The technology sector is expected to outperform again in 2024, with cybersecurity and cloud networking stocks best positioned, according to Barclays.
The main catalyst is artificial intelligence.
But for Wall Street, it’s not necessarily a “refresh.” Investors should look beyond chipmakers like Nvidia (NVDA) to lesser-known efforts in the tech industry. Here’s why: His second year of the generative AI boom will see companies focus on expanding use cases and mitigating risk.
“We’re going to use AI in a lot of different ways,” Tim Long, senior technology hardware and networking analyst at Barclays, told me at the Barclays Global Technology Conference last week. Ta. “We haven’t really seen the rest of the construction yet.”
Concerns about rising interest rates and a spending rebound have slowed the group’s momentum this year. Heading into the final two weeks of the year, the industry has lagged the broader tech stock rally year-to-date, with the Nasdaq CTA Cybersecurity Index (^NQCYBR) up 53% compared to the Nasdaq 100 Index (NDX) It has increased by 39%.
The performance gap could quickly close as companies increase spending to protect against AI threats. Research firm Gartner predicts that corporate cybersecurity spending will increase 14% next year to $215 billion.
Saket Kalia, senior software analyst at Barclays, explained that he feels the environment is “more stable” and that cloud security and secure access service edge (SASE) will continue to grow in 2024. I think this is the biggest investment theme. His top picks include CrowdStrike (CRWD) and Gen Digital (GEN).
“CrowdStrike is not only a great growth story in the security space, but also has strong free cash flow support and diversifies the business,” Kalia added. “It reminds me of Palo Alto Networks 18 to 24 months ago…Investors value diversification, and I think that’s what will continue the CrowdStrike story in 2024.”
CrowdStrike stock is up 150% this year.
Gen Digital (formerly NortonLifeLock and Avast) is also a top contender for the Barclays team. The security and privacy provider reported a 27% increase in revenue in the second quarter due to a surge in bookings compared to the same period last year.
“The company has an operating margin of nearly 60% and trades at a very comfortable valuation,” Kalia explained.
Gen Digital is one of the group’s weaker performers, with its stock price rising just 7% since the beginning of the year.
Beyond pure cybersecurity strategy, Barclays’ Long believes Arista Networks (ANET) is a top contender in the AI boom.
“Arista Networks is a leader in the AI space. They make the switches and routers that are the networking elements of these data centers, and that’s typically around 10% of the spend on AI data centers.” explained at length.
During the company’s third-quarter earnings call, CEO Jayshree Ural noted that customers are “clearly prioritizing and doubling down on AI this year,” adding that the demand for new technology is increasing. sued.
Arista Networks stock is up 95% since the beginning of the year, significantly outperforming rivals Juniper Networks (JNPR) and Cisco (CSCO).
sheena smith Anchor of Yahoo Finance. Follow Smith on Twitter @SeanaNSmith. Have a tip about a deal, merger, activist situation, or more? Email seanasmith@yahooinc.com.
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