The stock market continues to show its resilience, and that's especially true for stocks in the technology space. The tech-forward Nasdaq Composite index is trading within striking distance of its all-time high.
But as the saying goes, this is a market of stocks, not necessarily a stock market. In other words, just because the broader market is riding high, that doesn't mean that investors can't still find good deals within it.
For instance, take the three top technology stocks below. Two trade at fair valuations today, which is all investors really need to do well over the long term. However, the first company is such a compelling bargain right now that it had to lead things off.
Here is what you need to know about the three top tech stocks to buy right now.
Image source: Getty Images.
Alphabet is too good a business to be this cheap
Google parent Alphabet (GOOGL 2.81%) (GOOG 2.66%) might be the best bargain you'll find in the technology sector right now.
Fears over the potential threat that artificial intelligence (AI) poses as a competitor to Google Search, as well as concerns that antitrust regulators will convince courts to mandate the break-up of the Google ecosystem, have weighed on the stock to the point that Alphabet trades at a price-to-earnings ratio of just 18 today. Investors' fears are legitimate, but the selling simply appears to have gone too far.
For starters, Alphabet is a player in AI and has integrated its version, Gemini, into its search ecosystem. So, even as AI models begin to draw traffic away from traditional search queries, Alphabet is still monetizing some of them, as noted in the company's first-quarter earnings call. Until Google's ad revenue begins to deteriorate -- it grew by nearly 10% year over year in Q1-- it seems too early to panic.
Meanwhile, Alphabet is a prominent competitor in other high-growth industries. It's the third-largest cloud infrastructure company, and the rising adoption of AI is poised to drive significant growth in cloud usage in the coming years. Additionally, Alphabet's Waymo subsidiary has emerged as the leader in autonomous vehicles; its driverless ride-hailing service continues to announce expansions into new areas. Alphabet is a compelling buy here, even with analysts lowering their long-term earnings growth estimates to an average annualized rate of 15%.
A fair price makes this networking AI stock a buy today
Arista Networks (ANET -0.16%) looks like a big winner in AI.
Big technology companies like Microsoft and Meta Platforms are building massive data centers to provide processing power for AI software. These data centers require thousands of accelerator chips that must communicate to work together as one unit, often called a cluster. Arista Networks specializes in hardware and software for cloud networks, and is recognized by research firm Gartner as a leader in data center switching.
Arista Network's hardware and software help move vast amounts of data quickly, making data center clusters more efficient. According to a forecast by McKinsey & Company, the growth of data center infrastructure spending is poised to remain strong through 2030, potentially topping $7 trillion that year. That should continue to drive strong growth for Arista Networks.
However, the stock has stumbled over the past several months due to President Donald Trump's tariff threats, as Arista Networks has international supply chain exposure. The trade war is creating some uncertainty, but investors would be well advised to focus on the growth momentum that AI is providing to the business. The stock currently trades at 38 times earnings, which is a reasonable price tag for a business that analysts predict will grow its earnings at a compound annual rate of nearly 20% over the long term.
AI opportunities in travel could make this travel company a stock to buy and hold
An increasingly global society provides fertile ground upon which Booking Holdings (BKNG -0.17%) can grow.
The company owns multiple leading travel and leisure websites and apps, including Booking.com, Priceline.com, and OpenTable. Cumulatively, their users booked more than $166 billion in travel across more than 200 countries last year. Such a wide footprint gives the company an edge in brand recognition, and a treasure trove of data it can use to match travelers with ideal suggestions at the best prices.
Booking Holdings is a prime candidate to benefit from generative AI, as it can replace human agents with AI bots that can deliver faster, better booking experiences. It's part of the company's effort to touch more aspects of each traveler's journey. Additionally, global travel is already a multitrillion-dollar industry, and is projected to grow at a 3.5% annualized pace over the next decade. That should provide a nice tailwind to Booking Holdings' growth.
Trading at almost 33 times earnings, the stock isn't cheap, but Booking Holdings could grow into its valuation. Analysts estimate that the company will grow its earnings by an average of just over 15% annually over the long term. I think that makes Booking Holdings a solid buy here, especially if you're willing to give the business time to justify its current price tag.
