Best Tech Stocks for August 2024

The technology sector, as tracked by the Technology Select Sector SPDR Fund (XLK) finally
pared back some of the gains made this year, declining 4% in July, underperforming the Russell 2000’s 10% gain over the same period. The reason behind the pullback can be attributed to lukewarm earnings reports from tech sector giants such as Alphabet Inc. (GOOGL) amidst stretched valuations, along with a rotation out of tech stocks into interest rate sensitive sectors such as financials, prior to a rate cut by the U.S. Federal Reserve.

Below is an analysis of the top tech stocks for August 2024, screened for best value, fastest growth, and most momentum. All stocks are listed on the Nasdaq or New York Stock Exchange. We also excluded stocks with a price under $5, an average daily trading volume of less than 100,000, and a market cap of less than $300 million.

All data are current as of July 28, 2024.

Best-Value Tech Stocks

Value investing is an investing strategy that holds that investors can identify stocks trading below their true value. At the time the market corrects this mispricing, these undervalued names may increase in value. Investors typically attempt to identify undervalued stocks using fundamental metrics like the price-to-earnings (P/E) ratio. Typically, a lower P/E ratio signals an undervalued stock because it means the company is valued less than its fundamental value. These stocks may offer a stronger return after the market adjusts.

• Perion Network Ltd.: Perion connects advertisers with consumers across various digital channels, including search, social media, and display advertising. On June 10, Perion announced that changes in Microsoft Bing's policies, which exclude some publishers from its search distribution and adjust advertising pricing, have significantly reduced Perion's search revenue. This revenue is now expected to be less than 5% of total revenue in the second half of 2024.
• Consensus Cloud Solutions.: Consensus Cloud Solutions is a leading digital fax provider. The company offers solutions for industries like healthcare and finance, including cloud faxing, digital signatures, and AI-driven data extraction. For the first quarter of 2024, the company saw revenues decline by $3.3 million year-over-year.
• Opera Limited.: Opera is a leading web browser and a leader in the field of integrated AI-driven digital content discovery. In the first quarter of 2024, Opera's advertising revenue grew by 21%, making up 58% of its total revenue, thanks to strong performance from its browsers and the Opera Ads platform. Search revenue also saw a 14% increase.
  

Fastest-Growing Tech Stocks

Growth investors believe that increases in a company's revenue and earnings per share (EPS) can be an indicator of a strong business that has the potential to increase in value. However, focusing on just one of these two metrics can give an incomplete picture of a company's growth potential. Circumstances unrelated to a company's fundamental business strength—such as tax law changes, mergers, or one-off gains—can skew these figures on their own.

Investopedia uses a dual-metric approach to reach a more balanced assessment of growth companies. We equally weight the latest year-over-year (YOY) percentage growth for both EPS and revenue. This approach aims to reduce the impact of those one-time anomalies to provide a better view of a company's true growth pattern and potential. Additionally, any companies with growth in excess of 1,000% are excluded as outliers.

• Hut 8 Corp.: Hut 8 is a Bitcoin miner and energy infrastructure company based in Miami, operating 19 sites across North America, including mining and data centers. For the first quarter of 2024, Hut 8 reported an increase in revenue by $36.1 million to $51.7 million, compared to the first quarter of 2023.
• EHang Holdings Limited.: EHang offers unmanned aerial vehicle systems for passenger transport, logistics, smart city management, and aerial media. On July 29, EHang announced the delivery of the first 10 units of its pilotless electric aircraft to Xishan Tourism and completed inaugural passenger flights in Taiyuan, China.
• Credo Technology Group Holding Ltd.: Credo delivers high-speed connectivity solutions that address bandwidth challenges in the data infrastructure market, optimizing power and cost efficiency for Ethernet applications. On May 29, Credo reported revenue for fourth-quarter 2024 of $60.8 million, an 89.4% increase from the previous year. CEO Bill Brennan highlighted the company's record annual revenue of $193 million, driven by AI deployments.
  

Tech Stocks With the Most Momentum

Momentum investing is a strategy aiming to capitalize on pre-existing market trends by focusing on stocks that have outpaced their peers or the broader market on returns. This investment principal holds that stocks on an upward path are likely to continue to outperform, as long as fundamental aspects of the business, industry, or sector do not change.

Momentum investing is a common strategy applied to tech stocks because they regularly experience significant market disruptions. As companies launch new products, announce technological breakthroughs, and gain rapid popularity, investors have the potential to climb on board while these stocks are still ascending.

Here are the tech stocks with the highest total return in the last 12 months. We've excluded stocks with a share price under $5.

• AudioEye, Inc.: AudioEye is a digital accessibility company that helps businesses and organizations make their websites and digital content accessible to people with disabilities. On July 25, AudioEye reported a record revenue of $8.5 million in second-quarter 2024, with significant improvements in profitability and operating efficiency. The company also increased its customer count to 121,000.
• MicroStrategy Incorporated.: Self-described as the world’s first bitcoin development company, MicroStrategy is a technology solutions provider and serial accumulator of bitcoin. On July 11, MicroStrategy announced a 10-for-1 stock split through a stock dividend to holders of record on Aug. 1.
• EverQuote, Inc.: EverQuote is a leading online insurance marketplace. EverQuote’s stock has gained a staggering 123% year-to-date, as the company’s turnaround plans come to fruition. For the first quarter of 2024, EverQuote generated a positive operating cash flow of $10.4 million on $91 million in revenues.
  

Advantages of Tech Stocks

Growth potential

Tech stocks, particularly those in emerging areas, are known for experiencing some of the sharpest growth of any publicly traded company. Anticipating this, investors have sought periods in which the sector underperforms to invest heavily, as they expect significant growth over the long term.

But growth among tech stocks can vary dramatically. Many of the larger firms have limited growth potential because their market saturation and capitalization are already very high. Small-cap or penny tech stocks that experience technological breakthroughs or suddenly become incredibly popular may have periods of massive growth. Unusually, some of the biggest names in tech—including Amazon.com Inc. (AMZN), Meta Platforms Inc. (META), and Alphabet Inc. (GOOGL)—have continued to grow at significant rates.

Advanced innovation

Tech trends are always changing, with companies aiming to capitalize on the latest technology and to guide and follow developments in innovation. This makes the sector primed for breakthroughs. One of the most recent major trends to sweep the tech sector has been AI-related technologies, which are increasingly integrated into companies across many industries and sectors. To the extent that some tech companies continue to play a role in making this possible, they stand to benefit from the ongoing AI trend.

Disadvantages of Tech Stocks

Fluctuations in the tech sector

Tech stocks are known for their high volatility, where rapid technological changes and competitive pressures can lead to significant price fluctuations. They often carry high valuations based on growth expectations, making them susceptible to market corrections if they fail to meet these projections. Furthermore, regulatory challenges and geopolitical tensions can impact the sector, introducing additional risks and uncertainties for investors.

Trends shift quickly

The sharp gains of many tech firms can prove tempting to investors who may not be well-versed in the technologies themselves. With rapid innovation characterizing the sector, trends and prospects shift very quickly as well. Investors who are unprepared for this pace or who lack knowledge of the fundamental strengths of different tech companies may find themselves following a trend that has already changed.

The Bottom Line

The tech sector's performance in 2024 is poised to be significantly influenced by advancements in AI, which is expected to drive long-term growth. The adoption of AI, along with ongoing digitization and cloud computing, offers promising opportunities, particularly for companies involved in semiconductor production and cloud software services.  However, the macroeconomic environment will also play a key role in determining the sector's short-term performance, with the potential for volatility depending on interest-rate policies and economic conditions​.

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As of the date this article was written, the author does not own any of the above securities.