Technology has become the single most important sector in the U.S. stock market.
It contains the three most valuable companies in the world -- Microsoft (MSFT +0.12%), Apple, and Nvidia.
It has crushed the S&P 500 over the long term, gaining 342% over the last decade compared to 145% for the index.
The technology sector has grown in value by so much that it now makes up 29.6% of the S&P 500. That's even when excluding tech-focused companies that aren't in the tech sector -- like Alphabet, Meta Platforms, Amazon, and Tesla, to name a few.
But the sector's dominance also has its drawbacks. Due to massive market caps and the size of their declines, big tech stocks are responsible for most of the S&P 500's sell-off so far this year.
Long-term investors who can stomach the volatility of tech stocks may want to take a closer look at Microsoft, Broadcom (AVGO 0.19%), and Oracle (ORCL +1.59%). These stocks are down 23%, 41%, and 33% from their 52-week highs, respectively, at the time of this writing. And all three companies have paid and raised their dividends for 15 consecutive years, providing investors with a one-two punch of passive income and potential gains.
Here's why all three tech stocks are worth buying now.
Image source: Getty Images.
Microsoft
Microsoft is arguably the most well-rounded tech stock. The Microsoft 365 suite of apps gives the legacy tech giant an entrenched position in software. However, the business' most valuable aspect is its Intelligent Cloud segment.
Microsoft was an early investor in OpenAI and developed its own AI tools as well. It has integrated Copilot across its products and services, including Microsoft 365, GitHub Copilot for programmers, and Copilot in Azure for cloud. Microsoft also owns LinkedIn, Activision Blizzard, Xbox, and more.
NASDAQ: MSFT
Key Data Points
The company is a massive high-margin cash cow with a highly diversified business. It also has more cash, cash equivalents, and short-term investments than debt on its balance sheet, providing a vital cushion in case of economic weakness or if Microsoft wants to pounce on an acquisition opportunity.
The sell-off in Microsoft stock pushed its price-to-earnings (P/E) ratio down to just 29. For context, Microsoft's median P/E ratio over the last three-year, five-year, seven-year, and 10-year periods is between 32.5 and 34.3. So investors are getting the opportunity to buy the stock at a relatively inexpensive valuation. The stock is even cheaper given that Microsoft is arguably a much better business with more appealing growth prospects now than in past years, thanks to the cloud and AI. As you can see in the following chart, Microsoft is at the top of its game with its highest margins in a decade and steady revenue growth.
MSFT Revenue (TTM) data by YCharts.
Microsoft yields just 0.9%, which isn't much. But it's a nice bonus, considering that Microsoft is a screaming buy even without factoring in the dividend.
Broadcom
Just as Microsoft is balanced all around in the tech sector, Broadcom is arguably the best foundational chip stock to buy now.
Like Microsoft, Broadcom combines an established business with exciting up-and-coming growth areas. Broadcom made long-term shareholders rich mainly from its broadband and networking solutions, enterprise storage and software, and wireless and mobile communications. However, the company's future growth potential is all about AI.
NASDAQ: AVGO
Key Data Points
Demand for Broadcom's XPU accelerator chips is surging as hyperscalers look for cost-effective ways to power their AI models. These chips and other AI solutions vaulted Broadcom's AI segment to more than a quarter of total revenue.
Broadcom's growth could slow if hyperscalers pull back on AI spending. But the strength of Broadcom's other business units makes it a great way to invest in AI without the entire investment thesis depending on it.
Like Microsoft, Broadcom's valuation has come down in lockstep with its falling stock price. Investors can scoop up shares at just 22 times forward earnings. Broadcom yields 1.5%, which is slightly better than the S&P 500 dividend yield of 1.4%, even though Broadcom has arguably far better growth prospects than the index.
Oracle
This enterprise software and database company is benefiting from AI-driven data center demand.
Oracle pushed into the cloud services space, offering solutions to rival Amazon Web Services (AWS), Microsoft Cloud, and Alphabet's Google Cloud. According to Statista, Oracle made up 3% of cloud infrastructure service revenue in fourth-quarter 2024, compared to 12% for Google Cloud, 21% for Microsoft, and 30% for AWS.
While 3% may not sound like much, but it's massive considering where Oracle was just a few years ago. In its most recent quarter, third-quarter fiscal 2025, Oracle reported cloud infrastructure revenue of $2.7 billion, up 49% year over year. Cloud infrastructure made up 19.2% of total revenue, and cloud infrastructure plus application revenue made up roughly half of total revenue.
Oracle expanded its multi-cloud cooperation with other big cloud providers. For example, in fourth-quarter fiscal 2024, Oracle announced that customers can run every version of the Oracle database on both Azure and Oracle clouds. In its recent quarterly release, Oracle said it had now signed agreements with OpenAI, xAI, Meta Platforms, Nvidia, and Advanced Micro Devices -- forecasting its $130 billion sales backlog to drive a 15% increase in revenue in fiscal 2026.
Despite expanding its cloud offering, Oracle sports a relatively inexpensive valuation, with a 21.4 forward P/E -- even cheaper than Microsoft and Broadcom. Oracle has the same yield as Broadcom at 1.5%.
Three rock-solid tech stocks for long-term investors
Microsoft, Broadcom, and Oracle have stable legacy business segments, exciting growth opportunities, and growing dividends.
Investors can take solace in knowing that all three companies don't sport lofty valuations based on sky-high earnings estimates. Rather, they are all great values, especially relative to slower-growing companies.
Add it all up, and these three tech stocks stand out as high-conviction buys amid the broader growth stock sell-off.
