Throughout the pandemic, US tech stocks thrived. As other sectors declined, investors turned their heads towards the seemingly-pandemic-proof digital world. Take the NASDAQ Composite, a tech heavy index. Its share value has doubled in the last 12 months.
However, a rise in US bond yields has caused a large-scale tech stock sell-off. Rising yields are a key indicator of inflation, which erodes the future value of company earnings.
Though this may cause concern for investors, I’m taking advantage of cheaper share prices to top up on three US tech stocks I already hold.
#1. Palantir Technologies: data analytics
Palantir Technologies (NYSE: PLTR) specialises in data gathering and analytics. Its share price peaked at $39 in January 2021, up from $9 in October 2020.
The company offers three different data services, Gotham for governments, Foundry for corporate firms, and Apollo, which manages the two. Its Gotham government contracts provide a stable long-term income. In 2020 the company saw 47% revenue growth to $1.1bn, with 2021 forecasts expecting a similar figure.
However, the current price-to-book (P/B) ratio is around 28, signalling this stock could be overvalued. This is a risk for any investor buying now. For context US tech stock Microsoft trades on of P/B ratio of around 13. However, data collection is only going to accelerate in coming years, as the world increasingly shifts towards technological dependence. Therefore, I expect this stock to have a strong future and will buy more.
#2. NIO: Chinese electric travel
NIO (NYSE: NIO) is a Chinese electric car manufacturer. Its share price surged over 1,100% in 2020. Though the shares are down, this US-listed tech stock does boast some encouraging numbers. One example is the 113% year-on-year increase in production in 2020. It also has a much lower P/B ratio of 13.4, compared to industry leader Tesla’s 28.3. This indicates the current share price could be undervalued comparative to the industry giant.
However, if this US tech stock wants to become a front runner in the electric vehicle industry it will have to fend off some fierce competition, which is a risk that can’t be ignored. Ford has pledged $11bn for electric vehicle research from 2018-2022 and General Motors has set aside as even larger $27bn.
However, as a current investor I’m bullish about this US tech stock’s future growth. I’ll be buying more shares for my portfolio.
#3. Jumia Technologies: African e-commerce
Often referred to as “the Amazon of Africa”, Jumia Technologies (NYSE: JMIA) is a Nigerian e-commerce company. After its IPO in April 2019, this stock suffered some huge cash flow issues with operating losses exceeding revenues. However, throughout 2020 its share price exploded from just under $3, to peak at $65 per share in early February 2021.
With Africa’s lack of infrastructure, e-commerce has been largely overlooked as a viable business plan. Google owner Alphabet and Facebook are two US tech stocks that have announced plans to provide all of Sub-Saharan Africa with internet connections. If these projects are successful, I feel it would put Jumia in a great spot. Jumia’s conservative $4bn market cap also offers room for encouraging upside potential. I’m bullish about this US tech stock’s potential and, again, I’m going to add to my existing holding.
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Dylan Hood owns shares in Jumia Technologies, Palantir Technologies, and NIO. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to its CEO, Mark Zuckerberg, is a member of The Motley Fool's board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (A shares), Facebook, and NIO Inc. The Motley Fool UK owns shares of Palantir Technologies Inc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.