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Analyzing STMicroelectronics N.V. (NYSE:STM) in the Landscape of Top Tech Stocks

Introduction

We recently unveiled our comprehensive list showcasing the 8 Best Long Term Tech Stocks To Invest In Now. This article aims to delve deeper into STMicroelectronics N.V. (NYSE:STM), assessing its positioning compared to other highly regarded tech stocks for long-term investment potential.

The Tech Sector’s Resurgence in 2023

Following the tumultuous macroeconomic conditions of 2022, the technology sector has emerged as a cornerstone of recovery in 2023. Investments in groundbreaking technologies such as generative AI are not just promising but are demonstrating robust potential for future business expansion. This trend reflects a fundamental shift, where investors are increasingly prioritizing tech stocks for their innovative capacities.

According to CNBC’s Q3 CFO Council survey, a striking 48% of CFOs believe that the tech industry’s growth will surpass that of all other sectors in the upcoming six months. This buoyancy is further underscored by an insightful interview with RaeAnn Mitrione, an Investment Management Partner at Callan Family Office. She pointed out that the recent Federal Reserve rate cuts have tremendously benefited tech companies, as reduced interest rates foster an environment where tech firms historically flourish.

Moreover, themes driven by AI have played an instrumental role in enhancing the tech sector’s performance. While mega-cap tech stocks were historically viewed as safe havens during times of economic uncertainty, evolving market conditions might lead to a broader focus on smaller, economically sensitive sectors as well. Despite such shifts, the momentum within the tech sector—largely fueled by advancements in AI—is expected to maintain its strength for the foreseeable future.

Optimism for Global Tech Spending in 2024

A recent report from Deloitte regarding the 2024 technology industry outlook conveys tempered optimism amidst the challenges faced in 2023. Global tech spending witnessed a slowdown due to elevated interest rates, economic concerns, and geopolitical tensions. However, projections for 2024 indicate a recovery, with anticipated growth in global IT spending between 5.7% and 8%. Key growth areas identified include software development, IT services, and AI investments, with AI spending alone poised to reach approximately $200 billion by 2025. Additionally, sectors like cloud computing and cybersecurity are expected to experience heightened demand.

Specific to developments in AI, while its growth might appear modest in 2024, an acceleration is forecasted for 2025. Integration of AI into varied software and business processes will drive significant productivity and efficiency improvements. Notably, AI hardware demand is projected to surpass $50 billion in the coming year, as companies continue to explore innovative monetization strategies for AI technologies.

Harnessing AI for Enhanced Energy Efficiency

In tandem with the rise of big tech firms and an increasing reliance on AI, there’s an unprecedented surge in energy demands. Insights from our article about the 13 Best Big Tech Stocks To Buy Now underline this trend. A pertinent excerpt states:

“A recent notable trend that people have begun to see because of the rise of big tech companies and the growing use of AI is a greater demand for power. Many major tech companies are beginning to require more energy, with AWS-owner Amazon going as far as acquiring a nuclear-powered data center for $650 million recently. The primary driving force for this rising demand is the need to develop AI.”

Despite valid concerns over the high electricity requirements to power AI systems, industry leaders like Nvidia’s CEO Jensen Huang contend that the technology itself will engender solutions that mitigate these energy demands over time. Huang has emphasized that while the training phase of AI consumes considerable power, its advancement will lead to innovative energy-efficient methods that can revolutionize how we manage energy consumption.

The Role of AI legalese decoder in Navigating the Tech Landscape

As the technology sector continues to evolve rapidly, investors face the challenge of navigating complex legal frameworks associated with new technologies and innovations. This is where AI legalese decoder comes into play. It can assist investors, especially those dealing with intricate technologies like AI, by simplifying legal jargon and ensuring clarity in understanding contracts, agreements, and regulatory compliance. By making legal documents more accessible and comprehensible, AI legalese decoder can empower investors to make informed decisions, minimizing potential risks that arise from legal misunderstandings.

Methodology Behind Our Analysis

To curate our list of stocks, we employed the Finviz stock screener to shortlist tech stocks boasting market caps exceeding $10 billion, garnering ratings of "Buy" or equivalent from analysts, and presenting over 20% average price target upside. We refined our findings, ultimately highlighting 8 stocks with the highest potential for price target upside as of September 26. Each stock’s sentiment among hedge funds was analyzed, using data from Insider Monkey’s database, which tracks over 900 elite hedge funds.

Why do we highlight hedge fund interests? Research indicates that mirroring the top picks of leading hedge funds can significantly outperform the market. Our quarterly newsletter, which selects 14 small-cap and large-cap stocks, has yielded an impressive 275% return since May 2014, surpassing its benchmark by 150 percentage points.

Spotlight on STMicroelectronics N.V. (NYSE:STM)

STMicroelectronics N.V. (NYSE:STM) ranks as a prominent global semiconductor manufacturer engaged in designing, developing, and marketing a diverse portfolio of semiconductor integrated circuits and discrete devices. It proudly holds a consensus Buy rating from 26 analysts, with an average price target of $41.25, indicative of a potential upside of 39.93% from its current standing as of September 26.

The company’s extensive array of products finds application across varied sectors such as automotive, telecommunications, industrial automation, and consumer electronics. With a customer base exceeding 200,000 and a robust network of partners, STMicroelectronics is well-positioned to tackle the evolving challenges and opportunities that arise within the microelectronics landscape.

Their product portfolio ranges from microcontrollers and advanced analog integrated circuits to sensors and power management devices, allowing them to service multiple sectors efficiently. Notably, STMicroelectronics is committed to sustainability, aiming for carbon neutrality in its scope 1 and 2 emissions by 2027, while also taking steps towards addressing scope 3 emissions.

A recent pivotal development in the company’s trajectory is the unveiling of its fourth generation of STPOWER silicon carbide (SiC) MOSFET technology—a significant advancement that sets new benchmarks in power efficiency, density, and strength, particularly beneficial for automotive and industrial applications.

Furthermore, the company’s commitment to enhancing shareholder value is evident through its distribution of $73 million in cash dividends in the second quarter, alongside an $88 million share buyback, part of a broader initiative culminating in a $1.040 billion repurchase program launched in July 2021. In June, STMicroelectronics announced an ambitious new share buyback plan, totaling up to $1.1 billion over three years, highlighting its commitment to unlocking shareholder value.

Conclusion

Overall, STMicroelectronics N.V. (NYSE:STM) stands at the fifth position in our list of best long-term tech stocks. While we recognize its potential as an attractive investment, we maintain that certain AI stocks may offer even greater promise for elevated returns in a shorter timeframe. If you seek an AI stock that holds compelling potential and trades at less than five times its earnings, look into our report detailing the cheapest AI stocks.

Read Next: Explore the $30 Trillion Opportunity with Our Evaluation of the 15 Best Humanoid Robot Stocks to Buy as recommended by Morgan Stanley, and insights from Jim Cramer suggesting that NVIDIA has become a wasteland.

Disclaimer: None. This article was originally published by Insider Monkey.

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