3 Technology Stocks to Buy Hand Over Fist in November
Monday, Nov 11, 2024 11:33 pm ET
2min read In the rapidly evolving world of technology, artificial intelligence (AI) has emerged as a game-changer, captivating both companies and investors alike. While AI stocks have generated significant buzz, investors should remain cautious and consider the long-term profitability and cash flow stability of their investments. This article explores three technology stocks that are well-positioned to capitalize on the AI boom while maintaining relatively reasonable valuations and offering stable income prospects.
Alphabet (GOOGL, GOOG): The tech giant behind Google Search, Alphabet, is taking the threat of AI seriously. With a staggering $49.3 billion in capital expenditures, primarily spent on building out its AI infrastructure, Alphabet is poised to benefit from the AI boom. The company's Google Search segment remains dominant, with 89.3% global market share, and its AI Overviews feature has already reached over 1 billion monthly users. Alphabet's stock is up nearly 30% year to date and trades at a valuation of 24 times earnings, suggesting it is on sale compared to its five-year median P/E ratio of 26.6 times earnings. With $82.3 billion in net cash at its disposal, Alphabet can continue returning capital to shareholders through dividends and share repurchases.
Meta Platforms (META): The parent company of Facebook and Instagram, Meta Platforms, is also allocating capital expenditures for AI infrastructure, with management projecting to spend $38 billion to $40 billion. AI is already transforming the company, with CEO Mark Zuckerberg noting its positive impact on nearly all aspects of the business. Meta's financials show a 19% and 35% year-over-year increase in revenue and net income, respectively, for Q3 2024. The company's operating margin improved from 40% to 43% in the quarter, marking a three-year high. Meta's stock has soared over 60% in 2024 and recently posted quarterly revenue and net income records. With $42 billion in net cash on its balance sheet and improving margins, Meta appears fairly valued at 28 times trailing earnings.
Microsoft (MSFT): The last company on this list, Microsoft, is also the one with the largest capital expenditure spend over the trailing 12 months, with $49.5 billion. Microsoft is integrating AI across its workflow products, driving a fundamental change in the business applications market. The company's AI business is on track to be the fastest-growing business in its history, reaching an annual revenue run rate of $10 billion. Microsoft's stock is up over 50% year to date and is well-positioned to capitalize on the AI boom. The company's strong fundamentals and cash flows make it an attractive investment option for income-focused investors.
While AI stocks have generated significant buzz, investors should remain cautious and consider the long-term profitability and cash flow stability of their investments. The three technology stocks discussed in this article—Alphabet, Meta Platforms, and Microsoft—are well-positioned to capitalize on the AI boom while maintaining relatively reasonable valuations and offering stable income prospects. By focusing on these income-generating tech stocks, investors can secure steady returns and diversify their portfolios.
Alphabet (GOOGL, GOOG): The tech giant behind Google Search, Alphabet, is taking the threat of AI seriously. With a staggering $49.3 billion in capital expenditures, primarily spent on building out its AI infrastructure, Alphabet is poised to benefit from the AI boom. The company's Google Search segment remains dominant, with 89.3% global market share, and its AI Overviews feature has already reached over 1 billion monthly users. Alphabet's stock is up nearly 30% year to date and trades at a valuation of 24 times earnings, suggesting it is on sale compared to its five-year median P/E ratio of 26.6 times earnings. With $82.3 billion in net cash at its disposal, Alphabet can continue returning capital to shareholders through dividends and share repurchases.
Meta Platforms (META): The parent company of Facebook and Instagram, Meta Platforms, is also allocating capital expenditures for AI infrastructure, with management projecting to spend $38 billion to $40 billion. AI is already transforming the company, with CEO Mark Zuckerberg noting its positive impact on nearly all aspects of the business. Meta's financials show a 19% and 35% year-over-year increase in revenue and net income, respectively, for Q3 2024. The company's operating margin improved from 40% to 43% in the quarter, marking a three-year high. Meta's stock has soared over 60% in 2024 and recently posted quarterly revenue and net income records. With $42 billion in net cash on its balance sheet and improving margins, Meta appears fairly valued at 28 times trailing earnings.
Microsoft (MSFT): The last company on this list, Microsoft, is also the one with the largest capital expenditure spend over the trailing 12 months, with $49.5 billion. Microsoft is integrating AI across its workflow products, driving a fundamental change in the business applications market. The company's AI business is on track to be the fastest-growing business in its history, reaching an annual revenue run rate of $10 billion. Microsoft's stock is up over 50% year to date and is well-positioned to capitalize on the AI boom. The company's strong fundamentals and cash flows make it an attractive investment option for income-focused investors.
While AI stocks have generated significant buzz, investors should remain cautious and consider the long-term profitability and cash flow stability of their investments. The three technology stocks discussed in this article—Alphabet, Meta Platforms, and Microsoft—are well-positioned to capitalize on the AI boom while maintaining relatively reasonable valuations and offering stable income prospects. By focusing on these income-generating tech stocks, investors can secure steady returns and diversify their portfolios.
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