In 2024, technology is leading the next industrial revolution with breakthroughs in AI, 6G, and semiconductors. AI optimizes 6G networks for better performance and efficiency, while advancements in semiconductor technology, including chiplets and 3D ICs, drive innovation. These developments are reshaping communication, computing, and tech services, fueling significant growth and transformation.
Hence, as we enter the next industrial revolution, top tech stocks like NVIDIA Corporation (NVDA), Qualcomm Inc. (QCOM), and International Business Machines Corporation (IBM), present compelling investment opportunities.
The global tech services industry thrives with increasing demands for service assurance, cybersecurity, and marketing. These needs are enhancing operations, resilience, and productivity across various sectors, fueling the broader tech industry's expansion and innovation. Notably, Gartner forecasts IT services spending to rise by 8% to $5.06 trillion this year.
Similarly, advancements in technology and programming have fueled a rising demand for specialized chips, particularly in the automotive, MedTech, and electronics sectors. This surge has spurred heavy investments in advanced chip manufacturing, driving optimism in the tech market. The global semiconductor market is forecasted to reach $2.06 trillion by 2032, driven by a robust CAGR of 14.9%.
Considering these conducive trends, let’s analyze the fundamental aspects of the three tech picks.
NVIDIA Corporation (NVDA)
NVDA provides graphics, computing, and networking solutions internationally. It operates in three segments: Graphics, Compute & Networking. The company's products are used in gaming, professional visualization, data center, and automotive markets.
On August 28, 2024, NVDA announced that its new Blackwell GPU achieved up to 4x more performance on Llama 2 70B in its MLPerf Inference debut, with significant gains across AI benchmarks powered by the Hopper architecture.
On the same date, NVDA announced the addition of multi-LoRA support to its RTX AI Toolkit, enabling developers to achieve up to 6x faster performance when fine-tuning large language models (LLMs) on RTX AI PCs and workstations.
In terms of the trailing-12-month EBITDA margin, NVDA’s 63.53% is 533.6% higher than the 10.03% industry average. Likewise, its 75.98% trailing-12-month gross profit margin is 53.5% higher than the 49.49% industry average. Its 61.87% trailing-12-month EBIT margin is considerably higher than the 5% industry average.
NVDA’s revenue for the second quarter which ended on July 28, 2024, increased 122.4% year-over-year to $30.04 billion. The company’s non-GAAP operating income increased 156.4% year-over-year to $19.94 billion.
In addition, NVDA’s non-GAAP net income and non-GAAP net income per share came in at $16.95 billion and $0.68, representing increases of 151.5% and 151.9% from the year-ago values, respectively.
Street expects NVDA’s EPS and revenue for the quarter ending October 31, 2024, to increase 84% and 81.8% year-over-year to $0.74 and $32.93 billion, respectively. It surpassed the consensus EPS and revenue estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 144.3% to close the last trading session at $117.59.
NVDA’s strong fundamentals are reflected in its POWR Ratings. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Sentiment and Quality and a B for Growth. Within the Semiconductor & Wireless Chip industry, it is ranked #29 out of 90 stocks. To access additional grades for NVDA’s Value, Momentum, and Stability ratings, click here.
Qualcomm Inc. (QCOM)
QCOM engages in developing and commercializing foundational technologies for the wireless industry worldwide. It operates through three segments: Qualcomm CDMA Technologies (QCT), Qualcomm Technology Licensing (QTL), and Qualcomm Strategic Initiatives (QSI).
In terms of the trailing-12-month net income margin, QCOM’s 23.33% is 529.5% higher than the 3.71% industry average. Similarly, its 16.52% trailing-12-month Return on Total Assets is 658.6% higher than the industry average of 2.18%. Its 38.92% trailing-12-month Return on Common Equity is 721.1% higher than the industry average of 4.74%.
For the fiscal third quarter that ended June 23, 2024, QCOM’s revenues increased 11.1% year-over-year to $9.39 billion. Its non-GAAP earnings before taxes rose 24.9% year-over-year to $3.03 billion. Moreover, the company’s non-GAAP net income and EPS came in at $2.65 billion and $2.33, up 25.8% and 24.6% from the prior year’s quarter, respectively.
Analysts expect QCOM’s EPS and revenue for the quarter ending September 30, 2024, to increase 26.1% and 13.8% year-over-year to $2.55 and $9.86 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 49% to close the last trading session at $169.49.
QCOM’s POWR Ratings reflect a bright outlook. It has an overall rating of B, equating to a Buy in our proprietary rating system.
It has an A grade for Quality. It is ranked first in the Semiconductor & Wireless Chip industry. Beyond what we stated above, we also have given QCOM grades for Growth, Value, Momentum, Stability, and Sentiment. Get all the QCOM ratings here.
International Business Machines Corporation (IBM)
IBM and its subsidiaries provide integrated solutions and services worldwide. The company operates through the Software, Consulting, Infrastructure, and Financing segments.
On August 29, 2024, IBM announced a collaboration with Intel to deploy Gaudi 3 AI accelerators on IBM Cloud, aiming to enhance the cost-effective scaling of enterprise AI with improved performance, security, and resiliency. The service is expected to be available in early 2025.
On August 26, 2024, IBM announced the Telum II Processor and Spyre Accelerator, designed to power next-generation IBM Z systems, enabling scalable AI, including large language models and generative AI, with enhanced performance and energy efficiency.
In terms of the trailing-12-month levered FCF margin, IBM’s 13.21% is 27.3% higher than the 10.38% industry average. Its 23.45% trailing-12-month EBITDA margin is 133.9% higher than the 10.03% industry average. Also, its 7.50% trailing-12-month Return on Total Capital is 171.9% higher than the industry average of 2.76%.
During the fiscal second quarter that ended on June 30, 2024, IBM’s total revenue increased 1.9% year-over-year to $15.77 billion. Its non-GAAP gross profit stood at $9.12 billion, up 5.4% year-over-year over the prior year’s quarter. For the same quarter, IBM’s non-GAAP income from continuing operations came in at $2.27 billion and $2.43 per share, up 13.6% and 11.5% from the year-ago value, respectively.
For the quarter ending September 30, 2024, IBM’s revenue is expected to increase 2.1% year-over-year to $15.07 billion. Its EPS for the same quarter is expected to rise 1.1% year-over-year to $2.22. It surpassed the Street EPS estimates in each of the trailing four quarters. Over the past year, the stock has gained 36.6% to close the last trading session at $200.04.
It’s no surprise that IBM has an overall rating of B, which translates to a Buy in our proprietary POWR Ratings system.
It has a B grade for Quality. Within the Technology – Services industry, it is ranked #12 out of 75 stocks. To see IBM’s Growth, Value, Momentum, Stability, and Sentiment ratings, click here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
NVDA shares were trading at $117.93 per share on Friday morning, up $0.34 (+0.29%). Year-to-date, NVDA has gained 138.18%, versus a 18.30% rise in the benchmark S&P 500 index during the same period.
About the Author: Abhishek Bhuyan
Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments.
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