Tech Company Stocks To Buy
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Tech Company Stocks To Buy
Perhaps best known as the parent company of Google, Alphabet was created as part of a 2015 restructuring. Google, its crown jewel and also predecessor, was founded in 1998 in Menlo Park, Calif., as a project led by Sergey Brin and Larry Page at Stanford University. In the beginning, Google was a humble search engine, but today it and its parent company have grown to become online advertising and web services behemoths.
The company formerly known as Facebook is now named Meta Platforms to emphasize its embrace of the so-called metaverse. Facebook was originally founded by Mark Zuckerberg and a small cadre of Harvard classmates in his dorm room in 2004.
Samsung is a South Korean electronics giant based in Suwon-si. The company is the oldest on our list, having originally been founded as a grocery trading store in 1938, though its electronics arm launched in 1969. The company has had its share of bad press in recent years, with multiple reports of devices catching fire. However, it has largely recovered from early damage done to its public image and remains a solid maker of precision electronics.
ASML is a Netherlands-based company that designs and manufactures the machinery used by companies that make microchips. The company is a major supplier to two other firms on our list, Taiwan Semiconductor and Samsung. In fact, ASML has a near monopoly on making the photolithography machines employed by the global semiconductor industry, giving it an absolutely indispensable role in the global microprocessor supply chain.
Alibaba is a Chinese technology company that was founded in 1999 by a group that included Jack Ma, a tycoon who largely disappeared from public view over a year ago. Alibaba got its start as an online wholesaler linking manufacturers, distributors and importers and exporters. While it is still largely focused on e-commerce, it has since expanded into tools and services, including web portals, payment transfer and cloud computing. Alibaba shares trade on the New York, Hong Kong and Frankfurt exchanges.
Many tech companies are active in both hardware and software. Alphabet, for example, manufactures devices like phone and home assistants while also offering its Google search engine and a full suite of online productivity tools.
Growth companies boost returns. Buying tech stocks lets investors dial up the risk in their portfolios to increase their returns. While risk certainly cuts both ways, buying fast-growing tech names is a very effective way of boosting returns in a low interest rate environment.
Strong demand from indexing. Tech companies now compose over 20% of the S&P 500 stock market index. With hundreds of billions of dollars pouring into index funds each year, that helps sustain growth for shares of the largest tech companies.
Low dividends. Most technology companies pay minimal dividends. Tech companies in the S&P 500 average a dividend yield under 2%. Many of these companies forego dividends to reinvest in their future growth.
The biggest gains may be over. The biggest tech companies have already experienced explosive growth, and the best time to invest in them may have passed. Investors may be able to achieve higher returns by investing in smaller firms, though that introduces the risk of determining how to pick the biggest winners.
Shifting regulatory environment. Regulators can change the landscape for emerging technologies rapidly when things go wrong. Data breaches, revelations about data collection and other headlines spur regulators to pass new laws and regulations that can impede future tech sector growth.
Tech stocks delivered an uncharacteristically sluggish performance in 2022. The Technology Select Sector SPDR ETF (ticker: XLK), a popular exchange-traded fund, lagged behind the S&P 500 by about 10% last year as investors rotated from growth stocks to value stocks. For more than a decade, brief periods of tech sector underperformance have consistently been long-term