We recently published a list of 15 Hot Tech Stocks to Buy Right Now. In this article, we are going to take a look at where Palo Alto Networks, Inc. (NASDAQ:PANW) stands against other hot tech stocks to buy right now.
In 2024, the S&P 500 IT Sector Index outperformed the broader S&P 500 Index, rising approximately 36% compared to a 23% increase in the latter. This performance was underpinned by emerging trends and innovations, particularly generative AI (GenAI) and the huge investments that went into creating the infrastructure to support the growth of such technologies.
According to Gartner, the year 2025 might see a further uptick in investments. In its January 21, 2025 report, Gartner forecasts Worldwide IT spending to grow 9.8% year-over-year in 2025 to total $5.61 trillion. Among the segments, data center systems, devices, and software are projected to see double-digit growth in 2025 primarily due to GenAI hardware upgrades.
While increasing investment is a positive sign, John-David Lovelock, distinguished VP Analyst at Gartner, shared the complex intricacies of these investments in the report:
“While budgets for CIOs are increasing, a significant portion will merely offset price increases within their recurrent spending. This means that, in 2025, nominal spending versus real IT spending will be skewed, with price hikes absorbing some or all of budget growth. All major categories are reflecting higher-than-expected prices, prompting CIOs to defer and scale back their true budget expectations.
IT services companies and hyperscalers account for over 70% of spending in 2025. By 2028, hyperscalers will operate $1 trillion dollars’ worth of AI optimized servers, but not within their traditional business model or IaaS Market. Hyperscalers are pivoting to be part of the oligopoly AI model market.”
As indicated by these forecasts, technology continues to remain an exciting space in 2025.
Our Methodology
To shortlist the 15 hot tech stocks to buy, we screened companies with a market capitalization of at least $2 billion, more than 20% share price gains in the last 6 months and a potential upside of at least 20%. The stocks were then arranged in ascending order of their potential upside to arrive at the final list. We also included the number of hedge fund holders for each company based on hedge fund data from Insider Monkey’s database.
Note: All pricing data is as of market close on February 4.
At Insider Monkey we are obsessed with 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 cutting-edge computer lab full of IT experts monitoring the security of multiple systems.
Palo Alto Networks, Inc. (NASDAQ:PANW)
Upside Potential: 132%
Number of Hedge Funds: 64
Palo Alto Networks, Inc. (NASDAQ:PANW) is a leading cybersecurity company offering a comprehensive suite of security and zero-trust solutions designed to shield organizations from cyber threats. The company provides advanced firewalls, cloud-based security services, and endpoint protection, enabling businesses to secure their networks, applications, and data across various environments, including on-premises, cloud, and hybrid infrastructures.
With a strong emphasis on innovation, Palo Alto Networks, Inc. (NASDAQ:PANW) incorporates artificial intelligence, machine learning, and automation into its security offerings to enhance threat detection and response capabilities. Its market capitalization currently stands at approximately $121 billion, underscoring its significant position in the cybersecurity industry. Palo Alto Networks, Inc. (NASDAQ:PANW) aims to capture a larger share of the cybersecurity market, which is projected to grow substantially in the coming years. According to a report published by Statista in June 2024, the estimated cost of cybercrime may reach $15.6 trillion by 2029, up from $9.2 trillion in 2024. Thus, the company is well-positioned to benefit from the rising demand for cybersecurity solutions, driven by the increasing frequency and sophistication of cyberattacks.
On January 21, 2025, an analyst from Morgan Stanley raised the price target for Palo Alto Networks, Inc. (NASDAQ:PANW) from $223 to $230 and maintained an Overweight rating. The analyst views the current valuation as a favourable entry point, given recent underperformance, and anticipates potentially larger deals and stronger market share gains for the company. The analyst also believes that the stock could double in 4-5 years, driven by platform deals and increased market share.
Overall, PANW ranks 1st on our list of hot tech stocks to buy right now. While we acknowledge the potential of PANW to grow, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PANW 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 was originally published at Insider Monkey.