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Tech stocks have had a strong start to 2024, buoyed by factors including optimism that the Federal Reserve will lower rates this year and better-than-expected quarterly reports from several of the Magnificent Seven companies.
With AI adoption accelerating, many tech companies are poised to expand into new markets and attract fresh customers. It’s no wonder, then, that investors will watch this sector closely in the hopes that last year’s rally will continue. A helpful benchmark for tech firms more broadly is the Technology Select Sector SPDR Fund ( XLK ), an exchange-traded fund (ETF), which has risen by 51.7% in the last year compared with 20.8% for the Russell 1000 Index .
Below is an analysis of the top tech stocks for February 2024, screened for best value, fastest growth, and most momentum. All data are current as of Jan. 24, 2024.
Best Value Tech Stocks
Value investing is an investing strategy that holds that investors can identify stocks that are trading below their true value. At the time the market corrects this mispricing, these undervalued names may increase in value. Investors typically attempt to identify undervalued stocks using fundamental metrics like the price-to-earnings (P/E) ratio. Typically, a lower P/E ratio signals an undervalued stock because the company is valued less than its fundamental value. These stocks may offer a stronger return after the market adjusts.
| Best Value Tech Stocks | |||
|---|---|---|---|
| Price ($) | Market Capitalization (Market Cap) ($M) | 12-Month Trailing P/E Ratio | |
| Yiren Digital Ltd. ( YRD ) | 4.75 | 384.0 | 1.5 |
| Sound Group Inc. ( SOGP ) | 2.80 | 14.5 | 2.7 |
| AGM Group Holdings Inc. ( AGMH ) | 1.66 | 43.7 | 3.1 |
Source:
- Yiren Digital Ltd. : A Chinese fintech company, it operates a financial marketplace to connect borrowers with investors. Yiren Digital provides loan services, payment processing, and insurance products.
- Sound Group Inc. : Previously known as Lizhi, this audio-based entertainment company located in China offers podcasts and similar products through apps, including LIZHI, LIZHI Podcast, and Tiya. The company changed its name to Sound Group Inc., and changed its ticker listing on the Nasdaq Capital Market to SOGP in late January.
- AGM Group Holdings Inc. : A Hong Kong-based blockchain technology firm, AGM develops chips used in blockchain applications. It also offers a futures trading solution and foreign exchange trading services.
Fastest-Growing Tech Stocks
Growth investors believe that increases in a company’s revenue and earnings per share (EPS) can be an indicator of a strong business that has potential to increase in value. However, focusing on just one or the other of these two metrics can give an incomplete picture of a company’s growth potential. Circumstances unrelated to a company’s fundamental business strength—such as tax law changes, mergers, or one-off gains—can skew these figures on their own.
Investopedia uses a dual-metric approach to reach a more balanced assessment of growth companies. We equally weight the latest year-over-year (YOY) percentage growth for both EPS and revenue. This approach aims to reduce the impact of those one-time anomalies to provide a better view of a company’s true growth pattern and potential. Additionally, any companies with quarterly growth in excess of 1,000% are excluded as outliers.
| Fastest-Growing Tech Stocks | ||||
|---|---|---|---|---|
| Price ($) | Market Cap ($M) | EPS Growth (%) | Revenue Growth (%) | |
| GRAVITY Co. Ltd ( GRVY ) | 67.63 | 474.0 | 169.6 | 86.5 |
| Open Text Corp. ( OTEX ) | 41.89 | 11,374 | 163.9 | 54.7 |
| Nubeva Technologies Ltd. ( NBVAF ) | 0.42 | 22.6 | 89.6 | 918.0 |
Source: TradingView
- GRAVITY Co. Ltd. : A South Korea-based software developer, it focuses on online and mobile game applications. One of its flagship game products is Ragnarok Online. Gravity shares have surged by more than 40% in the last year.
- Open Text Corp. : A developer of enterprise information management software based in Canada. Open Text offers customer experience management, discovery, artificial intelligence solutions, and more. The company recently announced the launch of its Cloud Editions 24.1 product, including numerous AI integrations.
- Nubeva Technologies Ltd. : This firm provides decryption software and related services. Nubeva serves business and government clients as well as organizations.
Tech Stocks With the Most Momentum
Momentum investing is a strategy aiming to capitalize on pre-existing market trends by focusing on stocks that have outpaced their peers or the broader market on returns. This investment principal holds that stocks on an upward path are likely to continue to outperform so long as fundamental aspects of the business, industry, or sector do not change.
Momentum investing is a common strategy applied to tech stocks because they regularly experience significant market disruptions. As companies launch new products, announce technological breakthroughs, and gain rapid popularity, investors have the potential to climb on board while these stocks are still ascending.
Here are the tech stocks with the highest total return in the last 12 months. We’ve excluded stocks with a share price of under a dollar.
| Tech Stocks With the Most Momentum | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| Fang Holdings Ltd. ( SFUNY ) | 6.00 | 0.04 | 900.0 |
| AppLovin Corp. ( APP ) | 43.31 | 14.5 | 265.8 |
| Crexendo Inc. ( CXDO ) | 6.32 | 0.2 | 251.1 |
Source: TradingView
- Fang Holdings Ltd. : A China-based tech firm operating an online real estate portal. Fang provides marketing, listing, leads generation and financial services for real estate and home improvement markets in China.
- AppLovin Corp. : This is a game developer and mobile analytics, marketing, and development platform provider. AppLovin operates the platforms Lion Studios, SparkLabs, and AppDiscovery, among others. In its third quarter 2023 report, AppLovin announced 21% YOY improvement in revenue and $109 million in net income, driven by its AXON 2.0 AI-based advertising engine.
- Crexendo Inc. : A firm providing telecommunications services, broadband Internet services, and other cloud business services, including software licensing and maintenance support. The company announced in January that it had a user surge of 36% for 2023, about double the industry average.
Advantages of Tech Stocks
Growth potential
Tech stocks, particularly those in emerging areas, are known for experiencing some of the sharpest growth of any publicly traded company. Anticipating this, investors have sought periods in which the sector underperforms to invest heavily, as they expect significant growth over the long term.
But growth among tech stocks can vary dramatically. Many of the larger firms have limited growth potential because their market saturation and capitalization are already very high. Small-cap or penny tech stocks that experience technological breakthroughs or suddenly become incredibly popular may have periods of massive growth. Unusually, some of the biggest names in tech—including Amazon.com Inc. ( AMZN ), Meta Platforms Inc. ( META ), and Alphabet Inc. ( GOOGL )—have continued to grow at significant rates.
Advanced innovation
Tech trends are always changing, with companies aiming to capitalize on the latest technology and to guide and follow developments in innovation. This makes the sector primed for breakthroughs. One of the most recent major trends to sweep the tech sector has been AI-related technologies, which are increasingly integrated into companies across many industries and sectors. To the extent that some tech companies continue to play a role in making this possible, they stand to benefit from the ongoing AI trend.
Disadvantages of Tech Stocks
Fluctuations in the tech sector
While it can be tempting to imagine that the tech sector only moves upward, this is not the reality. For example, 2022 was generally viewed as a very poor year for the sector. Even the largest firms faced significant downturns. Alphabet dropped by 39% in that year, for instance.
One reason for the sector’s occasional stumbles is often related to the supply chain. When there are disruptions to the supply of materials and equipment necessary to make the highly specialized components used by tech companies, this can throw off an entire industry. A multi-year shortage of semiconductor components recently disrupted a range of industries, for example.
Trends shift quickly
The sharp gains of many tech firms can prove tempting to investors who may not be well-versed in the technologies themselves. With rapid innovation characterizing the sector, trends and prospects shift very quickly as well. Investors who are unprepared for this pace or who lack knowledge of the fundamental strengths of different tech companies may find themselves following a trend that has already changed.
Advantages
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Growth potential
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Advanced innovation
The Bottom Line
The tech industry’s rapid gains in 2023 appear poised to continue into 2024. Yiren Digital, GRAVITY, and Fang Holdings top the list of tech stocks for best value, fastest growth, and most momentum for February 2024, respectively. But while tech stocks have historically witnessed rapid growth at the cutting edge of technological development, investors should still watch out for risks including sector-wide turbulence and the quick pace of trends rising and falling.
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As of the date this article was written, the author does not own any of the above securities.
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