S&P 500 bounces back: 2 tech stocks to buy now, according to these Wall Street analysts

Stock market volatility returned over the summer, but after a brief respite, it was widely watched S&P 500 the index is hitting new highs again. As the stock market rises, Wall Street analysts are making bullish calls Broadcom (AVGO -3.03%) and Advanced microdevices (AMD -1.88%). Here’s why these growth tech stocks are poised for a comeback.

1. Broadcom

Broadcom shares are nearing new highs after a recent decline. The company is experiencing strong demand for its artificial intelligence (AI) semiconductor solutions, which enable data centers to move data, an increasingly important feature for AI training. But William Blair analyst Sebastien Naji sees more upside for investors as Broadcom’s non-AI business recovers.

Broadcom reported strong growth last quarter, driven by AI-related products and the inclusion of VMware, which the company acquired in 2023. Analysts expect revenue to rise 44% to $51 billion this year , with AI products contributing $12 billion to the top line. based on management guidance.

However, Broadcom’s non-AI revenue is recovering from a downturn. The company sells products in several markets, including smartphones and broadband, which have seen weak demand. The good news is that revenue from non-AI networks grew 17% sequentially from the previous quarter, and management also sees an increase in demand for the non-AI chip business, which signals a bottom for these businesses.

A rebound in these markets would be huge for Broadcom investors. The company could be firing on all cylinders by this time next year. Analysts expect revenue and earnings to grow 17% and 28%, respectively, in fiscal 2025. This explains why the analyst it has a superior performance rating to equities.

The stock’s price-to-earnings (P/E) ratio is 28, based on consensus estimates for next year’s earnings, which seems very reasonable for a business that’s expected to grow earnings at an annualized rate of 19% over the next few years. Investors should expect Broadcom stock to hit new highs over the next year and beyond.

2. Advanced microdevices

If Broadcom stock looks attractive, AMD stock could do even better. AMD stock trades at about the same forward P/E, but analysts are projecting even higher earnings growth for the leading chip company.

Nvidia controls the lion’s share of the market for graphics processing units (GPUs), which are needed for AI workloads, but AMD is in second place and positions it well for growth. Strong demand for AMD’s MI300 GPUs contributed to a 115% year-over-year increase in data center revenue last quarter.

However, Edward Jones analyst Logan Purk believes investors are overlooking the company’s opportunity with Xilinx, which AMD acquired in 2022. Xilinx is a leading supplier of programmable and adaptive chips, which expands the company’s opportunities in cloud, edge computing and smart devices.

The addressable market across all of these segments is estimated at $135 billion, but Purk doesn’t think investors are giving AMD credit for that growth potential, especially since Xilinx contributes high-margin revenue to AMD’s business.

Investors can buy AMD stock at an attractive forward P/E of 30, based on earnings estimates for 2025. That’s a modest valuation compared to analysts’ forecasts of 41% annual earnings growth over the next few years. For this reason, AMD stock is a great buy on the decline. As AMD reports strong earnings results over the next few quarters, the stock should climb back to new highs.