Best Tech Stocks for October 2024

September saw a rally in tech names, spurred by risk-on sentiment after the U.S. Federal Reserve cut its federal funds rate for the first time since 2020, citing a soothing of inflationary pressures and a slowing job market. The larger-than-expected move from the central bank caught many investors off guard. In the days following the announcement, the Technology Select Sector SPDR Fund (XLK) jumped 4%, with tech leaders such as NVIDIA Corp (NVDA) following suit.

Below is an analysis of the top tech stocks for October 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 Sept. 24, 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.

• Consensus Cloud Solutions, Inc.: Consensus Cloud Solutions provides a secure, cloud-based fax service that helps businesses, especially in healthcare, exchange and manage documents digitally. On Sept. 17, the company announced it had partnered with Olah Healthcare Technology to help health care organizations transition from outdated on-premise faxing to modern cloud-based solutions.
• Perion Network Ltd.: Perion Network is a digital advertising company that helps brands and publishers improve their online presence through targeted advertising and data-driven technology. In its second quarter 2024 results, Perion reported adding major brands like Walgreens (WBA) and Ford (F) as clients.
• DoubleDown Interactive, Co. Ltd.: DoubleDown Interactive is a developer and publisher of digital games, specializing in online social casino experiences like its popular DoubleDown Casino. Following its acquisition of SuprNation, the company also operates real-money iGaming sites in Western Europe. In its most recent quarter, the company reported a 17% year-over-year revenue increase to $88.2 million, driven by growth in both its social casino and newly acquired SuprNation iGaming business.

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.

• EHang Holdings Limited.: EHang Holdings Limited is a leading urban air mobility technology platform company, focused on passenger transportation, logistics, and smart city management through unmanned aerial vehicles (UAVs). Their flagship EH216-S is the world’s first certified pilotless aircraft for passenger transport. During its second quarter earnings, EHang expanded operations with significant orders across China, and strategic collaborations across the Middle East.
• InterDigital, Inc.: InterDigital is a global research and development company specializing in wireless, video, and AI technologies. It develops and licenses innovations used in communications and entertainment products, including wireless devices, internet-of-things (IoT), and cloud services. On Sept. 16, the company announced a target of $1 billion in annual recurring revenue and $600 million in adjusted EBITDA by 2030, driven by its innovation in wireless, video, and AI technologies.
• Nu Holdings Ltd.: Nu is the largest digital banking platform outside of Asia, serving over 105 million customers across Brazil, Mexico, and Colombia. Recently, Nu Holdings Ltd. posted strong second-quarter results, adding 5.2 million new customers, growing its total base to 104.5 million, with revenues up 65% year-over-year to $2.8 billion.

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.

• Exodus Movement, Inc.: Exodus is a multi-asset software wallet that enables users to securely manage and control their digital assets through self-custodial functionality on desktop, mobile, and browser. The platform offers access to over 20,000 digital asset swaps and services, allowing users to transition from traditional finance to digital assets.
• MicroStrategy Incorporated: MicroStrategy is a company focused on accumulating Bitcoin as its primary treasury asset and developing Bitcoin-related applications. As of Aug. 1, 2024, the company holds 226,500 BTC.
• Zeta Global Holdings, Corp. Zeta Global is an AI-powered marketing platform that helps businesses efficiently acquire, grow, and retain customers through its proprietary customer identification and market intelligence database. Due to strong adoption of its platform, Zeta raised third-quarter revenue guidance to $255 million, up from $239 million, reflecting year-over-year growth of 35%. 
  

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.