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Tech Stocks - Top Tech Stocks to Buy and How to Invest in the Technology Sector

Posted on Thursday, November 7th, 2019 by MarketBeat Staff

Tech stocks are issued by companies that create and distribute technology-based goods and services—whether those companies are big or small, established tech giants or small startups. New technology changes history, and investors who buy in can cash out with huge profits. As you research the next best investment in the tech sector, it’s important to keep your eye on the top tech stocks.

Top Tech Companies in the US

As you can see, many of these companies are already well-established, recognized brand names on Wall Street. While it would be nice to be a financier of game-changing technology before it takes off, not everyone is so lucky—or able to take on risk. However, investors looking to find out which tech stocks to buy will definitely want to know about these ten tech stocks.

Technology Industry

Technology has always affected everyone’s life on a daily basis, but within the last thirty years, technology has advanced rapidly. With the advent of personal computers, cell phones, and the internet, new vistas of integrated life services have opened up before us like never before. You can do your banking, keep up with friends, and watch movies right from your phone. Tech stocks are issued by companies who make all this possible.

Tech is a huge industry, and its integration into all parts of life have meant that it only keeps growing. As of 2019, three of the top 10 Fortune 500 companies were in tech: Apple, Amazon, and AT&T—and it’s more than a safe bet that the other seven make heavy use of technology in their everyday operations. Tech is a gigantic industry that has made enormous disruptions to the economy in recent decades, dethroning giants in oil, manufacturing, and retail...while also disrupting the very way these other verticals work.

The stock market itself has validated that technology stocks are the stocks to buy. If you look at the companies that have the largest market capitalization, you’ll see that Microsoft, Apple, Amazon, and Alphabet top the list. Facebook is in the top ten, along with Alibaba and Tencent (these Chinese tech giants indicate the international importance of the tech sector). Keep in mind that market cap represents the stock price multiplied by the number of shares, so these huge values of 800-900 billion dollars represent companies with a relatively low level of risk.

Top Tech Companies in the US

Traders performing short term trades can rely on mathematical analysis to go about their work as they ride the waves of rising and falling stock prices. But an investor looking to park their cash needs to do some serious fundamental analysis of a company before buying into it. Hype alone is not enough to validate buying shares of a tech stock. Investors need to ask themselves: Is this the type of company of which I’d be proud to be a partial owner? With that question in mind, investors of any level will want to know about the following 10 tech companies.

Apple (AAPL) was founded by Steve Jobs and partners in 1976. Despite the fact that Apple invented the personal computer, they lost huge amounts of market share in the 1990s to Microsoft. But between 1998 and 2007, they regained profitability by relaunching new models of computers, music players, and the game-changing iPhone. Today, Apple is the world’s largest tech company in terms of revenue, creating hardware and software along its signature lines of design and user interface, and retaining a high level of brand loyalty among users.

Alphabet (GOOGL) is the parent company of Google, an internet-based business that started out as a search engine, but over the years it’s morphed beyond that into an entire suite of productivity and marketing services (such as Google Docs, Google Maps, and Google Ads). Google has a virtual monopoly on internet search, which is how most consumers find information today—whether they’re shopping or conducting research. Google has moved into hardware within recent years, such as developing the Android phone, voice-controlled devices such as Google Home, and virtual reality headsets.

Microsoft (MSFT) was founded in Bill Gates in 1975 and quickly dominated the personal computer market through the 1980s and 1990s. They develop, manufacture, and support operating systems for their hardware, though in recent years they have scaled back on hardware and focused more on cloud computing and tech services. Even so, Microsoft is regarded as the primary operating system for enterprise clients (large businesses), and is the most valuable company in the world, with an enormous market capitalization that dwarfs the GDP of many countries (not companies).

Facebook (FB) was founded by Mark Zuckerburg and fellow Harvard students. Initially a networking tool for Ivy League students, it expanded to other colleges, high schools, and today is the largest social media network in the world. In recent news, Facebook announced that in one day, they had a billion active users (that essentially means a whopping almost 13% of the world logged on to Facebook that day). The premise of Facebook is simple: Users create a profile and can share pictures and status posts with fellow users. Facebook also actively acquires other social media platforms, such as Instagram and WhatsApp. They have also made recent forays into developing a digital currency.

Samsung (SSNLF) is a multinational conglomerate based in South Korea, which includes Samsung Electronics—the largest manufacturer of semiconductors and consumer electronics in the world. Their lithium-ion batteries, chips, semiconductors, and flash memory devices are used by Apple, Nokia, and Sony, among others. The Samsung Galaxy is one of the most popular mobile phones in the world, and Samsung has become involved in the development of 5G technology, a new frontier in telecom that will revolutionize the way we live life, namely through the interconnectivity of devices (referred to as the internet of things or IoT).

Amazon (AMZN), founded by Jeff Bezos, began as an online venue for buying and selling books. After expanding into a venue for buying electronics, software, clothes, food, toys, and pretty much everything else, it surpassed WalMart as the most valuable retailer in the United States in 2015. In addition to its status as the largest e-commerce marketplace in the world, Amazon also creates hardware like the Echo (an in-home vocal device) and Kindle (a digital reading tablet), along with streaming services and cloud-based business solutions. When brick and mortar retailers like Borders Books fell into oblivion, select pundits pointed to Amazon as a key disrupter in the retail industry. The model of internet shopping they’ve created has become commonly accepted as the future of commerce.

Until Uber (UBER) came around, if you needed to get somewhere and you didn’t have a car, you called a taxi. The premise of Uber is a perfect example of how one technology can lead to another—cell phones and cloud-based software provided fertile soil for a business model that involves peer-to-peer ridesharing. In addition to expanding into food delivery and researching self-driving cars, Uber has also expanded its operations into dozens of service options that are tailored to different types of passengers. Though Uber was one of the companies that spearheaded a sharing economy, the company has had to weather some crises and challenges both external and internal in recent years, such company executives who leveraged their position through ethically questionable strategies to retire from corporate life.

The premise of Snapchat (SNAP) is relatively simple: Users post pictures (usually of themselves), which disappear after 24 hours. Originally started as a platform for person-to-person messaging and photo-sharing, Snapchat was one of the first social media platforms to represent a consumer shift to mobile devices and an interest in capturing immediate life moments and sharing them with the world.

Though dozens of other social media platforms have come onto the scene, Snapchhat has retained its popularity. Snap Inc. now manufactures Spectacles, which are glasses that take short 10-second videos to be posted as “snaps” on Snapchat. In addition to representing the way that technology has become so integrated with everyday life, the development of this hardware indicates a future trend that will doubtlessly be followed by other tech giants—the development of ocular devices that boast a high degree of digital functionality.

Dell (DELL) sells and provides support for their personal computers, servers, data storage, network switches, and other hardware. They are well known in the business world for creating built-to-order units of hardware, designed with customer specs in mind—an approach that is particularly appreciated in the supply-chain and e-commerce industries. While these backend operations might not boast the glamour and glitter of other newsworthy areas of the tech sector, they play a huge role in the economy and therefore promise stable earnings. As more and more shopping is done remotely, the importance of a functional supply chain will only increase. Starting in 2013, Dell became a private company, but investors can once again buy stock in this company, which is listed at #34 in the Fortune 500 List.

Netflix (NFLX) is the leading service for streaming movies and television. Once upon a time, consumers who wanted to watch a movie at home would have to rent a physical DVD or VHS tape from a brick and mortar establishment like Blockbuster. Initially, Netflix operated along the lines of mailing out physical DVDs. Now, consumers can open their computer and stream whatever they’d like, all for a low monthly fee. Netflix has also expanded into production, creating its own movies and serials, which is a further disruption to traditional players in the entertainment industry. Some of these companies have threatened to fight back, such as entertainment mega-giant Disney, who has pulled their offerings from Netflix and announced plans to start their own streaming service. However, given the large number of consumers who watch movies and television and have a computer, it looks like Netflix will be sticking around. Today, there are almost 150 million Netflix subscribers around the world.

FANG Stocks

Consumers and investors have probably heard of this acronym, which stands for Facebook, Amazon, Netflix, and Google. These proverbial four horsemen are regarded as some of the biggest names in technology, and the most impactful companies worldwide. The term was coined by Jim Cramer, the host of Mad Money on CNBC. In recent years, the acronym has been recrafted into FAANG, in order to accommodate Apple—yet another of the great stocks to buy in the tech sector.

FANG stocks have performed very well, bringing in great returns for investors—in some cases, spectacular earnings. These five stocks have a powerful impact on the market; as they move, the market moves, whether that be up or down. However, individual shares of these FANG stocks are now priced at hundreds of dollars, making them rather difficult investments for entry-level investors with a limited amount of liquidity.

The future of FANG is surprisingly somewhat debated. Some of these companies have faced regulatory issues and consumer complaints in recent years, while their soaring prices have led some analysts to speculate that a tech bubble pop is on the way. If you pay attention to the news (as any good investor should) you’ve doubtlessly noticed that Congress has been very eager to sink their fangs into these companies and their leaders, summoning them to various hearings and discussing the idea of breaking up their virtual monopoly of the tech sector.

At the same time, these FAANG stocks are still considered growth stocks, because each one of these companies is constantly evolving and expanding into other areas of manufacture and service. With a huge percentage of the consumer market under their sway, these tech giants have the ability to affect not only the tech sector, but the course of history—can you imagine a world without social media, e-commerce, or the ability to find out anything you need to know just by typing a question into a search bar?

Semiconductor Stocks

Semiconductors carry electric currents and are crucial parts of electronic devices. Semiconductor stocks are issued by companies that develop and manufacture these little devices, which power the greater electronics industry. The average electronic device contains a semiconductor—calculators, phones, televisions, washing machines, and microwaves are just a few of the devices that use semiconductor technology.

As you can imagine, the companies that manufacture semiconductors are a driving force in the tech industry. With the tech explosion within the last few decades, annual growth has been high, but so has volatility in comparison to the market as a whole. This is largely due to frequent changes in technology that severely limit the effective lifespan of electronic devices in terms of their comparative usefulness. Samsung, Intel, and Texas Instruments are some of the more recognized names among semiconductor stocks, though there are dozens of smaller players that can present investors with possibilities for huge gains.

Telecom Stocks

Telecom is a catchall term for communications transmitted by electromagnetic systems. This includes radio, smartphones, and the internet—pathways of communication that the average person around the world uses every day. Although first-world countries like the United States are thoroughly covered by a variety of networks run by companies like Sprint, AT&T, and Verizon, there are large parts of the world that present exciting opportunities for growth in terms of digital connectivity. Telecom stocks are issued by companies that develop and manage these telecom networks.

Consumers and businesses alike use telecom technology all day, every day—from texting a spouse for a grocery list to hosting a video conference to negotiate an international deal. Some telecom stocks can be viewed as a very stable investment, and many of them can play into a dividend investing strategy. Other telecom stocks can be viewed as great opportunities for growth—especially companies involved in the development of new technologies, like a 5G network.

What Is the Best Technology ETF?

ETF stands for “exchange-traded fund,” which is an investment fund with shares that can be bought and sold on the market, like a stock. ETFs can hold assets like stocks, bonds, and/or commodities, although it is usually centered around a particular type of index, such as tech stocks.

Some of the more popular funds are the Invesco S&P 500 Equal Weight Tech ETF, the SPDR S&P Software & Services ETF, and the Fidelity MSCI Information Tech ETF. The Invesco tracks tech stocks in the Standard & Poor’s 500 Index of the largest publicly-traded U.S. companies. The SPDR tracks the same exchange but zones in on software, and the Fidelity ETF tracks around 320 American and foreign companies, among them members of FANG (Facebook, Amazon, Netflix, and Google). Investors unable to buy a decent number of shares of these companies can buy into the Fidelity ETF to get a slice of the FANG pie.

A pooled investment vehicle, such as an ETF, is a great way to get started with investing in tech stocks for the average retail investor. Risk is reduced by active management that crafts a stabilizing arbitrage mechanism to prevent the trading price from vacillating too far away from the fund’s net asset value. Investors don’t have to figure out the best tech stocks to invest in or trade, because the ETF does it for them. A bad fourth quarter in terms of company earnings, a bombed startup, or unexpected buybacks won’t rock their portfolio—not when it’s made up of dozens (if not hundreds) of technology stocks.

While some tech stocks are issued by stable corporate giants with a long history of stable growth, other tech stocks can be a risky investment. Unproven companies promising world-changing technology on a silver platter can fall into bankruptcy. Even established players can get bumped off the racetrack by a competitor who develops a new piece of hardware of software. Buying into an ETF eliminates much of the guesswork done by beginning investors.

Should I Invest in Tech Stocks?

Tech stocks are a great investment. They’ve become as much a staple as food, while still offering possibilities for growth—due in part to the relatively recent timing of the tech boom. Our world is powered in large part by the functionality created and maintained by tech companies. From running appliances in the home to international banking to digitized socializing, tech companies are heavily integrated into modern life, and business is booming.

However, like any other investment, investors should still exercise caution. Beginning investors can stabilize their portfolio and minimize risk by investing through a mutual fund or ETF. Investors with more experience can perform fundamental analysis of a company and assess their options.

Tech stocks can be volatile, which is great for traders looking to cash out on the price swings of the most active stocks, and tech stocks can also be stable securities that pay dividends, which is great for long-term investors building a retirement portfolio. Some pundits feel that valuations of select technology stocks are over-inflated and that the incredible revenue returns won’t last beyond a popping of the tech bubble, similar to the dot-com bubble that popped in the early 2000s.

In short, it would be wise to incorporate tech stocks into your investment strategy, whether it’s short-term or long term; you just have to know which companies to buy into. Telecom companies and long-established computer giants, like IBM and Microsoft, will provide you with steady growth, while recent comers like those in FANG have yielded some of the most explosive returns among the biggest stock gainers.

There are many exciting things happening in the stock market these days, with stocks to watch in every sector. New industries like cannabis, biotech, and artificial intelligence AI are promising new players in terms of future growth. The upside of these newcomers to the stock exchange is a possible future of astronomical earnings. But investors looking to buy stocks that outlast the excitement of a bull market and provide steady revenue should seriously consider technology stocks. Some tech giants already are worth several hundred billion dollars, and companies poised to hit one trillion dollars in net worth include Amazon, Alphabet, Microsoft, and Facebook—and all of them are technology stocks.

Companies Mentioned in This Article

CompanyCurrent PricePrice ChangeDividend YieldP/E RatioConsensus RatingConsensus Price Target
Apple (AAPL)$271.46+0.3%1.13%22.83Buy$249.00
Alphabet (GOOGL)$1,348.49+0.3%N/A28.38Buy$1,423.56
Microsoft (MSFT)$153.24+1.0%1.33%32.26Buy$160.14
Facebook (FB)$196.75-2.7%N/A25.99Buy$229.82
Samsung Electronics (SSNLF)$2,210.00flatN/AN/AHoldN/A
Amazon.com (AMZN)$1,760.33+0.7%N/A87.40Buy$2,192.08
Uber Technologies (UBER)$28.69+1.0%N/AN/ABuy$49.51
Snap (SNAP)$14.45+1.5%N/A-14.90Hold$17.09
Dell (DELL)$49.50+3.8%N/A3.64Buy$60.59
Netflix (NFLX)$298.50-0.1%N/A111.38Hold$366.71
Sprint (S)$5.19-1.1%N/A519.00Hold$6.31
AT&T (T)$38.35+0.5%5.32%10.89Hold$39.22

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