We recently published a list of 15 Most Promising Technology Stocks to Buy Now. In this article, we are going to take a look at where KLA Corporation (NASDAQ:KLAC) stands against other most promising technology stocks to buy now.
The global technology sector is on track for strong earnings growth in 2025, driven by advancements in artificial intelligence (AI), cloud computing, and semiconductors. Despite macroeconomic uncertainties, tech companies have demonstrated resilience, leveraging innovation to sustain revenue and profit expansion. Analysts anticipate substantial earnings growth across the sector, reflecting solid fundamentals and continued investment in transformative technologies.
According to a December 2024 report by John Butters, Vice President and Senior Earnings Analyst at FactSet, earnings for the S&P 500 are expected to grow by approximately 15% in 2025, with the information technology (IT) sector playing a crucial role in this expansion. Notably, all eleven sectors of the S&P 500 are projected to see year-over-year earnings growth, with six—including IT—expected to achieve double-digit increases. The report also emphasizes an interesting shift which is occurring outside of the “Magnificent 7,” the group of mega-cap tech companies that have historically driven market performance. While analysts forecast a 21% earnings growth for the Magnificent 7 in 2025, they also predict a significant improvement in earnings for the other 493 companies in the S&P 500, projecting a 13% increase. This represents a considerable jump from the mere 4% earnings growth expected for these same companies in 2024, signaling broader market participation in 2025.
Shifting Investor Focus Beyond Mega-Cap Tech
Although the Magnificent 7 continue to dominate the market, investor sentiment suggests a growing shift toward smaller, high-growth tech firms. Gene Munster, Managing Partner at Deepwater Asset Management, highlighted in a recent CNBC interview that while large-cap tech remains fundamentally strong, smaller companies within the “frontier tech” sector—typically valued below $500 billion—are poised to outperform over the next few years. This shift stems from concerns that trillion-dollar companies may have limited potential for high-percentage gains, prompting investors to explore smaller opportunities in AI, cloud infrastructure, and semiconductor equipment manufacturing.
A report from Deloitte’s 2025 Technology Industry Outlook reinforces the growth trajectory of the sector. Despite economic headwinds, technology investments are expected to accelerate, with increased spending on AI, cybersecurity, and enterprise software. Cybersecurity will be a critical focus as the digital attack surface expands due to the rise of IoT, generative AI, and cloud adoption. The global cost of cybercrime is projected to reach a staggering $10.5 trillion in 2025, emphasizing the need for heightened security investments.
Conclusion
As the technology sector heads into 2025, robust earnings growth is expected to continue, supported by AI-driven innovations and expanding digital transformation initiatives. The massive capital expenditures recently announced by major tech companies reflect confidence in the sector’s long-term potential. However, while mega-cap tech remains a dominant force, investor focus may increasingly shift toward smaller, high-growth companies that are pioneering next-generation technologies.
Our Methodology
To determine the 15 most promising technology stocks, we began by analyzing all U.S.-listed tech companies with a market capitalization of at least $2 billion. To exclude unprofitable companies, we considered only companies that reported a positive net profit margin over the trailing twelve months period. From this refined list, we further narrowed our selection to those stocks with a potential upside of more than 10%. Finally, we ranked the companies in ascending order based on the number of hedge funds holding stakes in the respective company, with the company attracting the most hedge fund interest securing the top spot.
Note: All pricing data is as of market close on February 17.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Is KLA Corp. (KLAC) the Most Promising Technology Stock to Buy Now?
The inner workings of a semiconductor manufacturing facility, neon hued machines humming with activity.
KLA Corporation (NASDAQ:KLAC) is a prominent supplier of process control and yield management systems for the semiconductor industry. The company’s comprehensive portfolio includes inspection, metrology, and data analysis solutions that assist semiconductor manufacturers in achieving optimal productivity and high-quality output.
KLA Corp. (NASDAQ:KLAC)’s cutting-edge technologies play a crucial role in the manufacturing of integrated circuits and other microelectronics, ensuring high precision and efficiency in semiconductor production. On January 31, Goldman Sachs raised its price target on the shares to $864 while reaffirming a Buy rating. This adjustment was driven by the company’s strong financial performance and optimistic outlook, highlighted by a 97% return on equity and two decades of consistent dividend payments. Morgan Stanley also revised its outlook on KLA Corporation (NASDAQ:KLAC), lifting its price target from $703 to $748 while maintaining an Equal-Weight rating. The firm acknowledged potential market softening, particularly in the Dynamic Random Access Memory (DRAM) segment, but noted that the company may be better positioned than its competitors. Morgan Stanley attributed this resilience to KLA Corp. (NASDAQ:KLAC)’s strong presence in advanced logic, as well as its ability to leverage longer lead times and higher margins, which could help mitigate the impact of market fluctuations.
Overall, KLAC ranks 7th on our list of most promising technology stocks to buy now. While we acknowledge the potential of KLAC to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than KLAC but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
