Technology stocks are experiencing an unremarkable 2022 according to the decline of 28% on the NASDAQ-100 Technology Sector index shows investors opting to sell high-growth, highly valued companies due to rising inflation, geopolitical instability within Europe, and rate hikes from the Federal Reserve.
But, the sharp fall in tech stocks this year suggests that investors can have the opportunity to invest in companies that are shaping the future at a low price. Nvidia (NVDA 5.38 percent) and Apple (AAPL 4.08 percent) are two of the tech stocks worthy of buying in the wake of pullbacks because they’re on track to make a profit from the profitable trends.
Let’s take a look at why buying these two stocks today can assist in establishing investors’ portfolios that will yield long-term benefits.
With shares falling nearly 40 percent by 2022, Nvidia shareholders were looking to see some positive results from the fiscal 2023’s first-quarter results, which covered the period ending May 1. The graphics maker, however, provided low-grade guidance due to supply chain problems exacerbated by COVID-related lockdowns imposed in China and the tepid demand for its gaming chips in some parts of Europe.
The chipmaker anticipates that the revenue for the current quarter to reach $8.1 billion by about the middle of their forecast range. This is lower than $8.29 billion in the first quarter and represents an increase of $500 million in the top line because of the reduction in revenue within Russia and China and the Lockdowns of COVID in China. Wall Street was looking for $8.54 billion in revenues coming from Nvidia this quarter. The company would easily have surpassed that number were the macro issues discussed earlier were not affected.
The tinny guidance might not be a source of confidence to investors over the short time. Still, it’s important to note that Nvidia declares it’s on track record with a year-over-year revenue increase of 24% despite the challenges. Furthermore, the company’s earnings are projected to increase by 32% over the five years to come.
A review of Nvidia’s most important growth hotspots reveals how the company can be predicted to record such impressive growth. Datacenter, for instance, is growing to be an enormous driver for Nvidia. The company recorded an increase of 83% year-over-year in revenue from this business during the quarter ending at $3.75 billion, which is a 45percent of its top revenue.
This phenomenal growth was fueled by the vital need for Nvidia’s graphic processing units (GPUs) by customers of hyper-scale cloud. Nvidia management is expecting the momentum in data centers to continue for the future, and that’s not surprising, considering Nvidia is constantly pushing the limits to secure its position as the leader in this rapidly growing sector.
Nvidia states that its H100 GPU for data centers will provide an impressive performance boost over the current A100 chip and is optimal for dealing with intense AI (AI) tasks. Nvidia states that it is “working with leading server makers and hyperscale customers to qualify and ramp H100.” In addition, Nvidia will increase its efforts to take advantage of its data center business opportunity by launching Grace, the Grace Central Processing Unit for data centers (CPU) that are expected to go live in the first quarter of 2023.
Nvidia announced various OEMs of servers (original equipment makers) like Foxconn, ASUS, Gigabyte, and others will soon manufacture servers with Grace. This means that Nvidia is expected to establish a strong foothold in the market traditionally dominated by rivals.
It is one of many factors that drive Nvidia that it isn’t unexpected that the business would maintain its rapid growth rate in 2022 or beyond. Investors who want to invest in a hot tech stock should take a closer glance at Nvidia because it’s being traded at 48 times its earnings which are less than its five-year average multiplier of just 58.
Apple shares are down 19 percent in the first quarter of this year and are trading with a valuation of 23x earnings instead of the previous year’s ratio of 31. This meager price makes Apple an outstanding stock to purchase. There are additional reasons I am very excited about Apple’s share price.
The advent of 5G phones has proven to be an enormous growth engine for Apple, and the company is dominating a large portion of the rapidly growing market. It is also enjoying strong pricing power. With many analysts expecting the sales of smartphones with 5G technology to increase at an average of 14% by 2025, Apple may see a steady increase in iPhone sales growth in the next couple of years.
Apple is also seeking to tap emerging trends in tech to boost its expansion. The company is on the verge of launching its augmented reality/virtual Reality-enabled headset. It is expected that Apple will launch the headset in the next year. This could allow Apple to benefit from an industry that is predicted to expand significantly over the next few years.
Apple has seen an impressive increase in its services division. The company’s revenue from services increased 17% over the fiscal year’s second quarter. This was more than Apple’s overall top-line growth of 9.9%. It’s also important to note that the company’s services division achieved a gross profit of 72.6 percent last fiscal quarter compared to the average gross margin of 43.7 percent.
The revenue from services is currently less than 18% of revenue. However, it could be significantly more prominent in the long run as the company expands the number of good services.