add more flexibility, more memory capacity, and more bandwidth. What that translates to is 2.4 times more memory capacity and 1.6 times more memory bandwidth than the competition."
At any rate, the MI300X should boost AMD's fundamentals, which were already sound. Analysts expect the company to grow revenue to $26.4 billion in 2024, up 16% from this year. Meanwhile, 2024 earnings are estimated to rise to $3.71/share, an increase of 40%.
Yet despite the rosy outlook, AMD isn't the stock for every investor. Shares trade at a price-to-sales ratio of 10, which is more than double its 10-year average of 4.5. So for value-oriented investors, or those unwilling to hold through future volatility, AMD may not be the right choice.
Airbnb
It's now been more than three years since Airbnb (ABNB +0.68%) debuted via an initial public offering. And in that time its stock price is almost unchanged.
NASDAQ: ABNB
Key Data Points
Granted, there have been ups and downs for sure. But for many investors Airbnb hasn't lived up to the hype.
However, I'm a believer in the stock for one reason: Its fundamentals are fantastic.
Let's start with the top line: revenue. The company has grown trailing 12-month revenue from a low of $3.4 billion in early 2021 to $9.6 billion as of its latest quarter (the three months ending on Sept. 30, 2023). That represents a compound annual growth rate (CAGR) of 41%. And while there's no denying the pandemic is behind that three-fold increase, it's an impressive bounce.
On top of the revenue growth, Airbnb is awash in net income and free cash flow. Net income over the last 12 months stands at $5.5 billion, and free cash flow has risen to $4.2 billion.
Those are signs the business is maturing. And as that occurs, Airbnb can return more of its profits and free cash flow to its investors. In May 2023 the company announced a share buyback of $2.5 billion. Over the long term, share repurchases like this (combined with more modest stock-based compensation) will help drive up Airbnb's stock price -- thus rewarding its shareholders.
Tesla
Last on my list is Tesla (TSLA +3.93%).
NASDAQ: TSLA
Key Data Points
Let me be clear: I'm a long-term Tesla bull, and that's because I believe certain things, like the following:
- The world is transitioning away from internal combustion engines, and millions of electric vehicles will take their place in the decades to come.
- Tesla will develop game-changing full-self-driving technology.
- Elon Musk is a visionary corporate leader, following in the footsteps of other corporate giants like Steve Jobs, Walt Disney, and Henry Ford.
Nevertheless, you don't have to believe all of those points to think Tesla is a smart investment.
In the short term, Tesla's production figures continue to rise. The company is on pace to deliver around 1.8 million EVs in 2023, roughly in line with what Wall Street expected. 2024 estimates vary, but somewhere between 2 million and 2.5 million seems likely -- representing about 25% production growth year-over-year. Not only would those figures help keep revenue growing nicely, but hopefully Tesla can capture some cost savings as production ramps, thus boosting gross margins.
In addition, a new calendar year brings new federal and state tax credits, which could help increase demand. Moreover, a more accommodative Federal Reserve, combined with declining long-term interest rates, may entice prospective buyers off the sidelines and into new Teslas. Finally, the debut of the Cybertruck is yet another sign that Tesla intends to take on competitors -- even in markets traditionally dominated by traditional gas-powered vehicles.
In any event, investors would be wise to consider Tesla, not just for 2024 -- but for the long term.
