Many tech stocks soared over the past year as expectations for lower interest rates and milder macroeconomic headwinds brought back the bulls. But with the Nasdaq Composite index now hovering near its all-time highs, investors should get a bit pickier when it comes to the tech stocks they buy.
Instead of blindly chasing the companies with the fastest growth, investors should focus on those that have wide moats and reliable growth rates, and that are trading at reasonable valuations. I believe Meta Platforms(NASDAQ: META), Advanced Micro Devices(NASDAQ: AMD), and ServiceNow (NYSE: NOW) check all those boxes.
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The social media leader: Meta Platforms
Meta is the world's largest social media company. Its four core apps (Facebook, Instagram, Messenger, and WhatsApp) served a total of 3.29 billion monthly active users in 2024's third quarter, up 5% from a year earlier.
Back in 2022, Meta's revenue fell by 1% as it struggled to adjust to the impact of Apple's iOS privacy improvements on its ad sales model, competition from ByteDance's TikTok, and macroeconomic headwinds that shrank the digital advertising market. But in 2023, its revenue rose by 16% as it rolled out more first-party tools to counter Apple's changes, expanded its Reels feature to counter TikTok, and attracted more ad purchases from Chinese e-commerce and gaming companies. Analysts expect it to report that its revenue and earnings grew by 21% and 52%, respectively, in 2024.
For 2025, the analysts expect Meta's revenue and earnings to rise by 15% and 12%, respectively. That growth should be driven by the continued expansion of its core social apps, its rising ad impressions, and its increasing ad prices. Moreover, the growth of its higher-margin ad business should help offset the persistent losses of its still-developing Reality Labs segment, which houses its mixed reality and virtual reality products. Meta's stock still looks reasonably valued at 24 times forward earnings, and it could soar higher as the macro environment warms up.
The resilient underdog chipmaker: AMD
AMD is the world's second-largest producer of x86 CPUs and discrete GPUs. Over the past decade, it gained ground against Intel in CPUs and kept pace with Nvidia in GPUs by selling its comparable chips at lower prices.
AMD's revenue surged 44% in 2022, but most of that gain was driven by its acquisition of programmable chipmaker Xilinx. In 2023, its revenue fell by 4% as it lapped that acquisition and grappled with declining shipments of new PCs, among other macro challenges. But for 2024, analysts expect it to report revenue and adjusted earnings growth of 13% and 26%, respectively, thanks to a stabilizing PC market and the rollout of its new data center GPUs for processing AI tasks.
AMD's data center sales soared 122% year over year in its latest reported quarter and accounted for more than half of its top line. That growth was driven by robust data center demand for its Epyc CPUs and Instinct GPUs, which are cheaper than Intel's comparable Xeon CPUs and Nvidia's H100 GPUs, respectively.
For 2025, analysts expect AMD's revenue and adjusted earnings to grow by 27% and 54%, respectively. Those are stellar growth rates for a stock that trades at 25 times forward earnings. Shares could head a lot higher over the next few years as the company's AI-driven data center business expands.
A high-growth cloud leader: ServiceNow
ServiceNow's cloud-based services help large companies streamline their unstructured work patterns with digital workflows. This helps them expand more efficiently, cut costs, and provide more support for hybrid and remote workers.
ServiceNow's revenue rose by 23% in 2022 and 24% in 2023, even as inflation, rising interest rates, geopolitical conflicts, and other macro headwinds rattled the market. It flourished during that challenging period because a wobbly economy often drives companies to seek ways to streamline their workflows.
It also locked in more government contracts and expanded its Now Assist platform of generative AI tools. For 2024, analysts expect it to report that revenue and adjusted earnings grew by 22% and 29%, respectively.
For 2025, these same analysts expect ServiceNow's revenue and adjusted earnings to rise 21% and 19%, respectively, as more companies look to automate tasks and use its AI services. ServiceNow's stock certainly isn't cheap at 64 times forward earnings, but its robust growth, sticky ecosystem, and heavy exposure to the booming AI market still make it a promising long-term investment.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Leo Sun has positions in Apple and Meta Platforms. The Motley Fool has positions in and recommends Advanced Micro Devices, Apple, Intel, Meta Platforms, Nvidia, and ServiceNow. The Motley Fool recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.
