Uncover Three Tech Stocks Set to Outperform in 2025 and Beyond, Boosting Your Investment Portfolio
Technology has undeniably been Wall Street's hottest sector in 2024. The swift expansion of fledgling markets, such as artificial intelligence (AI), has triggered a significant rally, making 2024 one of the most prosperous years for technology stocks in recent history. As we transition into 2025, it's time to scrutinize potential winners.
Upon conducting thorough research, three Our Website contributors pinpointed Broadcom (AVGO 0.25%), Qualcomm (QCOM 2.73%), and Meta Platforms (META 0.90%) as stocks with high prospects in 2025 and beyond. Given their reputation for substantial returns, these stocks may be quite familiar to you.
However, refrain from overthinking; winners often perpetuate their success. Below you'll find reasons why each company could continue delivering impressive returns to your portfolio.
Broadcom concluded 2024 on a high note, setting the stage for further gains
*Justin Pope* (Broadcom): Broadcom presents an attractive investment opportunity heading into 2025, despite its impressive 95% surge in value since January. The semiconductor and enterprise software giant wrapped up its fiscal year 2024 on a high note, signaling robust business momentum for the upcoming year.
Broadcom's fiscal year 2024 revenue amounted to $51.5 billion, representing a 44% increase from 2023. Broadcom initially built its reputation on semiconductors, but its foray into enterprise software, specifically infrastructure and security, has been significant. It acquired VMware for $69 billion toward the end of 2023, which significantly boosted Broadcom's software business, growing it by 181% in 2024. Broadcom's current revenue split is roughly 60-40 between semiconductors and software.
Semiconductor revenue reached $30 billion in 2024, but expanded by only 7% compared to the previous year. However, AI has emerged as an exciting growth opportunity. Broadcom started collaborating with prominent AI developer OpenAI earlier in 2024, and recent reports suggest that Broadcom is generating a dedicated AI chip for Apple's data center servers.
This sets the stage for promising developments down the line. These early-stage opportunities for Broadcom have led to a 220% surge in AI revenue in 2024, reaching $12.1 billion. The tremendous AI-driven growth Nvidia has achieved seems to be making its way into Broadcom's business. This trend is favorable for the stock, which trades at 29 times 2025 earnings estimates. With forecasted long-term earnings growth of 20%, this is an auspicious purchasing price for a company with such potential.
Broadcom shone in 2024, and its solid business results and promising AI opportunities can potentially continue rewarding investors in 2025 and beyond.
Diversification might be the key to this stock's revival
*Will Healy(Qualcomm):* Qualcomm, at first glance, does not come across as a robust stock. It has experienced a setback since the summer as 5G-driven growth begins to plateau, and rumors suggest that Apple** may introduce a competing smartphone chipset in 2027, possibly signaling the end of its partnership with Qualcomm.
This could negatively affect the benefits it derives from an AI upgrade cycle. In fiscal 2024, its handset sector, which encompasses the smartphone chipset business, accounted for 64% of its overall revenue, meaning that losing Apple's business would impact its primary revenue source.
However, Qualcomm has long anticipated a day when its chipsets would be less in demand. To that end, it has diversified into the Internet of Things (IoT) and automotive, while experiencing considerable success in the latter sector. Although its overall revenue increased by just 9% in fiscal 2024 (ending on September 29), its automotive revenue surged by 55%.
Qualcomm introduced PC chips earlier in 2024. Its Snapdragon X Elite chips outperform Apple's M2 chip in certain aspects. Furthermore, if the rumors of a potential acquisition of some or all of Intel are accurate, Qualcomm's influence in the chip industry could flourish if such a deal goes through.
Qualcomm's valuation may appear uncertain as it prepares for the loss of Apple's business and invests more heavily in new market niches. Nevertheless, the stock has managed to gain 20% over the past year, even after experiencing a 30% plunge from its June peak. This has led to Qualcomm's P/E ratio dropping to 18. This is a considerable discount compared to its chip industry competitors.
Admittedly, doing business without Apple's support and delving further into new market segments could present challenges for Qualcomm. Nevertheless, by capitalizing on its automotive, PC, and other recent growth, investors may want to acquire Qualcomm shares while its earnings multiple is still low.
Meta is a top-performing stock that investors should not overlook
*Jake Lerch* (Meta Platforms): Meta has been a standout stock for quite some time. Since its debut as a public company in 2012, Meta's shares have showcased a compound annual growth rate (CAGR) of 24.8%. This is nearly double the return of the S&P 500, which has yielded a CAGR of 15.2% during the same period. More importantly, Meta's outperformance has become even more pronounced recently. As of this moment, Meta stock has gained 75% for the year, contrasted with a 28% rise for the S&P 500.
However, there are additional reasons why Meta should be appealing to investors as we enter 2025. Its impressive earnings power is a significant factor to consider.
Over the past year, Meta Corporation has accumulated an impressive revenue of $156 billion, securing its position as the 22nd largest revenue-generating company in America (surpassing Home Depot just recently in 2022). What truly captivates my attention, however, is Meta's considerable free cash flow. During this same period, the company has recorded an astonishing $52 billion in free cash flow.
Put succinctly, Meta operates with significant profit margins, funneling an abundant stream of cash that can be employed to enrich shareholders in various methods. These options include purchasing shares back, settling debt, acquiring strategic assets, and/or distributing dividends. In fact, back in February, Meta unveiled a $50 billion buyback plan, as well as its inaugural quarterly dividend payment.
Individual investors, particularly those seeking a competitive long-term investment, may find Meta an attractive option.
In light of the potential gains in the technology sector, considering diversifying your investment portfolio with stocks like Broadcom, Qualcomm, and Meta Platforms could be warranted. For instance, Broadcom's robust business momentum, significant software growth, and promising AI opportunities may continue to yield impressive returns for investors. Similarly, Qualcomm's diversification into IoT and automotive sectors, as well as its potential acquisition of Intel, could revive its stock's fortunes. Lastly, Meta's impressive earnings power, free cash flow, and competitive long-term investment potential make it a top-performing stock that investors should not overlook.
