The recent surge in artificial intelligence technology has sent tech stocks — particularly mega-caps — rocketing back toward all-time highs. This year, the sector as a whole is up 28% year to date according to Fidelity. However, there is a great deal of uncertainty around whether this rally will be able to continue with an impending economic slowdown.
Opposing views have arisen, with some investors feeling optimistic and viewing tech stocks as the new “staples” of the market, while others worry it is not enough to provide an infallible buffer against an economic downturn.
In an effort to provide clarity, Morningstar analysts weighed in on the state of tech, and confidently reported that they see secular tailwinds that should power the sector further. In addition, they estimated that software revenue growth will have recovered to pre-pandemic levels by 2024. Furthermore, with the booming automotive industry making electronic components increasingly more valuable, Morningstar sees a bright future in this space particularly.
Capitalizing on these predictions, Morningstar’s analysts created a list of ten high-quality tech stocks that they consider cheap at the current time. Despite being spectacular performers thus far this year, the stocks on the list have not yet reached their maximum growth potential and are still trading at a discount. The full list of stocks has been featured in the original article, and each one can be further researched by the reader.
One of the companies on the list, Rockefeller Global Family Office, offers asset management services, focusing on aspects such as global expansion, corporate solution, and the equity market. Jimmy Chang, Chief Investment Officer of the firm, is more cautious about technology stocks, believing that the sector cannot remain independent from the drop of the economy as a whole.
David Lefkowitz, the Head of Equities Americas at UBS Global Wealth Management, also echoed this sentiment, noting in an interview with Insider that the tech sector has some of the highest valuations despite its lack of economic immunity.
The Morningstar technology sector director, Brian Colello, is the one who remains hopeful for the near-term performance of tech stocks. After reviewing the sector’s long-term prospects, Colello recognized software as well as sensor, connector, and electrical protector manufacturers as the potential driving forces behind the market. He believes that due to the investing industry’s growing attraction towards the tech sector, these stocks will not be going anywhere and they should maintain their growth in the coming years.
