Keep reading to learn more about the next generation of tech stocks beyond the Magnificent 7.
The Magnificent 7 stocks have driven stock market earnings over the last three quarters. That strong performance justifies the returns investors have received from those equities. At the same time, investors wonder whether it makes sense to continue to rely on such a narrow grouping of stocks to fuel returns. There’s reason to believe that the next generation of tech titan stocks will soon emerge.
Earnings growth within the Magnificent 7 is expected to slow in the second quarter. As earnings releases roll out, that is certain to cause the markets to reevaluate and likely diversify. That poses an interesting question for investors who want to capitalize on continued growth in the tech sector.
It also suggests that investors may want to forget the Magnificent 7 for the time being and consider the next generation of tech titans. Investors who agree with that theory should consider investing in the following tech stocks.
Wolfspeed (NYSE:WOLF) is a really interesting chip stock that not a lot of investors are aware of.
The chipmaker is focused on silicon carbide (SiC) and gallium nitride technologies. That makes Wolfspeed something of a focused play within the semiconductor sector. Most investors know that semiconductors are the building blocks of modern technology. But there is much more to the technology, and it will pay for investors to dig deeper. Those who do will find that power electronics are an area of the chip opportunity that many believe will experience rapid growth.
That’s where Wolfspeed comes in with its expertise and focus on SiC technology. Silicon carbide chips combine silicon and carbon, resulting in superior performance over traditional silicon chips. It’s an emerging area of the semiconductor industry with particular applicability in the automotive sector. EVs require far more chips than traditional cars, and Wolfspeed is positioned to capitalize on that emergence. That’s evident in projections suggesting the company should improve dramatically in 2025 and beyond.
Almost every investor is aware that Advanced Micro Devices (NASDAQ:AMD) has emerged as a leading AI stock. the same investors are well aware that AMD continues to play second fiddle to Nvidia (NASDAQ:NVDA). But beyond its challenger status many of those investors know little else about the company and what makes it such an interesting future tech titan.
One of the most important factors is that AMD is a major name in high-performance computing. What that really means is AMD provides powerful processors used in servers and data centers. It is one of few companies with the real ability to serve the demand for artificial intelligence chips.
Furthermore, AMD excels in producing both central processing units (CPUs) and graphical processing units (GPUs). Modern AI chips often leverage features and technological concepts from CPU and GPU. Tensor cores are an excellent example. They are AI chips designed to perform tensor operations used extensively for the purpose of deep learning.
Whether AMD can truly challenge Nvidia remains to be seen but there are strong reasons to believe it will.
Dayforce (NYSE:DAY) is a software stock that investors should really consider. It hits on a lot of upcoming trends and benefits from the strengths unique to the software sector.
One of the most important trends is that enterprises are seeking to improve HR efficiency. Dayforce has emerged as one of the better HR software companies and its stock has the potential to continue rising as the trend grows. More generally, the software market is expected to continue growing due to the increasing adoption of cloud-based solutions. Add in other broad factors like increasing digitization and AI and it’s easy to see why Dayforce will continue to have opportunities to grow.
One of the biggest advantages of software stocks is recurring revenues. Generally speaking, once a piece of software is sold, recurring revenues tend to continue. The truth was on exhibit in the company’s most recent earnings report which showed recurring revenue growth outstripping overall revenue growth.
The other glaring positive for Dayforce is the fact that earnings are really expected to grow in 2024. The company reached net profitability in 2023 and is expected to see earnings more than quadruple in 2024.
Qualcomm (NASDAQ:QCOM) has already begun to take off in 2024, appreciating by 35% thus far. The company’s opportunity will likely continue to grow, sending shares higher again.
Qualcomm is one of the leading phone chip manufacturers. That is a big part of the narrative behind its strong performance in 2024. It also explains why 2023 was so difficult for the firm. The smartphone market experienced a rapid decline in 2023. Qualcomm is a major supplier to Apple (NASDAQ:AAPL). The slowdown in iPhone sales exemplifies Qualcomm’s troubles in 2023.
This year is much different. The company’s Snapdragon chips are particularly adept at running AI applications. That provides Qualcomm with a strong runway as Apple introduces its generative AI offerings to the world.
Qualcomm isn’t so much the next generation of stocks beyond the Magnificent 7 as it is an extension of that current opportunity. It continues to be a solid choice for tech investors seeking price appreciation and income generation through dividends.
NXP Semiconductors (NASDAQ:NXPI) is really a stock to consider for forward-looking contrarians who fully expect the automotive chip market to rebound.
During the most recent quarter, NXP Semiconductors derived nearly 58% of its revenues from the automotive sector. Top Line results were flat on a year-over-year basis and declined sequentially. However, if the depths of the EV decline have been reached, NXPI shares are certainly worth buying at the moment.
Investors should not expect the blistering pace of growth experienced in the past few years to return soon. Instead, steady linear growth over the next several years is the more likely base case.
Furthermore, shareholders should continue to be rewarded in 2024 as NXP Semiconductors grows its EPS. Top line results have basically stagnated since 2022 but this year earnings are expected to increase by more than 40%. Chip sales growth should return in 2025 as a variety of factors contribute to a rebound in the EV sector. It all suggests that NXPI shares should continue to reward investors for the near and mid-term.
Adobe (NASDAQ:ADBE) is particularly focused on generative AI, a powerful type of AI that can create entirely new content based on user input. The company has multiple products to help users leverage generative AI to help with tasks like marketing and content creation. Adobe’s prowess in the generative AI realm is a strong reason to believe it is a stock to own.
Adobe’s primary generative AI tools are Sensei and Firefly. Firefly is a tool for generating novel creative assets whereas Sensei is more geared toward task automation, suggestions and the enhancement of existing workflows.
The reason to believe in Adobe relates to the generative AI space development. Generative AI refers to the creation of text-based assets and visual assets including photos and video. Adobe is one of the strongest visual content creation platforms available. The application of AI to Photoshop, InDesign and Illustrator provides so much opportunity for the company.
The future looks bright for CrowdStrike (NASDAQ:CRWD) stock. The cybersecurity market itself is expected to balloon to $299 billion by 2028, and CrowdStrike is well-positioned to capture a significant share.
The company has managed to carve out a niche as a leader in cloud-native cybersecurity. The firm offers a platform for delivering endpoint protection, threat intelligence and incident response, powered by AI.
CrowdStrike boasts impressive growth and surpassed $3 billion in annual recurring revenue (ARR) in 2024. That rapid growth of 34% in 2023 has established CrowdStrike as one of the go-to cybersecurity stocks. As AI and cloud growth continue, so will the opportunity for the company to further cement its positional leadership.
As impressive as CrowdStrike’s growth in 2023 was, 2024 and beyond are expected to be even more so. Annual growth through 2028 is expected to maintain a pace between 25% and 35%. Earnings are exploding this year. It’s a recipe for a continued surge upward into the future.
On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.