While the stock market has done much better in 2023, the truth is that just 10 companies have made up 95% of the gains in the S&P 500, and nine of the 10 heaviest-weighted stocks in the Nasdaq 100 have accounted for almost all its gains. What do these stocks have in common you may be wondering? They are almost all technology stocks, and it is likely that this sector continues to drive the upside for the rest of the year.
The good news for growth investors is there are still solid opportunities in technology, the bad news is that companies that have driven the huge year-to-date gains, like Nvidia and Meta Platforms, are very overbought and are likely due to consolidate some.
A good idea is to find tech names that can lead the next leg higher. We screened the Goldman Sachs Conviction List of top stock ideas looking for technology ideas favored by one of the top investment banks in the world. Four top stocks make the cut, and all offer aggressive growth investors solid upside potential. While they are rated Buy at Goldman Sachs, it is important to remember that no single analyst report should be used as a sole basis for any buying or selling decision.
Datadog
Some investors may not be as familiar with this name, but it holds tremendous upside potential. Datadog Inc. (NASDAQ: DDOG) engages in the development of monitoring and analytics platforms for developers, information technology operations teams and business users. The company’s platform integrates and automates infrastructure monitoring, application performance monitoring and log management to provide real-time observability of its customers’ entire technology stack.
Datadog announced in 2021 the extension of Network Performance Monitoring (NPM) to Windows. Datadog NPM now monitors the performance of network communications between applications running on Windows Server and Linux, providing seamless network visibility across cloud environments, on-premises data centers and operating systems.
The analysts noted last year that, based on the strength of its expanding product portfolio that addresses critical aspects of customers’ cloud migration, coupled with a solidly profitable business model that generates rising FCF margins alongside hyper-growth, Datadog is poised to grow into a preeminent infrastructure software business.
Goldman Sachs has a $114 price target on Datadog stock. That is well above the $97.33 consensus target and Wednesday’s $91.28 closing share price. Rising to the Goldman Sachs target would be close to a 30% gain.
Microsoft
This is a more conservative way for investors to participate in the massive cloud and AI growth. Microsoft Inc. (NASDAQ: MSFT) develops, licenses and supports software, services, devices and solutions worldwide. The company operates in the following three segments.
The Productivity and Business Processes segment offers Office, Exchange, SharePoint, Microsoft Teams, Office 365 Security and Compliance, Microsoft Viva, and Skype for Business; Skype, Outlook.com, OneDrive and LinkedIn; and Dynamics 365, a set of cloud-based and on-premises business solutions for organizations and enterprise divisions.
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