Technology has arguably been Wall Street’s hottest sector in 2024. Rapid growth in emerging industries, such as artificial intelligence (AI), has fueled a massive rally, making this year one of the best for technology stocks in recent memory. Now, it’s time to turn the page to 2025.
But try not to overthink it; winners often continue to have success. Below is the pitch for why each should continue delivering fantastic returns for your portfolio.
Broadcom’s fiscal year 2024 revenue totaled $51.5 billion, a 44% increase over 2023. The company built its name on semiconductors, but Broadcom has expanded into enterprise software, including infrastructure and security. It acquired VMware for $69 billion late last year, and the incremental revenue helped Broadcom grow its software business by 181% in 2024. The company’s revenue is now split roughly 60-40 between semiconductors and software.
Semiconductor revenue exceeded $30 billion in 2024 but grew just 7% from last year. However, artificial intelligence has become an increasingly exciting growth opportunity. Broadcom began working with prominent AI developer OpenAI earlier this year, and recent reports indicate that Broadcom is developing a dedicated AI chip for Apple‘s data center servers.
It sets the table for big things ahead. These are early-stage opportunities for Broadcom, which grew its AI revenue by 220% in 2024 to $12.1 billion. The AI-driven hyper-growth Nvidia has enjoyed seems to be beginning to show up in Broadcom’s business. That bodes well for the stock, which trades at 29 times 2025 earnings estimates. This is a solid buying level for a company that analysts estimate will compound earnings at a 20% growth rate over the long term.
Broadcom was a star in 2024, and its strong business results and developing AI opportunities could continue rewarding investors in 2025 and beyond.
Will Healy (Qualcomm): Qualcomm stock does not look like a winning stock at first glance. It has struggled since the summer as its 5G-driven growth runs its course. Moreover, Apple plans to launch a competing smartphone chipset in 2027, likely ending its relationship with Qualcomm.
Such a move would probably reduce the benefits it would experience from an AI upgrade cycle. In fiscal 2024, its handset segment, which houses the smartphone chipset business, comprised 64% of company revenues, meaning the loss of Apple’s business affects its largest revenue source.
However, Qualcomm has long prepared for the day when its chipsets are less in demand. To that end, it has diversified into IoT and automotive, and its car-related segment has experienced particular success. Although its overall revenue grew by only 9% in fiscal 2024 (ended Sept. 29), automotive revenue grew by 55%.
Additionally, Qualcomm released PC chips earlier this year. Its Snapdragon X Elite chips are faster than Apple’s M2 chip in some respects. Also, assuming the rumors that it wants to acquire some or all of Intel are true, its influence in the chip industry could grow if such a buyout occurs.
Despite these concerns, the semiconductor stock is up by 20% over the last year, even after dropping more than 30% from its June high. That decline has taken Qualcomm’s P/E ratio to 18, far below its chip industry competitors.
Admittedly, Qualcomm’s path is somewhat uncertain as it prepares for a likely loss of Apple’s business and invests more heavily in new market niches. Still, as it builds on its growth in automotive, PCs, and other businesses, investors may want to buy some Qualcomm shares while its earnings multiple is still low.
Jake Lerch (Meta Platforms): Meta has been a market-beating stock for some time now. Since its debut as a public company back in 2012, Meta’s shares have generated a compound annual growth rate (CAGR) of 24.8%. That’s nearly twice the return of the S&P 500, which has generated a CAGR of 15.2% over the same period. More to the point, Meta’s outperformance has been even more evident recently. As of this writing, Meta stock is up 75% year-to-date, as opposed to a 28% year-to-date return for the S&P 500.
However, it’s not just Meta’s track record that should make it appealing to investors as we head into 2025. What I love about the stock is its cash-generating power.
Over the last 12 months, Meta generated $156 billion in revenue, making it the 22nd largest American company by revenue (having just passed Home Depot earlier this year). But what truly catches my eye is how much free cash flow Meta generates. Over the last 12 months, Meta has tallied more than $52 billion in free cash flow.
Simply put, Meta is a high-margin business that has a river of cash to return value to shareholders in any number of ways, including repurchasing shares, paying down debt, making strategic acquisitions, and/or paying out dividends. Indeed, Meta announced a $50 billion share buyback plan back in February, along with a first-ever quarterly dividend.
Investors who are looking for a market-beating stock for the long term should consider Meta.
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Jake Lerch has positions in Nvidia. Justin Pope has no position in any of the stocks mentioned. Will Healy has positions in Intel and Qualcomm. The Motley Fool has positions in and recommends Apple, Home Depot, Intel, Meta Platforms, Nvidia, and Qualcomm. The Motley Fool recommends Broadcom and recommends the following options: short February 2025 $27 calls on Intel. The Motley Fool has a disclosure policy.
3 Market-Beating Tech Stocks to Supercharge Your Portfolio in 2025 and Beyond was originally published by The Motley Fool
