The top tech stocks to invest in for 2022.
The past year was chock-full of fresh all-time highs for the technology-heavy Nasdaq Composite index, as Big Tech got bigger and the pandemic-fueled shift to an increasingly digital economy continued unabated. Several other 2021 trends and talking points characterized the year in tech stocks, including the emergence of the metaverse, the specter of rising interest rates and a global semiconductor shortage. While rising rates are now virtually certain to come in 2022 and will be a modest headwind to the sector, the following companies all either benefit from current industry trends or are simply great businesses that investors should add to their portfolios. Here are 10 of the best tech stocks to buy for 2022.
ASML Holding NV (ticker: ASML)
Monopolies are great -- at least for shareholders in the dominant firm. Any longtime owners of ASML don't need to be schooled on the impressive economics; the stock is up about 600% in the last five years and 55% in 2021 alone. Shares are still poised for more gains, however, as ASML is the world's sole producer of a vital technology known as extreme ultraviolet, or EUV, lithography machines. These incredibly expensive, bus-sized precision instruments are the only way to make the world's most advanced semiconductor chips, which are now so small and packed with transistors that the laws of quantum physics must be taken into account. Expectations for revenue and earnings growth of 18.1% and 22.8%, respectively, in 2022 are nice -- but you're also buying monopoly pricing power and high barriers to entry during a global chip shortage.
Sensata Technologies Holding PLC (ST)
Most of the best tech stocks to buy for the year ahead are large- or megacap names, but Massachusetts-based Sensata Technologies is a humble, conservatively run $9 billion midcap stock. The company designs and produces sensors, mostly for the automotive and aerospace end markets, and has been around for over a century, since 1916. While makers of electric vehicles (EVs) have been darlings of the market in recent years -- Tesla Inc. (TSLA) hit a $1 trillion valuation while Rivian Automotive Inc. (RIVN) hit a $100 billion market cap without making a single car -- suppliers of components for EVs seem a bit overlooked. ST has strung together six consecutive quarterly earnings beats, trades for 24 times earnings despite an expected five-year earnings growth rate of 32.5%, and now supplies lithium-ion batteries to Jeff Bezos' space company, Blue Origin, after inking a multiyear agreement in November.
Asana Inc. (ASAN)
Of the best tech stocks to buy for 2022, none had more momentum in 2021 than Asana, the $14 billion workspace collaboration software company whose shares advanced more than 150% in the calendar year. The pandemic has accelerated adoption for digital productivity tools, as evidenced by Asana's most recent quarter when revenue surged 70%, customers spending at least $5,000 annually rose 96% and those dropping more than $50,000 annually jumped 132%. Although not yet profitable, Asana has fantastic gross margins of 90.7% and improved its operating margins from a 105.1% loss in the year-ago quarter to a 67.9% loss in the most recent one. Founder-led, Asana's CEO is Dustin Moskovitz, who is also a Facebook co-founder. Moskovitz has been aggressively buying ASAN stock in December, acquiring millions of ASAN shares and boosting his stake by almost 50% in the first half of the month alone.
Named as one of the overall best stocks to buy for the coming year, Google parent Alphabet was a shoo-in for one of the best tech stocks to buy for 2022. When presented with an opportunity to buy a great company at a reasonable price, take it. GOOGL sports a virtually identical price-earnings ratio to the broader S&P 500 (around 29), despite the company being one of the highest-quality businesses in the entire S&P 500. Beyond its globally dominant search engine, Alphabet's YouTube division is growing like a weed, surging 43% last quarter, and the company's ongoing research and development in areas like artificial intelligence, self-driving cars and quantum computing make Alphabet one of the best tech stocks to buy for 2022 as well as a great long-term holding.
Electronic Arts Inc. (EA)
The stock market is the ultimate test of whether you can wait for your pitch. Entering 2022, EA shares are worth a swing: One of the premier video game publishers, EA has a grip on the sports gaming market, with franchises that include FIFA, Madden, NHL and Formula One. After underperforming in 2021, shares trade at just 17 times forward earnings despite the new generation of gaming consoles (the Xbox Series X and PlayStation 5) now on the market. With supply chain issues slowing down the rollout -- the consoles technically came out a year ago -- expect a steady drip-drip-drip of more interest in EA's newest next-generation console games. With franchises like The Sims, Battlefield and Apex Legends also under its belt, EA isn't strictly tied to sports gamers and also has exposure to the growing PC gaming market.
Shopify Inc. (SHOP)
Shopify may not be the cheapest company on this list -- shares trade for over $1,300 apiece and the stock goes for 40 times sales -- but it's one of the most exciting from a growth standpoint. The Canadian company makes essential e-commerce infrastructure that allows small- and medium-sized businesses to easily set up online stores, with Shopify offering all-in-one solutions like site design, checkout and payment capabilities, marketing options, shipping fulfillment and even capital to help get your business up and running. With entrepreneurship more in vogue than ever, Shopify is a major beneficiary; revenue jumped 46% last quarter, and cumulative gross merchandise value for Shopify merchants took 16 months to double from $200 billion to $400 billion, after taking 15 years to get to $200 billion. Once you're set up with Shopify, it's a hassle to switch over, so the company has staying power, and the e-commerce market is still somehow in its infancy: U.S. online sales were only 13% of total retail sales last quarter.
Microsoft Corp. (MSFT)
Two out of three is a pretty good track record in most endeavors in life, and CEO selection is no different. In the roughly 36 years since Microsoft went public in early 1986, there have been only three CEOs: Bill Gates (1986 -- 2000), Steve Ballmer (2000 -- 2014) and Satya Nadella (2014 -- present). Ballmer was the clear disappointment, as the stock badly underperformed under his tenure and Microsoft bungled huge opportunities in search and mobile. Nadella's tenure has been defined by a single-minded focus on cloud computing and a shift from selling software licenses to software-as-a-service. It's working: While it took 10 years for Ballmer to double Microsoft's profitability, Nadella doubled profits in just six years despite starting from a larger base. With Windows and Office enjoying monopoly-like grips on their segments, and Azure the second-largest cloud computing provider next to Amazon Web Services, Microsoft is a good bet for 2022.
Uber Technologies Inc. (UBER)
Uber may be a longtime household name at this point, but frankly, it's still in the early innings of its corporate life cycle. Investors have a chance to own the transportation and logistics powerhouse at a discount to its May 2019 initial public offering price of $45 per share, when the company's most recent full-year revenue was $11.3 billion. Ride-hailing took a justified hit during the pandemic, but is bouncing back with a vengeance: Gross bookings surpassed 2019 levels over the 2021 Halloween weekend, and analysts expect revenue of $25.1 billion in 2022. Uber isn't yet profitable, but it's investing in its mobility network, its food delivery service, and Uber Freight, which aims to streamline the massive market of hauling and shipping at a time the global supply chain is in severe need of disruption. These investments have blockbuster long-term potential payoffs. Uber's recent $3.2 billion paper loss from its investment in Didi Global Inc. (DIDI) helped soften the share price, despite being a one-time headwind.
Meta Platforms Inc. (FB)
Indeed, the company formerly known as Facebook has suffered its fair share of public relations mishaps, and a cynic might consider its rebrand to Meta Platforms an effort to shed negative associations around privacy, misinformation and the effects of social media on teens' mental health. But like it or not, around 3.6 billion people use one of Meta's platforms -- Facebook, Instagram, Messenger and WhatsApp -- monthly. That makes Meta, along with Alphabet's Google, a powerful, profitable and growing company in the duopolistic digital advertising market. Given Meta's size, business quality and growth, 24 times earnings is a steal for this titan of Big Tech. The company is expected to change its ticker symbol from "FB" to "MVRS" in the first quarter of 2022.
Unity Software Inc. (U)
While Meta Platforms deserves credit for willing the metaverse topic into the zeitgeist, Unity Software may ultimately be a bigger beneficiary if virtual worlds where people live, work and play end up catching on. Pre-metaverse, Unity is already dominant in an analogous space, with its software platform being used to develop about half of all PC and console games and around 70% of top mobile games. That's huge and has earned U stock a nearly $40 billion market cap, but the total addressable market in the metaverse, where CEO John Riccitiello is aiming for a similar market share, could be enormous in a few years' time. The stock rapidly appreciated after its 2020 IPO, so shares slid in 2021, but that only offers an attractive entry point for one of the best tech stocks to buy for 2022.
The best tech stocks to invest in for 2022:
-- ASML Holding NV (ASML)
-- Sensata Technologies Holding PLC (ST)
-- Asana Inc. (ASAN)
-- Alphabet Inc. (GOOG, GOOGL)
-- Electronic Arts Inc. (EA)
-- Shopify Inc. (SHOP)
-- Microsoft Corp. (MSFT)
-- Uber Technologies Inc. (UBER)
-- Meta Platforms Inc. (FB)
-- Unity Software Inc. (U)