Technology stocks have a reputation for delivering large, consistent gains over the long term. The innovative nature of the market has created an ever-expanding environment and one of the best places to invest.
The chart below shows this, with the Nasdaq 100 technology index up significantly over the past decade compared to last year. Nasdaq Composite And Standard & Poor’s 500.
Wall Street has been particularly excited about technology stocks over the past year thanks to advances in emerging sectors such as artificial intelligence (AI) and cloud computing. It seems that these industries are just getting started.
The Nasdaq-100 technology sector gained 55% year over year, but it could have a lot to offer new investors in the future. Here are two tech stocks you can buy and hold for the next decade.
1. Alphabet
As home to powerful brands like Google, Android, and YouTube, the alphabet (Nasdaq: Google) (NASDAQ:GOG) It may already be on your radar as a potential investment. The company has a strong role in technology, with positions in search engines, online video sharing, cloud computing, digital advertising, and more.
In fact, Alphabet boasts nine products with over a billion users, and the top three are Google Search, Android, and Chrome. The success of its diverse services has led to Alphabet’s annual revenues rising by 75% since 2019 and its operating income rising by 108%, outperforming competitors. Microsoft And apple On both scales.
While Alphabet may be best known for its role in search engines, its main business lies in digital advertising. The tech giant’s massive user base provides nearly endless advertising opportunities, with Alphabet responsible for an estimated 27% of the $740 billion market.
Ad spending declined slightly alongside macroeconomic headwinds in 2022. However, Alphabet’s third quarter of 2023 suggests the market is back on track. The company’s revenue rose 11% year over year, beating Wall Street estimates by $980 million. The growth was primarily due to an 11% increase in Google Search revenue and a 12% increase in the YouTube Ads segment.
Alphabet is on a promising growth trajectory, surpassing $77 billion in free cash flow last year. The company has vast financial resources, which it is using to invest heavily in artificial intelligence. The company unveiled a long-awaited AI model called Gemini last December, and has plans to venture into the chip market. Alphabet has the brand strength and large cash reserves to make big gains from AI over the long term.
This chart shows that Alphabet is likely one of the biggest deals in technology right now. Its price-to-earnings (P/E) ratio and P/E cash flow are lower than those of some of the most prominent technology companies, suggesting that its shares offer the most value.
Combined with continued business expansion, Alphabet is among the best technology stocks for long-term investors.
2. Amazon
Amazon (Nasdaq: AMZN) It was particularly hard hit by the economic downturn in 2022, with its stock falling 50% over the year coupled with sharp declines in e-commerce profits. However, the company had an impressive turnaround in 2023, which proved why its stock is one of the best long-term investments.
Amazon shares rose more than 80% last year as its retail business returned to profitability and its AI cloud platform expanded. After a challenging 2022, the company began to restructure its business while prioritizing profit growth.
Cost-cutting measures such as closing or canceling construction at dozens of warehouses, laying off thousands of workers, and terminating unprofitable divisions like Amazon Care have sent the tech company’s free cash flow soaring 427% over the past year.
In the third quarter of 2023, Amazon reported revenue growth of 13% year over year, beating analysts’ expectations by $1.5 billion. Much of the growth came from retail. The North American segment generated operating income of more than $4 billion, which represented a significant improvement from the $412 million loss recorded in the same quarter last year.
Amazon’s ability to weather tough times economically has made it one of the most reliable stocks in technology. Meanwhile, its highly profitable cloud platform, Amazon Web Services, and its massive investments in artificial intelligence will likely keep its stock rising for decades.
Amazon stock has become more attractive thanks to its price-to-sales (P/S) ratio of 2.9. This metric is calculated by dividing a company’s market capitalization by its trailing 12-month revenue. The lower the number, the more value the stock offers. Compared to Microsoft and Apple’s P/E ratios of 13 and 7, Amazon is an excellent buy over the long term.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Susan Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Cook has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
2 Tech Stocks You Can Buy and Hold for the Next Decade was originally published by The Motley Fool