In this article, we will take a look at the 10 best tech growth stocks to buy right now.
Ever since the invention of the metal-oxide-semiconductor field-effect transistor (MOSFET) in 1959, the technology sector has helped shaped the modern world into the way that it is today. Companies such as Intel Corporation (NASDAQ: INTC), International Business Machines Corporation (NYSE: IBM), and Apple Inc. (NASDAQ: AAPL), all of which were small players at the time, have evolved into giant firms over the past seventy years.
However, even as they reign supreme, the technology sector has not stopped growing. New firms, disruptive technologies, and new areas for growth make sure that new players keep surfacing to take their share of the pie. Therefore, in this piece, we will look at the top ten technology growth stocks out there, whose shares have the highest potential for growth in the long term.
The technology boom has also created what is referred to as the global digital economy. This economy, according to The Brookings Institute, was worth $11.5 trillion in 2018 alone, equaling roughly 16% of the global gross domestic product (GDP). Data from the United States Bureau of Economic Analysis (BEA) mirrors the Brookings Institute. According to the government research body, in the U.S., the digital economy accounted for 9.6% of the U.S. GDP in 2019, with an output of $2 trillion. This share demonstrates the extreme importance of the digital economy to the U.S., as a 9.6% share stood a little over one percent below the manufacturing sector, which had an output of $2.35 trillion and a GDP share of roughly 11%. Crucially, the BEA, in its 2021 report, also reveals that the digital economy’s contribution to the GDP between 2005 – 2019 grew at a rate of 6.5%, which is thrice the GDP growth rate of 1.8%. This trend was maintained in 2019, however, the growth slightly slowed down to 5.2%.
These two studies make it clear that even though several decades have passed since the invention of the transistor, which forms the backbone of modern computing, the technology sector still packs a heavy punch. Some of the specific industry segments that are pegged for growth are fifth-generation (5G) telecommunications systems, artificial intelligence (AI), machine learning and large-scale data centers. The latest research from the International Data Corporation (IDC) released in 2015 reveals that the firm expects the AI market to grow at a rate of 16.4% this year to stand at $327.5 billion at year-end. The research firm goes on to add that by 2024 the market will exceed half a trillion dollars by growing at a comp0unnd annual growth rate (CAGR) of 17.5%.
Our Methodology
For the purposes of this piece, since our goal is to identify stocks with the highest growth potential, we will rely on a metric known as the price-to-earnings (P/E) ratio. This is the standard benchmark used in the financial world to identify high-growth firms, as it measures the number of times the market sentiment for a company (highlighted by its share price) is greater than its earnings-per-share (EPS). While generally high-growth firms are thought of as smaller companies who are in the early stages of their life, the nature of the tech sector is such that even the big players have growth potential since they are targeting the right sectors, some of which we’ve mentioned above.
However, since some potential high-growth firms are in their very early, pre-earnings stage, their P/E ratio cannot be determined. For these companies, we will use their share price growth.
With this context in mind, let’s now take a look at the 10 best tech growth stocks to buy right now.
10 Best Tech Growth Stocks to Buy Right Now
10. QuantumScape Corporation (NYSE: QS)
Share Price Growth: 116% since August 2020
QuantumScape Corporation (NYSE: QS) is a startup that aims to revolutionize the emerging electric vehicle sector by mass-producing solid-state batteries suitable for use in cars and other automobiles. QuantumScape Corporation (NYSE: QS) boasts ten years of experience in developing a technology that has evaded big-ticket companies and it has a partnership with Volkswagen through which both parties share research and the latter intending to use QuantScape’s batteries in its cars if they are mass-produced. QuantumScape Corporation (NYSE: QS) is currently in the early stages of technological development, with the company working on multi-layered pouch-sized battery cells to validate its technologies.
Since QuantumScape Corporation (NYSE: QS) does not generate any earnings, its price-to-earnings ratio is unavailable. However, the company’s shares started trading on the New York Stock Exchange (NYSE) at $9.8 on the 21st of August, 2020 and its closing price on Thursday, August 26 2021 was $21.26, making for 116% growth in little less than a year.
Baron Opportunity Fund, in its Q1 2021 investor letter, mentioned QuantumScape Corporation (NYSE: QS). Here is what the fund said:
“QuantumScape Corporation is an early-stage developer of solid-state battery technology for electric vehicles aimed at improving key aspects of batteries, including safety, charging times, energy density, and cost. The company went public via a SPAC in November. After rapid appreciation, the stock came under pressure when the company raised additional capital to help accelerate its commercialization process. We exited our small position, as described below.
We sold QuantumScape Corporation, an early-stage solid-state electric vehicle battery innovator, because it was an undersized position with an ambitious valuation. We will continue to monitor QuantumScape’s developments and may revisit the company as an investment at a future point in time.”
9. Coinbase Global, Inc (NASDAQ: COIN)
P/E Ratio: 32.23
Coinbase Global, Inc (NASDAQ: COIN) is the largest cryptocurrency exchange in the United States which allows its users to trade popular currencies such as Bitcoin and Ethereum and other cryptocurrency-based products. Its rise in popularity has taken place alongside the growth in cryptocurrency prices in the wake of the ongoing pandemic that saw investors rush in droves to alternative investment mediums such as Bitcoin. Coinbase Global, Inc (NASDAQ: COIN) allows its users to access cryptocurrency applications, trade and buy cryptocurrencies, and trade in cryptocurrency-based assets.
Coinbase Global, Inc (NASDAQ: COIN)’s shares made headlines during its IPO earlier this year after they fell during trading. However, its P/E ratio of 32.23 still suggests that the market is optimistic for its future.
In addition to Square, Inc. (NYSE: SQ), Tesla, Inc. (NASDAQ: TSLA), Amazon.com, Inc. (NASDAQ: AMZN) and Advanced Micro Devices, Inc. (NASDAQ: AMD), Coinbase Global, Inc (NASDAQ: COIN) is one of the most famous growth stocks out there.
8. Advanced Micro Devices, Inc. (NASDAQ: AMD)
P/E Ratio: 38.66
Santa Clara chip designer Advanced Micro Devices, Inc. (NASDAQ: AMD) is only one of two companies in the world with the license to design semiconductors, or chips, with the x86 microarchitecture. The other company is the chipmaking behemoth Intel Corporation, which allows Advanced Micro Devices, Inc. (NASDAQ: AMD) to take advantage of the budget conscious computing consumer and sell its products when Intel faces product roadmap delays.
Advanced Micro Devices, Inc. (NASDAQ: AMD) has experienced startling growth over the past couple of years owing to its popular chip designs and a successful partnership with the Taiwan Semiconductor Manufacturing Company (TSMC). Intel’s problems with its chip manufacturing and TSMC’s rapid growth as the world’s premium contract chip manufacturer has enabled Advanced Micro Devices, Inc. (NASDAQ: AMD) to reach new heights many thought was impossible.
AMD’s shares closed at $10.28 in 2017 and its closing price on Thursday, August 26 2021, was $107.27, which makes for a whopping 943% growth in just three years. Despite this staggering growth, the company’s current price-to-earnings ratio sits at 38.66, making it clear that investors expect a bright future ahead.
In addition to Square, Inc. (NYSE: SQ), Tesla, Inc. (NASDAQ: TSLA), Coinbase Global, Inc (NASDAQ: COIN) and Amazon.com, Inc. (NASDAQ: AMZN), Advanced Micro Devices, Inc. (NASDAQ: AMD) is one of the best growth stocks to buy now.
7. Amazon.com, Inc. (NASDAQ: AMZN)
P/E Ratio: 57.9
With a market capitalization of trillions of dollars, U.S. retail giant Amazon.com, Inc. (NASDAQ: AMZN), Inc is one of the best-known brands globally. However, even as its founder becomes one of the richest men on the planet, a little-known fact about Amazon is that it is a growth stock. Even as Amazon.com, Inc. (NASDAQ: AMZN) came to the forefront of digital shopping in the wake of the ongoing pandemic, it markets itself as a globally focused company and expects more growth in the future as it penetrates more markets.
Amazon’s shares closed at a price of $1,169 in 2017 and its closing price on Thursday, August 26 2021 was $3,316 which makes for a 184% share price growth over the past three years. Despite a high share price, Amazon.com, Inc. (NASDAQ: AMZN)’s price to earnings ratio of 57.9 reveals that investors are willing to pay a heft premium for low earnings per share.
Like Square, Inc. (NYSE: SQ), Tesla, Inc. (NASDAQ: TSLA), Advanced Micro Devices, Inc. (NASDAQ: AMD), QuantumScape Corporation (NYSE: QS) and Coinbase Global, Inc (NASDAQ: COIN), Amazon.com, Inc. (NASDAQ: AMZN) is one of the best growth stocks to buy now.
In the Q2 2021 investor letter of L1 Capital, the fund mentioned Amazon.com, Inc. (NASDAQ: AMZN). Here is what the fund said:
“Amazon.com, Inc. (NASDAQ: AMZN) flipped from being the largest detractor from portfolio performance in the March 2021 quarter, to one of the leading contributors in the June 2021 quarter. We took advantage of negative near-term sentiment in the March 2021 quarter to add to our Amazon investment. We continue to view Amazon as one of the best positioned businesses globally, with its share price still not reflecting fair value.”
6. GoDaddy Inc. (NYSE: GDDY)
P/E Ratio: 65.72
GoDaddy Inc. (NYSE: GDDY) is an American firm founded in 1997 which deals with Internet domain hosting and selling services. The company allows buyers to determine Internet domain name values before purchases and it also operates its own domain marketplace where Internet domains are bought and sold.
GoDaddy Inc. (NYSE: GDDY)’s share price at the end of 2017 was $50.28 and its closing price on Thursday, August 26 2021, was $73.40 making for 46% growth in three years for a firm that’s been in business since the late 1990s. Its P/E ratio is 65.72.
5. NVIDIA Corporation (NASDAQ: NVDA)
P/E Ratio: 79.79
While AMD designs both central processing units (CPUs) and graphics processing units (GPUs), another Santa Clara chip designer, NVIDIA Corporation, is known for inventing the modern-day GPU. NVIDIA is also one of the most fast-paced companies in the world, which is now targeting the emerging AI and machine learning segments. While originally a GPU designer is known for its close relationships with chip foundries, NVIDIA has now diversified its product lineup to launch a new CPU that targets datacenters, provides a virtual environment to several of the world’s biggest companies to finetune their manufacturing systems, and plans to target even more segments through the proposed acquisition of the British chip design house Arm Ltd.
NVIDIA’s shares closed at a price of $48.36 in 2017 and its closing price on Thursday, August 26 2021, was $220.68, which makes for an impressive growth of 356% in three years. More importantly, despite its higher revenue, NVDIA’s P/E ratio of 79.79 indicates that its bets on emerging technology sectors are playing well with investors.
In its Q2 2021 investor letter, Baron Opportunity Fund highlighted a few stocks and Nvidia Corp. (NASDAQ: NVDA) is one of them. Here is what the fund said:
“NVIDIA Corporation is a fabless semiconductor company and a leader in gaming cards and accelerated computing chips. Shares of NVIDIA rose in the second quarter on financial results and guidance significantly above Street expectations, as it benefited from the upgrade cycle in its gaming franchise along with continued AI-related strength driving its data center segment. NVIDIA’s total revenues of $5.66 billion beat Street expectations by $266 million, growing 84% (including the benefit of acquisitions, 65% organic), with its gaming business growing over 100% and its data center business expanding nearly 80%. We remain confident in NVIDIA’s leading position in gaming, data centers, and autonomous machines.”
4. Peloton Interactive, Inc. (NASDAQ: PTON)
P/E Ratio: 157
Peloton is one of the unique firms out there that allows its users to experience a community-based experience while sitting in the luxury of their homes. It offers exercise bicycles and treadmills which are connected to each other and allow video calls. Peloton also offers exercise classes and has a software application that lets users stream their classes.
Peloton’s share price at the end of September 27, 2018, when its shares started trading was $25.24, and its closing price on Thursday, August 26, 2021, was $114 making for 352% growth in three years. Its P/E ratio is 157.
Artisan Mid Cap Fund, in its Q1 2021 investor letter, mentioned Peloton Interactive, Inc. (NASDAQ: PTON). Here is what the fund said:
“Among our bottom Q1 contributors was Peloton Interactive. Peloton’s growth has accelerated throughout the pandemic as consumers replace in-person gym workouts with the company’s connected bikes and online classes. This has increased brand awareness, decreased the need for advertising spending and quickly proved the company’s high-margin, recurring revenue business model. These benefits were on clear display in Peloton’s Q4 results, which showed subscription growth trends remain robust entering 2021. However, this demand, combined with global supply chain bottlenecks, is resulting in bike shipment delays and has led the company to spend $100 million in the coming months to expedite deliveries. While this will pressure near-term profits, we expect trends to improve later this year as the company’s investments in manufacturing capacity bear fruit and as it rolls out a new, affordable treadmill. We trimmed our position early in the quarter based on valuation concerns, but the stock’s subsequent selloff brought the valuation back into an attractive range, in our view.”
3. Square, Inc. (NYSE: SQ)
P/E Ratio: 263.27
Square Inc is a financial technology firm founded in 2009 by Twitter founder Mr. Jack Dorsey and billionaire Mr. Jim McKelvey. Since its inception, the company has grown to be one of the biggest payments firms in terms of revenue, as it displaces well-established players in the sector such as Visa. Square is known primarily for hardware products, such as the Square Reader and the Square Stand, which allow gadgets such as smartphones and tablets to engage in financial transactions. It also has a software application called CashApp which allows individuals and businesses to transfer cash to each other.
Its successful targeting of the growing financial technology sector and the move to cryptocurrency have rewarded Square with momentous share price growth. Square’s shares closed at $34.67 in 2017 and its closing price on Thursday, August 26 2021, was $262.16 making for 656% growth in three years. The share price, combined with the company’s earnings, results in a P/E ratio of 263.27.
2. Tesla, Inc. (NASDAQ: TSLA)
P/E Ratio: 372
Tesla, Inc, simply known as Tesla, is well known globally for two reasons. The first is the fact that it is the first American auto manufacturer which has managed to not only develop a mass production system, and the second is its chief executive officer Mr. Elon Musk, who is known for his pledged drive to change the future by making electric vehicle ubiquitous and making life interplanetary through his second company, Space Exploration Technologies, Corp (SpaceX).
Tesla is also known for struggling to smooth out its manufacturing processes, and 2020 has been the first year that saw few problems for the company on this front. However, even as the company sets up a strong base in China and regularly pushes out vehicles, its true growth potential lies in a future where Musk wants a cheap electric vehicle affordable to the bulk of the global population.
These aspirations have fueled Tesla’s price to new highs. Tesla’s shares closed at $62.27 in 2017 and its closing price on Thursday, August 26 2021, was $701, making for eye-popping 1026% growth in just three years. And while the share price soars to new highs, investors are happy as they’ve rewarded Tesla with a P/E ratio of 372.
In the Q2 2021 investor letter of Worm Capital, the fund mentioned Tesla, Inc. (NASDAQ: TSLA). Here is what the fund said:
“Tesla underperformed in the quarter, but we maintain our high conviction in the long-term thesis on each business model. Much like art or writing, investment research is a continuous process—it never really ends. Prices can move in either direction in any given quarter, but our advantage often comes from knowing the businesses so well that short-term fluctuations in pricing shouldn’t affect our decision-making. On high conviction positions, this patience is often rewarded, which is why research is so valuable to our process…
..Tesla is in a class of its own. What many in the market seem to (still) not understand is that Tesla is not a car company so much as a complex manufacturing firm—with significant recurring software potential—growing, in our view, at a targeted rate of 50-100% YoY over the next several years. Unlike any other automotive firm in existence today, Tesla alone is a vertically integrated hardware and software business developing state-of-the-art manufacturing techniques that will revolutionize the auto industry (i.e. its Giga Presses, 4680 cells, etc.). It is a generational company and we anticipate it will eventually be the largest company in the world. Many of the conventional narratives around competition displacing Tesla’s lead are fundamentally flawed, and the many headlines surrounding Tesla’s approach to autonomy are frustratingly superficial. (As an aside, we highly recommend watching Andrej Karpathy’s, Tesla’s head of AI, his recent presentation from June: “Tesla details its self-driving Supercomputer that will bring in the Dojo era”)”
1. HubSpot, Inc. (NYSE: HUBS)
P/E Ratio: 518
The growth of the Internet provides traditional advertisers with a far greater medium to reach their potential customers. HubSpot is one such company that seeks to connect advertisers to their customers. It was founded in 2006 and provides a wide array of services to customers that include advanced data analytics, search engine optimization, and marketing tools.
HubSpot’s shares are one of the biggest growth stories out there, especially for the industry in which it operates. The company’s shares closed at $88.4 in 2017 and its closing price on Thursday, August 26 2021, was $684 making for a staggering 677% growth in three years. HubSpot reported $1.32 in non-GAAP EPS at the end of its previous fiscal year and a GAAP EPS loss. Based on its share price and the non-GAAP EPS, its P/E ratio is 518.
n the Q2 2021 investor letter of Alger, the fund mentioned HubSpot, Inc. (NYSE: HUBS). Here is what the fund said:
“HubSpot provides a cloud-based marketing and sales software platform that enables small and mid-size businesses (SMB) to attract new potential customers, convert them to paying customers and retain them. HubSpot targets its services to companies with 10 to 2,000 employees and seeks to attract visitors to its clients’ digital content through inbound marketing techniques. It then seeks to convert visitors into leads, close leads into customers, and improve engagement and customer services. The stock outperformed during the second quarter after the company reported accelerating growth momentum at scale during the first three months of this year. The headwinds HubSpot experienced during the pandemic created a setup for the company to emerge from the crisis in a much stronger strategic position than before. Management raised fiscal year 2021 revenue guidance by $77 million, a 6.5% increase, after just one quarter into the fiscal year, implying accelerating growth into the rest of the year. We believe HubSpot currently has potential to revise upward annual revenue guidance throughout the year. In addition, the company has been expanding its services and has moved from simply helping small businesses grow better to providing what we believe is the best-of-breed customer relationship and customer experience platform for companies interested in building scale.”
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Disclosure: None. 10 Best Tech Growth Stocks to Buy Right Now is originally published on Insider Monkey.
