Cheap Tech Stocks to Watch in 2026

The technology sector has played a leading role in powering the market's gains over the past couple of decades. New hardware, software, and services have driven changes in business and everyday life. Tech's ability to shape and influence almost every industry under the sun means the sector remains one of the best starting places for investors seeking big gains.

Kyndryl (KD -0.11%) is an IT services company that was spun off from IBM late in 2021. The business was separated so that IBM could focus on units that presented stronger growth opportunities, but Kyndryl has been unlocking its potential now that it's a standalone entity. It could also have some underappreciated growth catalysts on the horizon.

When the business was still part of IBM, its products and services were often sold through discounted bundles to promote other products. As a result, Kyndryl's pricing and margins were under serious pressure -- and the business recorded wide losses in its first couple of years as a publicly traded company. However, the IT specialist has gotten much more selective with its contracts, focusing on deals that are directly beneficial. This strategy is transforming the margins picture for the better.

In addition to improved profitability on legacy offerings, the company has also been winning new contracts with cloud hyperscalers. Thanks to the breadth of data that Kyndryl has accumulated through its vast experience in the IT space, the company could be an undervalued artificial intelligence play.

Kyndryl is trading at a forward price-to-earnings (PE) ratio of roughly 19.5, which doesn't look particularly cheap for a business that's battling to return to sales growth. But with shares trading at roughly 11 times next year's forecast profits and signs pointing to continued earnings growth from there, the stock is attractively valued.

2. Applied Materials

Applied Materials (AMAT -1.15%) provides the equipment needed to manufacture semiconductors. Many chip companies are cyclical, with revenue and profits ebbing and flowing with consumer and business demand.

However, Applied Materials has a much more stable growth business model. New chip fabrication plants and expansions take years of planning, and their equipment requires ongoing service -- a source of revenue for Applied, as well.  The company should be able to continue growth in conjunction with the overall microchip manufacturing industry and increasing demand for network-connected industrial equipment, electric vehicles, and artificial intelligence (AI) technologies.

The company consistently generates high operating profit margins and returns all of its free cash flow to shareholders via a dividend and share repurchases. The stock trades for roughly 17 times next year's expected earnings -- a level that looks cheap in the context of the tech specialist's business strengths and growth opportunities further out.  

3. Alphabet

One of the FAANG stocks (large tech companies with big competitive advantages), Alphabet (GOOG -0.12%) (GOOGL -0.16%) has gone from high-flying internet search technologist to value-stock status. Alphabet's Google search business has emerged from pressures facing the overall digital advertising industry, and the company has returned to generating operating profit margins above 30%. It uses its profits to fund even higher-growth businesses, such as YouTube and Google Cloud, as well as emerging technologies, such as its self-driving car subsidiary Waymo.  

Alphabet also had one of the largest cash and short-term investment (net of debt) balances of any public company at roughly $95 billion as of mid-2024. When paired with its strong product suite and long-term expansion potential, there's a lot to like about Alphabet -- especially with shares trading at 17 times one-year forward expected earnings.  

4. AT&T

6. Intel

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