3 technology stocks with promising innovation pipelines

The tech sector is full of companies that have outperformed S&P 500. In fact, more than a quarter of the S&P 500 consists of technology companies. The preference for technology stocks is even more evident in Nasdaq 100. Part of this distribution is due to the extraordinary presence of Magnificent Seven stocks. This is a group of some of the best tech stocks, as almost all of the companies have posted impressive long-term gains.

Many Magnificent Seven actions continue to innovate. They are investing heavily in initiatives like artificial intelligence as they strengthen their product lines. However, there are other tech companies that continue to innovate in their industries. Investing in companies that continue to tackle innovative projects can lead to long-term returns. However, some corporations do a better job than others.

If you’re looking for the best tech stocks that can charge more due to their promising pipelines, you might want to monitor these three promising opportunities.

Amazon (AMZN)

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Amazon (NASDAQ:AMZN) has been innovating across multiple industries for decades. The company popularized free 2-day shipping, Prime Day and other trends. The stock continues to perform well, posting an 8% year-to-date gain while rising 79% over the past five years. The tech conglomerate is in the midst of a correction that presents a buying opportunity.

The e-commerce giant reported a 10% year-over-year revenue increase in the second quarter. It was slightly lower than expected and guidance for the third quarter did not please analysts. Any long-term stock will go through ebbs and flows, especially innovative companies that tend to have high valuations.

Amazon is the leader in the cloud computing industry, which is poised to benefit from the AI ​​boom. The tech firm is also investing heavily in artificial intelligence to expand its market share across multiple industries. Amazon Web Services was a bright spot, as that segment grew 19% year over year.

Microsoft (MSFT)

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Microsoft (NASDAQ:MSFT) is the second largest cloud provider, and cloud computing accounts for more than half of the company’s total revenue. The tech giant reported 15% annual revenue growth and 10% annual net income growth in the fourth quarter of fiscal 2024. These results were largely fueled by Microsoft Cloud’s 21% annual revenue growth. Cloud revenue accounted for $36.8 billion of the company’s revenue of $64.7 billion in Q4 FY24.

Investments in artificial intelligence have positioned Microsoft to expand its market share in various industries. Technology also gives Microsoft more opportunities to innovate. Copilot has been the catalyst for Microsoft’s AI expansion, and investors got a glimpse of its possibilities with Copilot for Security. This AI-powered generative assistant helps cybersecurity professionals keep data safe and simplifies mundane and repetitive tasks.

Microsoft has been a reliable long-term winner in the stock market. The stock is up 8% year to date and has gained 190% over the past five years. The stock is in the midst of a correction that presents a greater margin of safety for investors.

SoFi (SOFI)

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SoFi (NASDAQ:SOPHIE) is a digital bank that continues to report significant increases in total membership. The fintech firm has attracted members thanks to its competitive financial products. Because SoFi has no physical branches, the bank has less overhead and passes the savings on to consumers.

SoFi’s stock earnings haven’t been stellar or noteworthy for several years. It’s an underdog story, to be quick and concise in terms of 5-year returns. However, some underdogs grow big over time, and the finances support the bullish case. Revenue was up 20% year-over-year in the first quarter, while net income was $17.4 million. SoFi reported a net loss of $47.5 million in the same quarter last year.

Rising profit margins with continued revenue growth indicate an opportunity for the innovative fintech firm. Analysts are mixed and have rated the stock a “hold.” The average price target implies a 27% gain from current levels.

As of this publication, Marc Guberti held long positions in AMZN, MSFT and SOFI. The opinions expressed in this article are those of the writer, with reservation InvestorPlace.com Publishing Guide.

At the time of publication, the editor-in-chief held a LONG position in SOFI.