We recently compiled a list of the 12 Best Technology Stocks to Invest In for the Long Term. In this article, we are going to take a look at where Adobe Inc. (NASDAQ:ADBE) stands against the other technology stocks.
On January 1, King Lip, BakerAvenue Wealth Management’s chief strategist and partner, joined CNBC’s ‘Closing Bell’ to discuss market outlooks as we enter 2025. His focus was on the impressive performance of tech stocks in 2024, with expectations for a second consecutive year of double-digit gains. Lip was against the prevailing sentiment among investors that big tech has peaked and that funds should rotate into smaller stocks or other themes. He argued that the recent weakness in the tech sector is largely due to technical rebalancing rather than a fundamental downturn. He emphasized that cash is likely to flow back into leading tech stocks, as they are projected to deliver the highest earnings growth in 2025, with an anticipated earnings increase of over 20%.
Discussing high valuations in the tech sector, particularly for large-cap stocks trading at forward earnings multiples between 32 and 35 times, Lip countered that many valuations remain within one standard deviation of their historical norms over the past decade. He pointed out that the MAG7 have consistently provided strong returns and are well-positioned for future growth. Lip identified Broadcom as a top stock, praising its management under Hock Tan and its unique role in the market as a provider of custom AI chips. He noted that the company operates at a lower earnings multiple while benefiting from substantial growth.
Lip also discussed Palantir, which has garnered attention for its profitability and positive cash flow since becoming profitable two years ago; despite its high valuation exceeding 50 times revenue, he believes it is well-positioned to benefit from government spending cuts and AI initiatives. While acknowledging concerns about insider selling and high valuations for the company, Lip remains optimistic about its future potential, suggesting it could be more appealing if it drops to the mid-$60 range.
Lip is bullish on tech stocks in 2025 that will be driven by strong earnings growth and ongoing investments in AI infrastructure. The NASDAQ 100 index has performed remarkably well, achieving a return of 27% in 2024 following a staggering 53.8% return in 2023. This reflects a broader trend where major tech companies have outperformed traditional indices significantly, and with that being acknowledged, we’re here with a list of the 12 best technology stocks to invest in for the long term.
Methodology
To identify the best long-term tech stocks according to media, we sifted through financial media reports and watched Wall Street analysts’ appearances on the news. We compiled a preliminary list of 25 stocks first and then selected 12 stocks that were the most popular among elite hedge funds. The stocks are ranked in ascending order of the number of hedge funds that have stakes in them, as of Q3 2024. The hedge fund data was sourced from Insider Monkey’s database which tracks the moves of over 900 elite money managers.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A team of engineers and scientists collaborating at a workstation surrounded by their applications and solutions.
Adobe Inc. (NASDAQ:ADBE)
Number of Hedge Fund Holders: 123
Adobe Inc. (NASDAQ:ADBE) is a software company known for its creative, marketing, and document management solutions. Some of its widespread tools include Photoshop, Illustrator, InDesign, Acrobat, and Premiere Pro, which millions of individuals and professionals use globally.
In 2024, it launched several AI models, including Firefly, which features cutting-edge image, vector, design, and video generation tools. These AI-powered features are integrated into core applications like Photoshop, Premiere Pro, and Acrobat. AI-powered creativity contributed to a record revenue of $21.51 billion in FY2024, representing an 11% year-over-year growth.
Still, the company’s stock fell recently due to the 2025 revenue forecast of $23.3-$23.55 billion, which was below analysts’ consensus of $23.77 billion. This was fueled by investor concerns that its investments in AI-powered software applications may not yield immediate returns. The company didn’t clearly explain how it planned to monetize its new AI tools.
However, Brent Thill recently pointed out Adobe Inc.’s (NASDAQ:ADBE) growth potential based on the anticipated Firefly AI monetization. Therefore, continued investments in AI innovation position the company for continued success.
Polen Focus Growth Strategy also increased its holdings in Adobe Inc. (NASDAQ:ADBE), anticipating renewed revenue growth driven partly by monetizing its GenAI product, Firefly. Here’s what it stated regarding the company in its Q3 2024 investor letter:
“We added to several existing positions in the quarter including Adobe Inc. (NASDAQ:ADBE), Workday, Shopify, MSCI, and Paycom Software. We feel Adobe is poised for re-accelerating revenue and earnings growth partially due to the monetization of its Firefly GenAI product embedded in its creative software.”
Overall ADBE ranks 10th on our list of the best technology stocks to invest in for the long term. As we acknowledge the growth potential of ADBE as an investment, our conviction lies in the belief that AI stocks hold great promise for delivering high returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than ADBE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.