With the tech-heavy NASDAQ index on track to deliver its best year since 2009, it’s not an easy job to pick the winners for 2021. Many analysts believe top technology stocks are vulnerable to a correction after a powerful rally in 2020 as they trade on extreme valuations.
The task to pick the right stocks for next year becomes more challenging as the global economy continues to face the challenges posed by the pandemic and its uncertain path ahead. That said, smart investors can still see the so-called mega trends that are reshaping consumer preferences and buying habits as they attempt to benefit from these long-term shifts.
These mega trends are defined as transformative forces that have the capacity to change the global social, economic and political landscape over the decades to come.
Below, we have identified three tech stocks from different sectors that, we believe, will continue to benefit from these shifts and could provide investors additional upside potential.
1. NVIDIA
NVIDIA Corporation (NASDAQ:NVDA) has emerged as one of the top-performing chip stocks during this global health crisis. Its business has thrived as demand for its products, which serve the data-center and video-gaming markets, soared during the pandemic.
As a result, the company’s share price has more than doubled, making it this year’s third-best performing S&P 500 stock. These gains have pushed its market cap to more than $325 billion, making it more valuable than its two main rivals—Intel (NASDAQ:INTC) and Advanced Micro Devices (NASDAQ:AMD)—combined.
But one key question for investors is whether this super-surged journey will continue in 2021?
According to Jefferies, with a rapid shift toward online entertainment and cloud solutions as well as fintech, companies like NVIDIA are at the forefront of this accelerating change and will continue to benefit from this powerful trend.
NVIDIA is a leading provider of chips used in data centers, while it also generates more than 20% of its sales from online entertainment. The chip-maker posted strong sales of its graphics processing chips in the third quarter, which are gaining importance for both games and artificial intelligence developers.
Shares of NVIDIA closed Monday at $533.29, up 0.45% on the day.
2. Amazon
For investors who want to play it safe but continue to hunt for additional capital gains, the global e-commerce giant Amazon.com (NASDAQ:AMZN) is the best bet. The online retailer is going through an unprecedented surge and no other company is better positioned to take advantage of this shift than Amazon.
Last month, Amazon forecast a steep jump in sales in the current quarter, indicating the mammoth e-tailer expects the surge in online shopping to continue during the pandemic and beyond. Amazon has benefited immensely during this health crisis as people shopped online, stocking up on a vast array of goods from electronics to groceries.
The e-commerce giant’s increasing investments in facilities is a strong indicator of the company’s burgeoning growth, Mizuho analyst James Lee said in a note to clients last week.
The Seattle-based company's “aggressive build-out plan for fulfillment centers and logistics is a leading indicator for demand of new product lines,” positioning the company to continue gaining share across its businesses, Lee wrote in a note published by CNBC.com
Said Lee:
“We believe the path for growth remains robust for Amazon into FY21 and beyond due to increased penetration of grocery, continued rebound in discretionary products and the large TAM in online pharmacy.”
J.P. Morgan analyst Doug Anmuth earlier reiterated his overweight rating on Amazon, saying AMZN remains his "top idea,” with the 12-month price target of $4,050.
Amazon stock, after surging more than 70% this year, hasn’t moved much since reaching a record high on Sept. 2. Shares closed on Monday at $3,206.18, up another 0.14% on the day.
3. Uber Technologies
Ride-hailing services have become a key indicator for the revival of normal life in this pandemic-hit economy. Their bookings collapsed during the early part of the year as the rapid spread of the virus forced governments to institute lockdowns and mass closure of businesses and offices.
That situation pressured shares of Uber Technologies (NYSE:UBER), the world’s largest ride-hailing service, and competitors, causing them to plunge. But as economies around the globe continue to cope with the virus, which has drastically changed our travel routines, it's becoming clear that some transportation companies in this digital world can survive.
What separated Uber from other players during this global health crisis was its business diversification. The company’s food-delivery business thrived during the pandemic, helping to mitigate the hit that came from people taking fewer rides. That service recorded gross bookings growth of 134% in the third quarter, while Uber’s ride-hailing division sank by 53%.
Many Wall Street’s analysts have a bullish view on Uber in hopes that global travel will normalize once the vaccination against the COVID-19 is widely available. After plummeting 50% in March, Uber stock is now up 66% for the year.
Shares of the San Francisco-based company closed Monday at $51.80, adding 2.33% on the day.