The technology sector has seen an unprecedented rally this year, sparked and sustained by the effects of the COVID-19 pandemic. And it now appears that even the mass distribution of an effective coronavirus vaccine may not stop this rally. This is arguably because genie is now out of the bottle, so to speak, regarding the work efficiencies that can be achieved using digital communications amid a remote working and leisure-activity environment. We think the current rapid and ongoing development and introduction of artificial intelligence (AI), 5G network, cloud computing, virtual reality, and autonomous driving may well drive the sector for the next decade.

Alphabet Inc. (GOOGL) and Advanced Micro Devices (AMD) have performed exceptionally well this year. They ave upgraded and expanded their offerings to meet changing consumer demand. These companies are currently working on cutting-edge technologies that could position their stocks nicely for future gains. Alphabet Inc. (GOOGL)

GOOGL offers performance and brand advertising services worldwide. The company operates through Google and Other Bets segments and offers products such as Ads, Android, Chrome, Google Cloud, Google Maps, Google Play, Hardware, Search, and YouTube, as well as technical infrastructure. The Other Bets businesses include Access, Calico, CapitalG, GV, Verily, Waymo, and X, as well as internet and television services.

GOOGL is expanding its Cloud segment’s edge computing rapidly to help companies leverage AI and 5G. The company recently finalized a strategic, multi-year partnership with Deutsche Bank (DB) to accelerate the bank’s transition to the cloud and co-innovate new products and services. Earlier this month, the company also entered into an agreement to acquire Actifio, a leader in backup and disaster recovery.

GOOGL’s revenue for the third quarter ended September 2020 grew 14% year-over-year to $46.17 billion. This growth was led primarily by an increase in advertiser spend in Search and YouTube as well as continued strength in Google Cloud and Play. GOOGL’s EPS grew 62% year-over-year to $16.40.  Analysts expect GOOGL’s revenues to grow 21.3% next year. Its EPS is expected to grow at a rate of 16.5% per annum over the next five years.

GOOGL has gained 32% so far this year to close yesterday’s trading session at $1767.65. The stock is up more than 15% in the past three months and is currently trading at just 4% below its 52-week high of $1843.83.

How does GOOGL stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

A for Industry Rank

A for Overall POWR Rating.

It is ranked #2 of 59 stocks in the Internet industry.

Advanced Micro Devices (AMD)

AMD designs and produces microprocessors for the computer and consumer electronics industries. The company has benefited from robust adoption of 7nm chip-based Ryzen and Radeon, and second-generation Epyc server processors, and 5nm chips. The demand is derived from a rapid increase in the usage of artificial intelligence and machine learning in both cloud gaming and supercomputing. The company operates in two segments – Computing & Graphics (C&G), and Enterprise, Embedded & Semi-Custom (EESC).

In October, AMD announced its plan to acquire Xilinx (XLNX), a leader in the field programmable gate arrays. The marriage has created the industry’s leading high-performance computing company, significantly expanding the breadth of AMD’s product portfolio. Moreover, the company recently announced its new AMD Instinct MI100 accelerator – the world’s fastest HPC GPU ,and the first x86 server GPU to surpass the 10 teraflops (FP64) performance barrier.

For the third quarter ended September 30th, AMD reported a record revenue of $2.8 billion, representing a 56% year-over-year gain. The growth was driven by higher revenue in both the operating segments through the sale of Epyc processor and its Ryzen processor. EPS nearly tripled to $0.32 compared to the year-ago value of $0.11.

AMD is benefiting from booming demand for high-end gaming graphics cards and corporate data center spending. Semiconductors are the core of hardware technology and the innovation of artificial intelligence and 5G networks begins at chip-level. Hence, analysts expect AMD’s revenues to grow 25.4% next year. Moreover, its EPS is expected to grow at a rate of 38.2% per annum over the next five years.

AMD closed yesterday’s trading session at $91.66, nearly doubling year-to-date. The stock is up 16% in the past three months and is currently trading just 5% below its 52-week high of $96.37.

It is no surprise then that AMD is rated “Strong Buy” in our POWR Ratings system. It also has an “A” for Trade Grade, Buy & Hold Grade and Industry Rank, and a “B” in Peer Grade. It is ranked #6 of 86 stocks in the Semiconductor & Wireless Chip industry.

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GOOGL shares were trading at $1,762.70 per share on Friday morning, down $4.95 (-0.28%). Year-to-date, GOOGL has gained 31.60%, versus a 15.07% rise in the benchmark S&P 500 index during the same period.

About the Author: Sidharath Gupta

Sidharath’s passion for the markets and his love of words guided him to becoming a financial journalist. He began his career as an Equity Analyst, researching stocks and preparing in-depth research reports. Sidharath is currently pursuing the CFA program to deepen his knowledge of financial anlaysis and investment strategies. More...

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