In the fast-moving tech space, separating companies in hypergrowth mode from ones that are just hype isn't always easy. Throw in the fact that artificial intelligence (AI) is fueling speculation in tech stocks, and things become even cloudier.
To help you cut through all the noise, here are three compelling buy opportunities for the new year that have potential for years.
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1. Nvidia
Nvidia's (NVDA -2.09%) leading position in artificial intelligence semiconductors cannot be overstated. The company holds an estimated 70% to 95% of the AI semiconductor market, and Nvidia's strong third quarter (which ended Oct. 27) proved this AI juggernaut isn't slowing down.
Nvidia's total sales rose 94% in the quarter to $35.1 billion, and non-GAAP (generally accepted accounting principles) earnings per share increased by 119% to $0.81, both outpacing Wall Street's estimates. Nvidia's data center segment is the catalyst behind that growth, with revenue jumping 103% from the year-ago quarter to $30.8 billion.
CEO Jensen Huang estimates companies will spend $2 trillion in AI data center investments over the next five years. Even if it's half that, Nvidia would benefit immensely from that spending, as large tech companies gobble up its powerful GPUs for AI.
With its stock trading at a price-to-earnings ratio of 54.5, Nvidia isn't cheap. However, the company's fantastic growth and leading position in AI chips at a time of huge investments means the company is still a great long-term buy.
2. Palo Alto Networks
Palo Alto Networks (PANW -1.23%) is another great hypergrowth opportunity for investors, especially if you're interested in cybersecurity. The company's firewalls, cloud security, and endpoint security products and services consistently put the company in a leadership position in Gartner's cybersecurity rankings.
The company recently reported its fiscal 2025 first-quarter (which ended Oct. 31) results, and revenue rose 14% to $2.1 billion, while non-GAAP earnings spiked 77% to $0.99, beating analysts' consensus top- and bottom-line estimates.
A bright spot in Palo Alto's quarter was the company's 40% increase in next-generation security annual recurring revenue (ARR) to $4.5 billion. This means the company's active contracts for cloud-based cybersecurity services are growing quickly, which is great news, as the global cybersecurity market grows to an estimated $272 billion by 2029, according to Statista.
Like many tech stocks right now, Palo Alto's shares aren't cheap, at a P/E ratio of about 50.3. But the company's leadership position in security, current growth, and its long-term opportunity in the growing cybersecurity space make it a compelling opportunity for investors.
3. AppLovin
AppLovin (APP -3.33%) is an advertising technology company that uses AI to help companies place ads on mobile apps and connected TVs. While the company may not be a household name, it's garnered tons of attention among investors, as its stock has soared nearly 800% over the past year.
AppLovin reported strong third-quarter results (ending Sept. 30), with total revenue increasing 39% to $1.2 billion and diluted earnings per share rising 317% to $1.25. Both of these beat Wall Street's consensus estimates.
AppLovin is tapping into a massive digital advertising market that's currently worth $740 billion worldwide. And by 2028, an estimated 81% of digital ads will be generated through programmatic advertising, like AppLovin's platform, according to Statista. That gives the company lots of opportunity to expand its reach in the coming years, even on top of its current growth.
Like the other stocks on this list, AppLovin isn't cheap, with a P/E ratio of 102.3. Long-term investors may want to wait until the share price dips a bit before picking up shares, but with analysts estimating AppLovin's earnings per share will rise 32% from 2024 to 2025 and the AI-driven adtech market expanding quickly, the stock likely has more room to run.
