Technology stocks offer investors the promise of growth in ways that few other sectors can. After all, tech is synonymous with innovation that spawns new products, services, and features.
The Morningstar US Technology Index returned 32.89% over the trailing one-year period through Jan. 13, 2025, while the Morningstar US Market Index returned 23.25% during the same period.
The tech stocks that Morningstar covers look 1.4% overvalued as a group, but there are still opportunities to be found in the sector.
10 Best Tech Stocks to Buy Now
The stocks of these technology companies with Morningstar Economic Moat Ratings of wide or narrow are the most undervalued according to our fair value estimates as of Jan. 13, 2025.
- Sensata Technologies ST
- STMicroelectronics STM
- Nice NICE
- Onsemi ON
- Sabre Corporation SABR
- NXP Semiconductors NXPI
- Adobe ADBE
- Infineon Technologies IFX
- Advanced Micro Devices AMD
- Endava DAVA
Here’s a little more about each of the best technology stocks to buy, including commentary from the Morningstar analyst who covers the stock. All data is as of Jan. 13, 2025.
Sensata Technologies
- Morningstar Price/Fair Value: 0.47
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Scientific and Technical Instruments
Trading 53% below our fair value estimate, narrow-moat Sensata Technologies tops our list as the best tech stock to buy again this month. The firm is a global supplier of sensors for transportation and industrial applications. We think Sensata stock is worth $58 per share.
“We think Sensata Technologies is a differentiated supplier of sensors and electrical protection, predominantly for the automotive market. The firm has oriented itself to benefit from secular trends toward electrification, efficiency, and connectivity. Despite the cyclical nature of the automotive and heavy vehicle markets, electric vehicles and stricter emissions regulations provide Sensata the opportunity to sell into new sockets, which has allowed the firm to outpace underlying vehicle production growth by about 4% historically. We think such outperformance is achievable over the next 10 years, given our expectations for a fleet mix shift toward EVs and Sensata’s growing addressable content in higher-voltage vehicles.
“In our view, Sensata’s ability to grow its dollar content in vehicles demonstrates intangible assets in sensor design, as it works closely with OEMs and Tier 1 suppliers to build its products into new sockets. We also think the mission-critical nature of the systems into which Sensata sells gives rise to switching costs at customers, leading to an average relationship length of roughly three decades with its top 10 customers. As a result of switching costs and intangible assets, we believe Sensata benefits from a narrow economic moat and will earn excess returns on invested capital for the next 10 years.
“Over the next decade, we expect Sensata to focus on organic growth in EVs and increasingly electrified industrial applications. The firm has historically been an active acquirer but is focusing on organic investment, reduced leverage, and increased shareholder returns in the medium term, of which we approve. The firm’s ability to grow content in EVs and outperform underlying global automotive production are the primary drivers of our investment thesis.”
William Kerwin, Morningstar Analyst
STMicroelectronics
- Morningstar Price/Fair Value: 0.55
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Semiconductors
STMicroelectronics is a chip supplier for the automotive and industrial industries. The chipmaker is trading 45% below our fair value estimate of $44 per share.
“STMicroelectronics is one of Europe’s largest chipmakers and holds one of the broadest product portfolios in the industry. The company has made structural improvements to its product mix and gross margin profile, which has allowed it to carve out a narrow economic moat. We think ST has some promising growth opportunities on the horizon in microcontrollers and automotive products, including silicon carbide-based semiconductors.
“ST didn’t always have the best track record, regularly failing to earn robust profitability a decade ago owing to investments in money-losing digital chip businesses and share loss in other chip products, among other stumbling blocks. It has turned around nicely as it exited these businesses and reduced its investments in various digital chips. Nonetheless, it is still in some highly competitive segments of the chip industry, such as commoditylike discrete chips that carry lower margins than analog chips and microcontrollers from US-based peers. We anticipate strong competition from Chinese firms in these areas in the years ahead but think ST’s reliability will still give it a leg up on these upstarts.
“Still, ST’s leading technologies and strong position in the automotive market are reasons to be optimistic about the future, with especially promising opportunities in silicon carbide-based power products. The automotive industry is focused on safer, greener, smarter cars, which is leading to increased electronic content per vehicle. Broad-based chipmakers like ST stand to profit from greater demand for advanced infotainment systems, battery management solutions, and sensors associated with new safety features like blind-spot detection. Broad-based microcontroller sales also appear to be a nice growth avenue.
“We anticipate decent growth and profitability improvement out of ST. However, we see wider moats and even more attractive product mixes and margin profiles across several pure-play US-based analog chipmakers we cover.”
Brian Colello, Morningstar Strategist
Nice
- Morningstar Price/Fair Value: 0.57
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Narrow
- Industry: Software—Application
Software application company Nice earns a narrow economic moat rating while serving the customer engagement and financial crime and compliance markets. This undervalued tech stock is trading at a 43% discount to our fair value estimate of $290 per share.
“Nice provides cloud and on-premises software solutions that primarily serve the customer engagement market as well as the financial crime and compliance, or FC&C, market. The majority of revenue is generated in the US, but international expansion has become a bigger priority.
“The customer engagement segment contributes around 80% of company revenue, which includes Nice’s nascent public safety business. CXone, Nice’s flagship customer engagement product, is a cloud-native contact center as a service, or CCaaS, platform that delivers a seamless solution combining contact center software and workforce engagement management. CXone is an industry-leading product that will become increasingly critical for enabling omnichannel interactions amid a move to digital-first customer engagement. With only 15% to 20% of contact center agents in the cloud, including minimal from the enterprise market, the residual opportunity is significant. Consequently, we expect strong mid-term growth as customers transition to the cloud.
“The company earns about 20% of its revenue from its FC&C business, which represents cloud-based risk management, fraud prevention, anti-money-laundering, and compliance solutions. We expect that the increasing cost of compliance, the digitalization of financial-services firms, the disruption of digital assets, and the explosion of data will accelerate the cloudification of the financial-services industry. Nice now has cloud-based solutions to serve organizations of all sizes, including X-Sight for the enterprise market and Xceed for the small and medium-size markets.
“For its 2022-26 strategic cycle, Nice is targeting double-digit total revenue growth, more than 80% of total revenue from cloud products, and a non-GAAP operating margin above 30%.”
Rob Hales, Morningstar Senior Analyst
Onsemi
- Morningstar Price/Fair Value: 0.65
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Semiconductor
Onsemi is trading at a 35% discount to our fair value estimate of $86 per share. The company is the second-largest power chipmaker in the world and the largest supplier of image sensors to the automotive market. The semiconductor company earns a narrow economic moat rating.
“We believe Onsemi is a power chipmaker aligning itself to the differentiated parts of its portfolio in order to accelerate growth and margin expansion. We expect Onsemi to outpace the growth of its underlying markets over the next five years as it tailors its portfolio of chips and sensors to pursue secular trends toward electrification and connectivity that allow it to sell into new sockets. Specifically, Onsemi is the top supplier of image sensors to automotive applications like advanced driver-assist systems, or ADAS, and its semiconductors enable power management and conversion in electric vehicles, or EVs, and renewable energy—all of which we expect to keep Onsemi’s sales growth above that of the broader semiconductor industry.
“We think Onsemi will be vulnerable to cyclicality, but that its portfolio realignment will lend itself to more durable returns through a cycle. The firm’s increased focus on sticky verticals, as well as its differentiated sensor and silicon carbide technologies, contribute to our narrow economic moat rating. Onsemi’s bread and butter historically was in more commoditylike power chips, but we expect it to focus on higher-value applications in the automotive and industrial end markets going forward and in turn earn more consistent returns on invested capital.
“We expect Onsemi to focus on expanding margins over the medium term. Management has invested heavily in pruning and improving its manufacturing efficiency, and we expect it to see the fruits of these efforts going forward. We also think the firm will continue to focus its investments on the automotive and industrial markets—higher growth and higher margin than its legacy consumer and smartphone markets. We think management faces execution risk in hitting its lofty goal of 53% non-GAAP gross margin, but expect both a focus on higher-margin verticals and an improved manufacturing footprint to get it to the low-50% range over the next five years—from a previous midcycle margin below 38%."
William Kerwin, Morningstar Analyst
Sabre Corporation
- Morningstar Price/Fair Value: 0.66
- Morningstar Uncertainty Rating: Very high
- Morningstar Economic Moat Rating: Narrow
- Industry: Software—Infrastructure
Sabre is a software company that provides travel booking and IT solutions. It has the second-largest air booking volume share in the global distribution system industry. While Sabre stock trades 34% below our fair value estimate of $4.87, it is the only stock on our list to earn a Very High Uncertainty Rating.
“Despite near-term reduced consumer saving rates and long-term corporate travel demand uncertainty, we expect Sabre to maintain its position in global distribution systems, or GDS, over the next 10 years. This view is driven by a gradual recovery in corporate travel and Sabre’s leading network of airline content and travel agency customers as well as its solid position in technology solutions for these carriers and agents. Sabre’s 30%-plus GDS air transaction share is the second largest of the three companies (behind narrow-moat Amadeus and ahead of privately held Travelport) that together control about 100% of market volume. Sabre is also a leader in providing technology solutions to travel suppliers.
“Sabre’s GDS enjoys a network advantage, which is the source of its narrow moat rating. As more supplier content (predominantly airline content) is added, more travel agents use the platform, and as more travel agents use the platform, suppliers offer more content. This network advantage is solidified by technology that integrates GDS content with back-office operations of agents and IT solutions of suppliers, leading to more accurate information that is also easier to book. The company’s network prowess should be supported by next-generation platforms, like SabreMosaic, which is an open-source cloud-based, artificial intelligence solution that makes it easier for airlines to customize its offering and upsell content.
“Replicating Sabre’s GDS platform would entail aggregating and connecting content from several hundred airlines to a platform that is also connected to travel agents, which requires significant costs and time. Although we see GDS aggregation, processing, and back-office advantages as substantial, technology architectures like those of Etraveli enable end users to access not only GDS content but also supply from competing platforms, which could take some volume from companies like Sabre. Also, GDS faces some risk of larger carriers making direct connections with larger agencies, although we expect these relationships to be the exception rather than the rule and for Sabre to still be the aggregating platform in either case.”
Dan Wasiolek, Morningstar Senior Analyst
NXP Semiconductors
- Morningstar Price/Fair Value: 0.69
- Morningstar Uncertainty Rating: Medium
- Morningstar Economic Moat Rating: Wide
- Industry: Semiconductors
Trading 31% below our fair value estimate, NXP Semiconductors is an undervalued tech stock with a wide moat. This firm is the leading supplier of high-performance mixed-signal products. We think NXP stock is worth $300 per share.
“NXP Semiconductors is one of the largest suppliers of semiconductors for the automotive market and a significant player in the analog and mixed-signal chip markets generally. We believe the company has a strong position in the automotive, industrial, mobile, and communications infrastructure markets through a combination of switching costs and intangible assets. Although the company sells into cyclical industries, the strength of these competitive advantages gives us confidence that it will generate excess returns over the cost of capital over the next decade and beyond.
“The merger of Freescale and the former NXP in 2015 led to a powerhouse in automotive semiconductors, which makes up more than half of the company’s total revenue. Like many of its chipmaking peers, NXP is well positioned to benefit from safer, greener, smarter cars in the years ahead. It is among the market leaders in automotive semis, especially in microcontroller units, or MCUs, which serve as the brains of a variety of electronic functions in a car. We’re optimistic about NXP’s development of products used in active safety systems, such as 77-gigahertz radar modules and battery management systems in upcoming electric vehicles, most notably from Volkswagen.
“Yet, NXP’s prospects are also bright in its industrial and Internet of Things segment, thanks to its legacy strength in MCUs and embedded processors, along with its development of newer crossover MCUs that combine some of the benefits of each.
“In communications infrastructure, NXP should remain a key supplier of power amplifiers for 5G wireless infrastructure equipment. Finally, NXP’s mobile wallet solutions should remain the industry’s gold standard and the backbone of mobile payment technologies offered by Apple, Google, and others.”
Brian Colello, Morningstar Strategist
Adobe
- Morningstar Price/Fair Value: 0.69
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Wide
- Industry: Software—Infrastructure
Adobe provides content creation, document management, and digital marketing and advertising software and services to creative professionals and marketers. The shares of this software infrastructure firm look 31% undervalued relative to our $590 fair value estimate.
“Adobe has come to dominate in content creation software with its iconic Photoshop and Illustrator solutions, both now part of the broader Creative Cloud. The firm has added new products and features to the suite through organic development and bolt-on acquisitions to drive the most comprehensive portfolio of tools used in print, digital, and video content creation. The December 2021 launch of Adobe Express helps further broaden the company’s funnel, as it incorporates popular features of the full Creative Cloud but comes in lower cost and free versions. The 2023 introduction of Firefly marks an important artificial intelligence solution that should also attract new users. We think Adobe is properly focusing on bringing new users under its umbrella and believe that converting these users will become more important over time.
“CEO Shantanu Narayen provided Adobe with another growth leg in 2009 with the acquisition of Omniture, a leading web analytics solution, that serves as the foundation of the digital experience segment that Adobe has used as a platform to layer in a variety of other marketing and advertising solutions. Adobe benefits from the natural cross-selling opportunity from Creative Cloud to the business and operational aspects of marketing and advertising. On the heels of the Magento, Marketo, and Workfront acquisitions, we expect Adobe to continue to focus its M&A efforts on the digital experience segment and other emerging areas.
“The Document Cloud is driven by one of Adobe’s first products, Acrobat, and the ubiquitous PDF file format created by the company; it is now racing to become a $4 billion business. The rise of smartphones and tablets, coupled with bring-your-own-device and a mobile workforce, has made a file format that is usable on any screen more relevant than ever.
“Adobe believes it is attacking an addressable market that’s well in excess of $200 billion. The company is introducing and leveraging features across its various cloud offerings (like Sensei artificial intelligence) to drive a more cohesive experience, win new clients, upsell users to higher-price-point solutions, and cross-sell digital media offerings.”
Dan Romanoff, Morningstar Senior Analyst
Infineon Technologies
- Morningstar Price/Fair Value: 0.72
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Semiconductors
Infineon Technologies develops automotive and power semiconductors. Infineon stock is trading at a 28% discount to our fair value estimate of $46 per share.
“Infineon is a leading broad-based European chipmaker, with significant exposure to secular growth drivers in the automotive chip sector. Infineon should emerge as a leading supplier for electric vehicles and active safety systems used in cars, with increasing exposure to car “infotainment” systems. However, like most chipmakers, Infineon’s business remains highly cyclical as demand rises and falls with the health of its various end markets.
“Looking at the automotive chip market, electric vehicles and cars with advanced powertrain technology and safety systems require a variety of sensors and power voltage chips supplied by firms like Infineon. Silicon-carbide-based, or SiC-based, semis, used to handle higher voltages and improve the range and efficiency of EVs, are a particularly attractive opportunity for Infineon but also for its rivals. Infineon’s exposure to power semis also allows it to benefit from trends in the electronics industry toward power conservation, not only in more efficient devices like industrial drives but also in green energy solutions like solar panels and even artificial intelligence. Infineon is also a leader in chip card and security products, such as chips for chip-and-pin credit cards.
“Nonetheless, Infineon’s product lines still face formidable competition. Many other large semiconductor firms also focus on power semiconductors and have similar products. The Chinese government is also focused on building up an ecosystem of emerging power chipmakers. Further, Infineon focuses on discrete power products rather than analog power management integrated circuits. While the former products are valuable to customers, the latter of which we view as more complex products allow leading analog firms (such as several wide-moat names we cover) to enjoy stronger pricing power and relatively higher returns on invested capital. Infineon also has a hefty manufacturing capacity for its products, which may lead to a higher fixed-cost structure and may cause significant margin compression when supply far exceeds demand.”
Brian Colello, Morningstar Strategist
Advanced Micro Devices
- Morningstar Price/Fair Value: 0.73
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Semiconductors
Trading at a 27% discount to our fair value estimate of $160 per share, Advanced Micro Devices joins our list of best tech stocks to buy now. The company designs a variety of digital semiconductors for markets such as PCs, gaming consoles, data centers, industrial, and automotive applications.
“Advanced Micro Devices has a wealth of digital semiconductor expertise and is well positioned to prosper from favorable trends in data centers and artificial intelligence. We consider AMD to be one of two notable firms in graphics processing units, which are especially well suited for AI. The company may play second fiddle to Nvidia in AI GPUs, but its GPU expertise should become increasingly valuable, and lucrative, in the years ahead.
“AMD’s primary products include processors and GPUs tailored to PCs, game consoles, and servers. In our view, AMD’s PC and server success stems from the rare x86 architecture license that it possesses from Intel, which allows AMD and Intel to build x86 CPUs for Microsoft Windows PCs. We view it as a heavy lift for Windows to rewrite its x86 software to work with other processors, but Apple made this move in recent years to support its internal ARM-based processors. ARM will likely gain share in the PC market, but we still expect x86-based chips from AMD and Intel to retain leadership in the Windows PC market for quite some time.
“AMD has benefited from its outsourced manufacturing model, as its tight relationship with industry leader Taiwan Semiconductor enabled AMD to grab a technological lead as its rival, Intel, stumbled with its internal manufacturing roadmap. We anticipate that AMD will continue to gain market share over the next few years as Intel strives to turn it around, but AMD’s gains could be longer-lasting if Intel were to stumble further.
“We think AMD’s data center business should boom over the next few years. Its server CPUs should be in high demand, as should its GPUs suited for AI workloads. AMD pegs the total addressable market for AI accelerators, such as GPUs, at $500 billion by 2028. While we foresee Nvidia capturing the bulk of this value over the next several years, we think that all AI vendors and customers will seek alternatives to keep Nvidia’s dominance at bay, and AMD might be the best positioned to emerge as a second source in AI.”
Brian Colello, Morningstar Strategist
Endava
- Morningstar Price/Fair Value: 0.74
- Morningstar Uncertainty Rating: High
- Morningstar Economic Moat Rating: Narrow
- Industry: Software—Infrastructure
IT services firm Endava rounds out our list of best tech stocks to buy. Endava stock is 26% undervalued relative to our fair value estimate of $42 per share.
“Endava, based in the UK, is an IT services company focused on providing digital transformation and engineering services. It generates revenue mainly by charging clients on a time and materials basis for services such as consulting/advice, customized software development and integration, and quality assurance and testing. Endava is highly exposed to the financial-services sector, with nearly half of its revenue generated from the sector. Within financial services, Endava is known for its expertise in payments and private equity.
“Like many of its peers, Endava’s core strategy is to land and expand, which means securing big clients and growing revenue in those relationships by increasingly providing these clients with more services. Endava’s 10 largest clients account for around a third of group revenue with the largest, Mastercard, contributing around 10%. Mastercard has been a client for over 20 years.
“Endava concentrates on the financial-services and technology, media, and telecom industries. The company aims to diversify its industry exposure by securing new clients from new verticals. In particular, Endava is targeting clients in retail and healthcare given its current expertise is most transferrable to these areas.
“Similarly, the company is geographically concentrated with around 33% of revenue generated in the UK and around 26% generated in continental Europe. To diversify, Endava is primarily growing its business in North America.
“Endava’s delivery model is based on agile project management from employees in nearshore locations, which it plans to expand. To best serve its clients' unique digital transformation goals, the flexibility from the iterative nature of agile project management is effective. Furthermore, the nonstandardized nature of these projects requires constant dialogue and interaction between Endava and its clients, which means having delivery teams with similar time zones to its clients (nearshoring) is best to deliver the project successfully in a timely manner.
“Endava is striving to return organic revenue growth to around 20% per year with a relatively stable adjusted profit-before-tax margin of 20%.”
Rob Hales, Morningstar Senior Analyst
How to Find More of the Best Technology Stocks to Buy
Investors who would like to extend their search for the best tech stocks can do the following:
- Review Morningstar’s comprehensive list of technology stocks to investigate further.
- Use the Morningstar Investor screener to build a short list of technology stocks to research and watch.
- Read the latest news about notable technology stocks from Morningstar senior analyst Dan Romanoff.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
