Investors looking for the next stage of economic growth are largely focused on the tech sector. Companies involved in the production and design of innovative new technologies continue to command a premium in this market. But for many investors, this premium is certainly worth paying, considering that’s where the lion’s share of consumer attention is being paid.

For those thinking long-term, investing in companies with strong artificial intelligence offerings, or platforms that can support a new era of how we live and work, is an increasingly important piece of the investing puzzle. Companies with strong presences in the cloud computing sector and other consumer discretionary items are seeing strong demand, which many expect will continue for years and decades to come.

That’s not to say that there isn’t plenty of uncertainty in the market. Valuations remain high, with expectations just as high. And as we’ve seen with recent earnings reports, even beats and raises sometimes aren’t enough to quell concern over just how highly valued many top tech stocks are.

That said, I think the following three companies may make for decent buys before summer is over.

Key Points About This Article:

• Tech stocks continue to see higher volatility build, as earnings season winds down.
• These three major technology players appear to have significant long-term upside potential, despite the near-term noise in the market right now.
• If you’re looking for some stocks with huge potential, make sure to grab a free copy of our brand-new “The Next NVIDIA” report. It features a software stock we’re confident has 10X potential.

Adobe (ADBE)

Adobe (NASDAQ:ADBE) recently reported another strong quarter, bringing in $5.31 billion in revenue, up 10.2% year-over-year. The company exceeded expectations for key metrics including its revenue, RPO, and EPS, largely due to $487 million in annual recurring revenue for its Digital Media division, which handily surpassed estimates of $434 million. These results led Adobe to raise its annual guidance, boosting its stock price. CEO Shantanu Narayen highlighted this record revenue quarter was driven by the company’s Creative Cloud, Document Cloud, and Experience Cloud businesses.

Adobe has a strong track record of market-beating returns and is projected to reach a $1 trillion market cap over the next decade. Over the past ten years, the company’s revenue grew at a 17.4% CAGR, free cash flow increased by 19.7%, and adjusted net income rose 36.4% annually. Despite these impressive growth rates, the stock’s price gains have been moderate, indicating ADBE stock appears to be fairly valued relative to its underlying business performance.

Importantly, investors are keenly watching another key growth catalyst. Adobe is integrating generative AI into its Creative Cloud suite, enhancing tools like Photoshop and Premiere Pro with the Firefly AI engine for tasks like editing photos and videos via simple text commands. Though early results suggest there will continue to be a need for human refinement, Adobe’s early adoption positions it well for future growth. The company’s history of market-leading innovations, such as shifting to subscription-based services, underscores its adaptability. While facing competition from Apple and IBM, Adobe’s trajectory suggests it could hit a $1 trillion market cap in the next few years, potentially even sooner.

Qualcomm (QCOM)

Qualcomm (NASDAQ:QCOM) exceeded analyst expectations for its Q3 results and Q4 guidance despite a weak smartphone market. Projected revenue growth of 5% for the next fiscal year may increase with a rebound in AI-powered devices. The company’s extended partnership with Apple (the next company on this list), lasting until 2026, continues to provide many investors with optimism. Baird upgraded its rating on QCOM stock to Outperform and raised their price target to $250, citing anticipated high demand for the iPhone 16 and strong sales of AI PC components.

Qualcomm’s IoT segment supports smart home devices, remote monitoring, and robotics, while its automotive division focuses on autonomous driving and digital cockpit technologies. Recently, Qualcomm has ventured into PC chips with its Snapdragon platform, offering high performance alongside improved battery life. Despite handsets driving 63% of its Q3 fiscal 2024 revenue, IoT contributed 15%, and automotive grew to 9% (growing at an impressive 87% pace).

Qualcomm’s low valuation, with a price-to-earnings ratio of 21-times, sets it apart from other major chip stocks. Following a downturn due to declining smartphone sales and the end of the 5G upgrade cycle, Qualcomm’s revenue growth rebounded to 11% annually, reaching $9.4 billion in Q3. Net income rose 18% to $2.1 billion, making the stock a strong value given its growth potential, especially as 5G adoption increases.

Apple (AAPL)

Apple (NASDAQ:AAPL) leads the AI-capable PC market, dominating with its Mac computers, which accounted for 60% of shipments in Q2 2024. Canalys projects AI PC shipments will surge from 44 million in 2024 to 103 million in 2025. Despite concerns over new EU regulations, Bank of America analyst Wamsi Mohan upheld a Buy rating for Apple with a $256 price target, noting the company’s ability to adapt to regulatory changes.

Apple is developing a high-end home device featuring an iPad-like display and a robotic arm. A team of hundreds of employees is working on this device, which uses actuators to tilt and rotate the screen. This new product aims to innovate beyond existing home devices like Amazon’s Echo Show 10 and Meta’s former Portal. The next catalyst for the stock always appears to be on the horizon, and Apple is a company that hasn’t disappointed from the innovation angle, to be sure. 

Indeed, Apple has also become a strong dividend growth stock, supported by its powerful brand and expanding services. Despite a modest 0.45% yield, its three-year dividend growth rate of 2.81% and low payout ratio of 14.7% suggest ample room for increases. With $110.5 billion in operating cash flow for 2023, Apple’s solid financial position and ongoing innovation position it well for sustained dividend growth, providing a solid total return profile for this tech behemoth long-term. 

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