Technology and growth stocks helped power the market higher over the past 15 years, and there is no reason to think that this won't continue. Let's look at two leading tech stocks to buy this year.
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1. Alphabet
Alphabet (GOOGL 1.66%) (GOOG 1.69%) has the most complete artificial intelligence (AI) tech stack of any company, which positions it to be an AI leader for many years to come. The company has developed one of the world's foremost large language models (LLMs) with Gemini, which it incorporated throughout its products, including Google Search, to both make them better and help drive revenue growth.
NASDAQ: GOOGL
Key Data Points
As search and AI chatbots meld in general discovery, Alphabet is uniquely positioned by being able to offer traditional search and AI chatbot experiences within the same solution. Meanwhile, it has unmatched distribution through its ownership of the Android smartphone operating system and Chrome browser, as well as a search revenue-sharing deal with Apple.
On top of that, Gemini is trained with Alphabet's own custom AI chips, which gives it a big cost advantage. Its tensor processing units (TPUs) were developed more than a decade ago and have been tightly integrated with its systems. They have proven to be so good that its cloud computing customers, such as Anthropic, have placed big orders to run some of their AI workloads using its chips within Google Cloud.
Morgan Stanley has estimated that for every 500,000 chips Alphabet customers deploy, it generates around $13 billion in yearly revenue. It estimates that customers will deploy 5 million TPUs in 2027 and 7 million in 2028.
Alphabet's Google Cloud is already growing quickly and seeing strong operating leverage, with segment revenue climbing 34% last quarter and operating income surging 85%. Meanwhile, it is looking to capture even more data center revenue following its pending acquisition of leading cloud security company Wiz. Throw in YouTube and its Waymo robotaxi business, and Alphabet has a lot of growth drivers moving forward.
2. Meta Platforms
With Instagram and Facebook, Meta Platforms (META 2.52%) has one of the largest digital advertising platforms on the planet. What Meta does better than any other social media company in the world is monetize its large user base through advertising. And with AI, the company has gotten even better at it.
NASDAQ: META
Key Data Points
Meta's sites today are much more about entertainment than connecting with friends and family, and it is using AI to keep its users more entertained. AI-powered algorithms are now feeding its users more of the content they are interested in, which is keeping them on its sites longer and giving the company more opportunities to show ads to these users.
At the same time, the company is employing AI to help advertisers create better campaigns, improve user targeting, and get better results from their ad spending. This, in turn, is leading to higher ad pricing on its platform. Last quarter, Meta's revenue surged 26%, driven by a 14% increase in ad impressions and a 10% increase in ad prices.
Moving forward, AI should continue to help drive Meta's ad revenue. Meanwhile, the company has a big opportunity with its WhatsApp messaging platform and new Threads platform. WhatsApp has more than 3 billion monthly users globally, and it is just beginning to serve ads on the platform. While most of these are lower-monetizing international users, it is still a huge opportunity. At the same time, it is still building out Threads and looking to gradually introduce ads to the platform.
Investors have been worried about the company's spending on its money-losing metaverse ambitions, but it will reportedly make significant spending cuts to funnel more money into AI, where it is seeing strong returns. Continued strong revenue growth and a little more spending discipline would likely be nice catalysts for the stock, which is one of the cheapest in the megacap tech universe, trading at a forward price-to-earnings (P/E) ratio of just 19.5 times 2026 analyst estimates.
