Top Tech Stocks Poised for Growth: A Look Ahead to 2025

Chicago, IL – December 31, 2024 – Today, Zacks Investment Ideas highlights Cadence Design Systems, Inc. (CDNS), Nvidia (NVDA), Arista Networks (ANET), Microsoft (MSFT), and Meta (META).

Two Promising Tech Stocks for Long-Term AI Growth (CDNS, ANET)

After a strong market rally in 2024, many tech stocks could become more affordable in early 2025.

Investors should be on alert, ready to take advantage of key price points during the next stock market dip. Historical patterns show that stock corrections—defined as drops of 10% to 19%—are typical for any market.

Recently, the Nasdaq slid 1.5%, dropping below its 21-day moving average for the first time since early September. This fluctuation highlights the market’s volatility, reminding investors to monitor both the 50-day and 200-day moving averages of the S&P 500 and Nasdaq closely.

Any downturn in the market could present buying opportunities, especially with encouraging earnings growth expected in 2025 and 2026.

Additionally, with a potentially favorable economic climate from the second Trump administration, the environment for stocks could further improve.

Let’s explore two strong stocks that investors should consider purchasing as soon as they become available at lower prices in 2025.

Why Cadence Design Systems is a Stock to Watch in 2025

Cadence Design Systems, Inc. has experienced impressive growth, with its stock price rising about 5,000% over the last 15 years, significantly outpacing the Tech sector’s 625% and the Computer-Software industry’s 975% gains.

Cadence’s software, which is vital in the semiconductor lifecycle, has attracted considerable attention from Wall Street. While the company underperformed compared to its peers in 2024, this could create a favorable buying opportunity for investors looking ahead.

As the demand for advanced semiconductors for AI and computing grows, Cadence’s value to chip manufacturers increases. Companies like Nvidia utilize Cadence’s technology in their development processes. The firm has achieved an average revenue growth of 14% over the past five years.

Projected revenue growth of 13% for 2024 and 2025 is anticipated to enhance its adjusted earnings per share by 15% and 16%, respectively.

Currently, Cadence trades at 55.2 times forward earnings, a steep premium compared to the Tech sector average of 27.8 times. Nevertheless, it remains about 25% lower than its peak price-to-earnings ratios.

With an impressive 76% of analysts rating Cadence as a “Strong Buy,” the stock holds promise. Currently hovering 7% below its high, any moves toward its 50-day or 200-day moving average could signal a recovery and a rise to new heights.

Why Arista Networks is a Key Player in AI and Big Data

Arista Networks specializes in networking solutions for AI, cloud, data centers, and campus environments. The firm has seen substantial growth alongside the increasing demand for cloud services and big data analytics.

With over 8,000 global cloud customers, including major tech firms like Microsoft and Meta, Arista has positioned itself as a leader in networking infrastructure. In fact, cloud providers accounted for 46% of Arista’s revenue last year.

The strengthening ties to Microsoft and Meta highlight investor confidence, reflected in the 13 out of 19 brokers recommending Arista as a “Strong Buy.”

Arista’s revenue surged from $361 million in 2013 to $5.86 billion last year—an average growth of 37% over the past three years. Projections show further growth of 19% in 2024 and 17% in 2025, with expected revenues reaching $8.15 billion.

The company anticipates adjusted earnings growth of 26% and 10% for the next two years, following a remarkable 52% increase in fiscal year 2023. This financial health earns Arista a Zacks Rank of #2 (Buy).

With a solid $7.4 billion in cash against only $3.6 billion in liabilities and no debt, Arista Networks displays a robust balance sheet. Over the past decade, its stock has surged about 2,800%, significantly outperforming competitors like Meta and Microsoft. In 2024, Arista outperformed the tech index with a 92% increase.

Arista has consistently traded at a premium compared to Tech stocks. Recently completing a 4-for-1 stock split has made its shares more accessible, yet the stock may be due for a price adjustment given its proximity to all-time high earnings multiples.

Any decrease toward Arista’s 50-day or 200-day moving average could present an excellent buying opportunity.

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