Many blue chip tech stocks generated market-beating gains over the past few years. But with the Nasdaq 100 hovering near its all-time highs and trading at a historically high 36 times earnings, investors might be wary of starting fresh positions in those market darlings. However, investors who plan to hold those stocks for at least a few more years shouldn't fret over the near-term noise about interest rates, tariffs, and trade wars.
Instead, they should gradually accumulate more shares of well-run tech companies like Broadcom (AVGO 1.01%) and Palo Alto Networks (PANW 1.09%). Let's see why these two components of the Nasdaq 100 could outperform the index over the long term.
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Broadcom
Back in 2016, Avago acquired the original Broadcom, inherited its brand, and became a dominant producer of wireless, storage, networking, optical, mobile, and radio frequency chips for a broad range of industries. This "new" Broadcom subsequently built an infrastructure software business by acquiring the enterprise software provider CA Technologies in 2018, Symantec's enterprise security business in 2019, and the cloud software giant Vmware in 2023.
From fiscal 2019 to 2024 (which ended last November), its revenue and adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) grew at a CAGR of 19% and 28%, respectively. It achieved that growth even as the pandemic, inflation, rising rates, tariffs, and geopolitical conflicts rattled the global economy.
NASDAQ: AVGO
Key Data Points
That growth was fueled by its big acquisitions, the 5G upgrade cycle in smartphones, and the secular expansion of the AI market. Most of its recent growth was driven by its sales of AI-oriented networking, optical, and custom accelerator chips for data centers. In fiscal 2024, its sales of AI-oriented chips more than tripled and accounted for nearly a quarter of its top line. That explosive growth is offsetting its weaker sales of non-AI chips and macro-sensitive infrastructure software.
From fiscal 2024 to fiscal 2027, analysts expect Broadcom's revenue and adjusted EBITDA to grow at a CAGR of 29% and 31%, respectively. Its stock still looks reasonably valued at 29 times next year's adjusted EBITDA, and it could be a balanced way to profit from the growth of the mobile, AI, and cloud-based infrastructure software markets.
Palo Alto Networks
Palo Alto Networks, which serves more than 80,000 enterprise customers in over 150 countries, is one of the world's largest cybersecurity companies. It splits its ecosystem into three main platforms: Strata's on-premise network security services, Prisma's cloud-based security services, and Cortex's threat-detection services. Most if its recent growth was driven by Prisma and Cortex, which it collectively refers to as its "next-gen security" (NGS) services.
NASDAQ: PANW
Key Data Points
From fiscal 2020 to 2025 (which ended this past July), its revenue and adjusted net income grew at a CAGR of 22% and 37%, respectively. In fiscal 2025, its NGS annual recurring revenue (ARR) increased 32% to $5.6 billion, or 61% of its top line. It expects that figure to rise 26% to 27% in fiscal 2026 as it rolls out more cloud and AI features.
From fiscal 2025 to 2028, analysts expect Palo Alto's revenue and adjusted EPS to both grow at a CAGR of 13%. Its stock might seem a bit pricey relative to that outlook at 54 times forward earnings, but I believe it deserves that premium valuation for two simple reasons.
First, it continues to expand its ecosystem with new features which directly target niche cybersecurity companies. It expects that "platformization" strategy to drive its smaller competitors out of the market and increase the stickiness of its services. Second, it's well-insulated from economic downturns because companies generally won't shut down their digital defenses to save a few dollars.
So if you're looking for an evergreen tech stock to buy and hold in this choppy market, Palo Alto checks all of the right boxes.
