Even after the recent rally, the stock market offers multiple exciting opportunities.
The U.S. stock market has been unusually volatile since 2020, primarily due to the lingering effects of the COVID-19 pandemic, increased economic uncertainty, and geopolitical tensions. But despite the turbulent economic environment, many tech stocks have posted impressive returns.
Remote work, online shopping, cloud computing and increased adoption of artificial intelligence (AI) technology are playing a big role in boosting technology stocks. As investors are keen to take advantage of digital transformation trends, here are three of my top technology picks that are well positioned to deliver solid long-term returns in the coming years.
microsoft
Tech giant stocks microsoft (MSFT 1.83%) It has increased by about 50% over the past year. In late January, the company announced impressive results for the second quarter of 2024, with sales and profits exceeding analyst expectations.
Unsurprisingly, the company's investment in ChatGPT developer OpenAI continues to be talked about. Microsoft has successfully integrated OpenAI's technology across its product suite, rapidly gaining new customers and significantly improving productivity.
Azure, Microsoft's cloud computing platform, has emerged as a big beneficiary of the company's AI strategy. Azure ended the quarter ending December 31, 2023 with an estimated market share of 24%, up 2 points from the year-ago period. Customers have chosen Azure to simplify and accelerate their migration to the cloud. Microsoft also says that his OpenAI service on Azure is increasingly used by more than half of Fortune 500 companies, as well as several AI-first startups. Microsoft had 53,000 Azure AI customers at the end of the second quarter, more than one-third of which were new customers to the Azure platform.
Beyond Azure, CoPilot, Microsoft's AI-powered assistant, is improving efficiency and productivity for users of the Microsoft 365 cloud-native productivity platform and GitHub software development platform. CoPilot played a key role in increasing his Github revenue by over 40% year over year in Q2.
While the introduction of AI technology is accelerating Microsoft's growth strategy, the company's broad geographic presence and diversified product portfolio are additional reasons to like this stock. The company also boasts a strong balance sheet with $81 billion in cash and $58.7 billion in free cash flow.
Given the long-term potential of Microsoft's AI-powered business and its strong financial position, it seems like a smart buy to buy this stock now.
Amazon
Another stock that looks quite exceptional right now is the e-commerce and cloud computing giant Amazon (AMZN 2.82%)We also achieved strong revenue and profit in the fourth quarter of 2023. Amazon's operating income increased significantly by 383% year over year to $13.2 billion. This also played a major role in driving trailing-twelve-month free cash flow to $35.5 billion at year-end, up $48.3 billion year over year.
Despite increasing competition from Azure, Amazon Web Services (AWS) continues to dominate the cloud infrastructure space with 31% market share. AWS is growing at double-digit rates and is on track to reach his $100 billion annual revenue mark. AWS's robust security and access control capabilities have proven to be a key differentiator in attracting customers for long-term projects.
Amazon is also rapidly introducing new capabilities and generative AI technologies to AWS. Nvidia Chips and our own custom-designed AI chips provide the computational power for AI workloads. Amazon launched Bedrock fully managed services to give customers access to a large number of its own basic models and those of other his AI players to build their own AI applications. AWS also offers Amazon Q, a coding companion that helps developers and provides valuable insights from multiple data sources.
Amazon is trying to rake in profits from its world-leading e-commerce business. The company focuses on delivery speed, which helps Prime members purchase more frequently. The increasing proportion of third-party sellers is also contributing to the strengthening of the company's e-commerce business. Finally, Amazon monetizes its online platform beyond selling products by providing targeted and relevant advertising to sellers and customers.
As a leader in multiple high-growth markets, Amazon appears to have a lot of growth ahead of it.
Confluence
Confluence's (CFLT 0.17%) The platform enables the storage, processing and analysis of large amounts of streaming data, enabling clients to derive actionable insights for informed decision-making. forester recognized Confluent as a leader in streaming data platforms in the fourth quarter of 2023.
The Confluent Cloud cloud-based platform has emerged as a key growth driver and is increasingly being adopted by digitally native customers, even in a challenging macroeconomic environment. Confluent Cloud reached its $100 million mark in revenue for the first time in the fourth quarter, up 46% year over year.
Confluent's recent financial performance highlights the resilience of its business model. After the weak guidance provided in the third quarter sent the stock price crashing, the company made a solid comeback in his fiscal fourth quarter of 2023 with impressive results. Sales and profits exceeded consensus expectations. Additionally, the company achieved its first positive non-GAAP (adjusted) operating margin of 5.3% in the fourth quarter, an increase of 27 percentage points year over year.
Free cash flow was negative in 2023, but Confluent expects to break even in 2024. Additionally, the company is currently focused on a targetable market of over $60 billion. With an annual revenue run rate of just $777 million, the company still has a lot of runway left.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Manali Pradhan has no position in any stocks mentioned. The Motley Fool has positions in and recommends Amazon, Confluent, Microsoft, and Nvidia. The Motley Fool recommends the following options: His January 2026 $395 long call on Microsoft and his January 2026 $405 short call on Microsoft. The Motley Fool has a disclosure policy.
