Benzinga - by Shanthi Rexaline, Benzinga Editor.
This year witnessed a strong rally in mega-tech stocks right from the beginning. After a brief pause in late summer, they regained momentum and are poised to end the year with impressive gains. Gene Munster, a tech venture capitalist and analyst at Deepwater Asset Management, shared his insights into the outlook for tech stocks in 2024.
What Happened: Following Federal Reserve Chairman Jerome Powell‘s indication that the central bank has concluded its rate hikes, emerging tech stocks, representing companies with a market capitalization under $50 billion, outperformed the “Magnificent Seven,” as noted by Munster.
On Wednesday, while emerging tech stocks recorded an average increase of 9.3%, the “Magnificent Seven” posted a modest 1.1% gain, Munster added.
The “Magnificent Seven” includes mega-cap tech stocks like Apple, Inc. (NASDAQ:AAPL), Microsoft Corp. (NASDAQ:MSFT), Amazon, Inc. (NASDAQ:AMZN), Alphabet, Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG), Tesla, Inc. (NASDAQ:TSLA), Nvidia Corp. (NASDAQ:NVDA), and Meta Platforms, Inc. (NASDAQ:META).
Munster suggested that given the recent strength of the technology sector, there might be a potential sell-off. However, he remains optimistic about sub-$50 billion tech stocks in 2024, even if the Federal Reserve doesn’t cut interest rates.
“A stable interest rate environment will allow investors to feel safer in returning to some of the 2021 darlings,” he added.
Stock Picks To Play The Trend: Benzinga screened a handful of tech stocks with sub-$50 billion market capitalization and fairly positive fundamentals using the following criteria:
- Market cap between $300 million and $50 billion
- Average trading volume over 500,000
- Stock Price over $5
- Profitable
- Average analysts’ recommendation of Buy or better
- The upside potential of over 20% (based on analysts’ average price target)
Axcelis Technologies, Inc. (NASDAQ:ACLS): Axcelis provides tools and process expertise to form the transistors that power all electronics, namely smartphones and laptops, cameras, personal music players, and more.
GLOBALFOUNDRIES Inc. (NASDAQ:GFS): Malta-New York-based GlobalFoundries is a contract manufacturing and design company created by the divestiture of the manufacturing arm of AMD. Following the divestiture, it was owned by UAE sovereign wealth fund Mubadala Investment Company until its initial public offering in October 2021.
Sensata Technologies Holding plc (NYSE:ST). Sensata supplies sensing, electrical protection, control, and power management solutions and has operations and business centers in 13 countries.
Extreme Networks, Inc. (NASDAQ:EXTR): It is a cloud-networking company focused on delivering services that connect devices, applications, and people in new ways. The company leverages the powers of machine learning, artificial intelligence, analytics, and automation.
The Technology Select Sector SPDR Fund (NYSE:XLK) rose 0.41% to $191.99 in premarket trading on Thursday, according to Benzinga Pro data
Read Next: Google, Meta, Qualcomm: What’s Brewing Behind Their Unseen Tech Coalition?
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