Many big tech stocks have led the market higher over the past two years. However, not all tech stocks are alike. Investors have been betting on plays with fast growth now. But as the market shifts, looking for consistent growth may be a better option for investors.
That’s because the spending growth on AI is likely to start slowing in 2025. The big spending now should decline as companies look to integrate new AI tools and reassess their needs from there.
So when the market next pulls back and looks fearful, the one tech play investors should target first is Microsoft (MSFT). The company’s diverse operations and high margin software make it a standout investment opportunity for a fearful market.
Plus, Microsoft has become a dividend growth play, with the company recently hiking its dividend by 10%. While Microsoft’s yield isn’t huge, buying on a pullback and taking advantage of long-term growth can easily play out well over time.
Microsoft is also using its huge cash flow advantage to increase its share buyback to $60 billion.
Action to take: Look to buy Microsoft during market pullbacks of 8% or more from all-time highs. We may yet face such a pullback over the coming weeks.
For traders, shares are still slightly off their July all-time highs and could retest those in a year-end rally. The January 2025 $465 calls, last trading for around $13.80, could see mid-to-high double-digit returns.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.