After crashing into a bear market last year, tech stocks have rebounded aggressively in 2023, with the Nasdaq Composite up 31% year to date.
However, the tech-focused index has some room to run before it reaches its all-time high, and there are still a number of stocks down substantially from their pandemic-era peaks. Keep reading to see two that look like great buys right now to these Motley Fool contributors.
A chip stock on the move
Jeremy Bowman (Advanced Micro Devices): Chipmakers' stocks are still emerging from a cyclical decline following a boom in PC sales during the pandemic, but excitement in the industry is overflowing due to the potential of artificial intelligence (AI).
Thus far, Nvidia has captured the lion's share of demand for AI chips thanks to its strength in graphics processing units (GPUs), but there should be plenty of spoils in the AI boom, and Advanced Micro Devices (NASDAQ: AMD) looks well positioned to take its share as well.
The company is already seeing demand for its chips accelerate as cloud infrastructure giants continue to build out data centers to support demand for AI. Oracle said it was spending billions of dollars on central processing units (CPUs), including those from AMD, to support the growth of its cloud infrastructure business, and AMD is set to release its competitor to Nvidia's H100, the MI300 GPU, later this year, which could establish it as a major player in AI infrastructure.
Investors seemed concerned when AMD announced the new device without a flagship customer, but there's clearly lots of demand for chips that are designed to run large language models and other generative AI applications, as the MI300 is.
And the company should benefit from the broader turnaround in chip demand as the cycle accelerates. Revenue was down 18% year over year in the second quarter to $5.36 billion and flat sequentially as stiff headwinds remain in the PC-based client segment, where revenue fell 54% year over year to $998 million due to reduced processor shipments in a weaker PC market and a significant inventory correction across the PC supply chain.
Those are temporary impediments, and investors will benefit as the PC market improves. While it has recovered some of its post-pandemic losses, AMD stock is still down 37% from its peak during the pandemic, and its opportunity looks even bigger now with the emergence of generative AI. Don't let short-term headwinds mislead you.. This looks like a great buying opportunity.
CrowdStrike will benefit from cybersecurity trends
Keith Noonan (CrowdStrike): Founded in 2011, CrowdStrike Holdings(NASDAQ: CRWD) was one of the first companies to concentrate on making AI and machine learning central to cybersecurity. The move has already paid off in a big way.
Today, CrowdStrike is the leading provider of cloud-based protections for endpoint hardware like computers, mobile devices, and servers. The company's Falcon platform uses AI and machine learning to identify, categorize, and shut down attacks and prevent bad actors from gaining access to networks and creating chaos. As Falcon comes into contact with new threats, it learns and adapts to provide more-comprehensive protection.
But while the company has generally continued to serve up very impressive business results, its stock has seen some volatile trading over the last few years. After hitting an all-time high in November 2021, CrowdStrike's valuation has shrunk due to macroeconomic pressures and decelerating growth. Even after enjoying some strong gains this year, the company's share price is still down roughly 42% from its peak.
The cybersecurity specialist's sales and earnings growth have slowed recently, but the business has continued to serve up impressive performance and expand at a healthy clip. Revenue increased 37% year over year in the second quarter to reach $535.2 million, and adjusted earnings per share more than doubled to hit $0.74. Meanwhile, free cash flow jumped roughly 39% to $188.7 million.
Even though businesses have become more cautious on spending because of macroeconomic uncertainty, CrowdStrike has continued to post very strong results. With the company showing resilience in the face of short-term impediments, its long-term potential becomes even more appealing.
As business and communications are increasingly conducted through digital channels, cybercriminals have added incentives to carry out attacks. In turn, demand for high-performance cybersecurity will only continue to increase. CrowdStrike is perfectly positioned to capitalize on these trends through the next decade and beyond.
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Jeremy Bowman has no position in any of the stocks mentioned. Keith Noonan has positions in CrowdStrike. The Motley Fool has positions in and recommends Advanced Micro Devices, CrowdStrike, Nvidia, and Oracle. The Motley Fool has a disclosure policy.