Many tech stocks soared over the past year as the bullish enthusiasm for artificial intelligence (AI) hardware, software, and chips broadly offset the bearish concerns about high interest rates, geopolitical conflicts, and other macro headwinds.
But with the Nasdaq Composite now hovering near an all-time high, some investors might be reluctant to add more tech stocks to their portfolios. However, I believe it's still safe to buy more shares of Meta Platforms (META 0.43%), ASML (ASML 2.04%), and Broadcom (AVGO 3.84%) as the bears fret over a potential downturn. Here's why I would buy these three supercharged tech stocks without hesitation.
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1. Meta Platforms
Meta Platforms, the world's largest social media company, lost its luster in 2022 as Apple's privacy changes for iOS, fierce competition from ByteDance's TikTok, and macro headwinds curbed the growth of its core advertising business. At the same time, it ramped up its spending on its unprofitable Reality Labs business. During that challenging year, its revenue and earnings per share declined 1% and 38%, respectively.
But in 2023, Meta's revenue rose 16% as its earnings jumped 73%. Its advertising business recovered as Chinese e-commerce and gaming companies ramped up their spending on Facebook and Instagram, it revamped its algorithms to counter Apple's iOS changes, and it expanded Reels to keep pace with TikTok's short videos. That recovery indicated Meta could continue subsidizing Reality Labs' costly expansion with its higher-margin advertising revenue.
To top it all off, Meta ended the year with enough cash to initiate its first-ever dividend and boost its existing buyback plan by $50 billion. Analysts expect Meta's revenue and earnings to grow 19% and 31%, respectively, in 2024. Those are impressive growth rates for a stock that trades at just 24 times forward earnings -- so investors shouldn't hesitate to buy Meta right now, even as it trades slightly below its all-time highs.
2. ASML
ASML is the world's largest producer of lithography systems, which are used to optically etch circuit patterns onto silicon wafers. It's also the only producer of extreme ultraviolet (EUV) lithography systems for manufacturing the world's smallest and densest chips.
ASML's dominance of that crucial chipmaking technology makes it a linchpin of the global semiconductor market. Its revenue rose 30% in 2023 as the world's top foundries installed more EUV systems, but it expects its revenue to stay nearly flat in 2024 as tighter export restrictions throttle its sales to Chinese chipmakers. Analysts expect its revenue to stay flat and for its earnings to decline by 4%.
But looking ahead, ASML expects to generate "significant growth" in 2025 as PC sales stabilize, the smartphone market warms up, and it ramps up shipments of its next-gen "high-NA" EUV systems for the production of even smaller chips. For 2025, analysts expect its revenue and earnings to grow 24% and 45%, respectively.
ASML's stock might seem a bit pricey at 43 times forward earnings, but its dominance of the lithography market justifies that higher valuation. Investors who are bullish on the semiconductor market should still buy this stock hand over fist.
3. Broadcom
Broadcom sells a wide range of wireless, optical, data storage, networking, mobile, and industrial chips. It also expanded into the infrastructure software market over the past six years by acquiring CA Technologies, Symantec's enterprise security division, and the cloud software giant VMware.
Broadcom still generated a fifth of its revenue from Apple over the last two fiscal years. However, its acquisition of VMware last November -- which boosts its software business to about half of its top line -- should significantly reduce its dependence on the iPhone maker. It should also reduce its overall exposure to the cyclical semiconductor sector and make it a more diversified tech giant.
Analysts expect Broadcom's revenue and adjusted earnings to grow 40% and 10%, respectively, in fiscal 2024 (which ends in October) as it integrates VMware. In fiscal 2025, they expect its revenue and adjusted earnings to rise 11% and 20%, respectively, as it laps that acquisition and its integration expenses. Those are robust growth rates for a stock that trades at 27 times forward earnings and pays a forward yield of 1.7%. Investors looking for a stable tech play that offers balanced exposure to the semiconductor, infrastructure software, and cloud markets shouldn't hesitate to buy Broadcom stock today.
