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5 High-Flying Tech Stocks With Solid Growth Potential

The technology sector is booming this year and dominating the stock market rally once again. The hype surrounding artificial intelligence (AI), easing inflation, upbeat corporate earnings, and safe plays have been driving the sector higher.

In fact, tech names on the S&P 500 have surpassed the overall index this year, gaining 27% since January. This makes it the second-best performing sector on the S&P 500, which has risen 9% since the start of the year. Based on data from BofA Global Investment Strategy, U.S. tech stocks are enjoying their greatest outperformance, relative to the S&P 500, in 97 years.

Given this, investors should overweight the sector in their portfolio if they want to outperform the broader market. For them, we have presented five top-performing stocks of this year that have a Zacks Rank #1 (Strong Buy) or 2 (Buy), a Growth Score of A or B, and a top-ranked Zacks industry. These include Harvard Bioscience HBIO, MicroStrategy MSTR, Meta Platforms META, InterDigital IDCC and Weave Communications WEAV. You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Most of the surge was driven by better-than-feared results from some of the world's largest companies and investors’ flight to mega-cap, cash-rich technology stocks amid the regional bank crisis and the rising risk of a recession. The mega-cap tech stocks have strong balance sheets, durable revenue streams and robust profit margins and are, thus, better positioned to withstand a possible economic downturn.

Additionally, AI has emerged as a significant driver of mega-cap tech's outperformance in recent weeks. The hype around AI has created a positive sentiment for stocks like Nvidia (NVDA) and Microsoft (MSFT). In fact, the five biggest stocks on the S&P 500 — Nvidia, Microsoft, Amazon (AMZN), Alphabet (GOOGL) and Apple (AAPL) — are from the tech sector and now worth nearly $9 trillion. These together account for almost 25% of the S&P 500.

The tech leadership is further supported by bets that the Fed is nearing the end of its interest rate hiking cycle. Per CME FedWatch Tool, markets have priced in a 74% chance the Fed pauses rate hikes at its June policy meeting and a 40% chance the Fed could cut rates 25 basis points in November, a move that would likely be bullish for stocks. As the tech sector relies on borrowing for superior growth, it is cheaper to borrow more money for further initiatives when interest rates are low.

Further, technology has a solid Zacks Sector Rank, being in the top 50%, suggesting continued outperformance in the coming months. The long-term outlook for the sector remains strong given that the global digital shift has accelerated e-commerce for everything, ranging from remote working to entertainment and shopping. The rapid adoption of cloud computing, big data, the Internet of Things, wearables, VR headsets, drones, virtual reality, machine learning, digital communication, blockchain and 5G technology should continue to fuel a rally.

Stocks to Outperform

Harvard Bioscience develops, manufactures and markets tools used in drug discovery research at pharmaceutical and biotechnology companies, universities and government laboratories. With a market cap of $247.7 million, the stock has expected earnings growth of 91.7% for this year.

Harvard Bioscience has more than doubled this year, surging 112%. It has a Zacks Rank #2 and Growth Score of A.

MicroStrategy provides enterprise analytics software and services in the United States, Canada, Europe, the Middle East, Africa, and internationally. It offers MicroStrategy, an enterprise analytics software platform that enables users to create visualizations, customize apps, and embed analytics directly into workflows, and MicroStrategy Cloud Environment, a managed software-as-a-service solution, which offers always-on threat monitoring and enables rapid analytics development and deployment to deliver security and data privacy requirements.

MicroStrategy has an estimated earnings growth of 124.9% for this year and has a market cap of $3.8 billion. The Zacks Rank #1 stock has returned 108% so far this year and has a Growth Score of A.

Meta Platforms is the world’s largest social media platform. The company’s portfolio offering evolved from a single Facebook app to multiple apps like photo and video sharing app Instagram and WhatsApp messaging app owing to acquisitions. With a market cap of $26.3 billion, Meta Platforms has an estimated earnings growth of 22.5% for this year.

Meta Platforms has risen 106% and has a Zacks Rank #1. It carries a Growth Score of B.

InterDigital is a pioneer in advanced mobile technologies that enables wireless communications and capabilities. The company is engaged in designing and developing a wide range of advanced technology solutions, which are used in digital cellular as well as wireless 3G, 4G and IEEE 802-related products and networks.

InterDigital has an estimated earnings growth of 96.4% for this year and a market cap of $2.3 billion. The Zacks Rank #1 stock is up 71% so far this year and has a Growth Score of A.

Weave Communications provides all-in-one customer communications and engagement software platform for small and medium-sized businesses. The stock has risen 69% this year. It has estimated earnings growth of 47.9% for this year.

Weave Communications has a market cap of $517.1 million and a Zacks Rank #2. It sports a Growth Score of A.

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InterDigital, Inc. (IDCC) : Free Stock Analysis Report

Harvard Bioscience, Inc. (HBIO) : Free Stock Analysis Report

MicroStrategy Incorporated (MSTR) : Free Stock Analysis Report

Meta Platforms, Inc. (META) : Free Stock Analysis Report

Weave Communications, Inc. (WEAV) : Free Stock Analysis Report

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Zacks Investment Research