Got $5,000? 2 Tech Stocks to Buy and Hold for the Long Term

The economic backdrop has shifted in the past couple decades. Even the most laid-back observers have figured out that technology is becoming an increasingly important part of our daily lives. This has investment implications.

When positioning your portfolio, perhaps it's obvious that putting money to work in technology and internet-related companies is a no-brainer decision. This looks like a smart perspective.

With this framework in mind, if you've got $5,000 ready to invest, look at these two tech stocks to buy and hold for the long term.

Billions of users

Alphabet (GOOGL -0.72%) (GOOG -0.63%) and Meta Platforms (META -0.44%) should have investors' attention right now. One important reason why is because of their large user bases.

Alphabet CEO Sundar Pichai said in July 2023 that the business has "15 products that each serve half a billion people, and six that serve over 2 billion each." That's hard to wrap your head around, and it points to just how important Alphabet has become in people's lives.

Meta is no slouch in this regard. Its family of social networking apps, which include Facebook, Instagram, WhatsApp, Messenger, and Threads, combined had 3.35 billion daily active users as of Dec. 31. These are some of the most popular internet properties on the face of the planet.

Having such massive user bases points to the dominance of these two companies. But it also presents a key advantage when it comes to artificial intelligence (AI) ambitions, for example. Both Alphabet and Meta can introduce new AI-related features and updates, whether it's geared to individual users or to advertisers, to almost instant adoption.

This can then inform strategic pivots at a rapid pace. Most companies aren't as fortunate.

Network effects

Investors should want to own businesses that have durable competitive advantages, otherwise known as an economic moat. This helps lower the chances a company gets disrupted anytime soon. Both Alphabet and Meta possess network effects -- perhaps the most powerful source of competitive advantage there is.

The amount of information on the internet continues to grow. This leads to more people conducting more searches, resulting in Google Search's algorithm improving, which leads to a better service. Furthermore, all this activity drives more ads.

Alphabet-owned YouTube also benefits from a network effect. As more content is put on the site, viewers are enriched by having more things to watch. And as more viewers are drawn to the platform, it incentivizes the production of more content.

Meta's social media apps are in the same boat. With more users, a greater number of connections can be made. Then there's more content being created, which can lead to more engagement and more users. This is also valuable to advertisers.

Buy-the-dip candidates

The latest market sell-off has presented a fantastic buying opportunity. Shares of Alphabet and Meta have dropped 20% and 19% (as of March 17), respectively, from their all-time highs that were established in February. Alphabet trades at a price-to-earnings ratio of 20.4, while Meta's multiple is at 25.1. This makes them the two cheapest stocks of the "Magnificent Seven." 

This valuation seems too hard to pass up. Both businesses are projected to generated double-digit earnings-per-share growth over the next three years. This seems totally reasonable, given that these forecasts are lower than the gains achieved in the past 10 years.

And in addition to the positive factors mentioned, these companies are in incredible financial shape. They are extremely profitable, generate ridiculous amounts of free cash flow, and have strong balance sheets. This will allow them to weather whatever industry or macro headwinds present themselves, while also investing heavily in AI capabilities to further bolster their standing with users and ad customers.

Investors shouldn't think twice: Buying Alphabet and Meta stock with $5,000 and holding for the long term is the smart move.