Top Tech Stocks for June 2023

Tingo Group Inc., Super Micro Computer Inc., and Aehr Test Systems are among the top-performing tech stocks this month, each providing investors with returns in excess of 300% in the past year.

The Technology Select Sector SPDR Fund (XLK), a benchmark for tech stocks, has risen about 20% in the past 12 months, outperforming the broader market amid increased interest in artificial intelligence. The Russell 1000 Index rose about 4% over the same period.

We look at the top tech stocks in three categories: the best value, the fastest growth, and the most momentum. Benchmark figures above are as of June 5, and all data below are as of June 4.

Best Value Tech Stocks

Value investing is a factor-based investing strategy that involves picking stocks that you believe are trading for less than what they are intrinsically worth, usually by measuring the ratio of the stock’s price to one or more fundamental business metrics. A widely accepted value metric is the price-to-earnings (P/E) ratio.

Value investors believe that if a business is cheap compared with its intrinsic value (as measured by its P/E ratio, in this case), then its stock price may rise faster than that of others as the price comes back in line with the worth of the company. These are the tech stocks with the lowest 12-month trailing P/E ratio.

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• Daqo New Energy Corp.: Daqo is a Chinese monocrystalline silicon and polysilicon manufacturer developing products mainly used in solar energy applications. Daqo's shares are down about 39% in the last year amid news that its polysilicon price growth has slowed.
• Tingo Inc.: Tingo is an agri-fintech company providing a smartphone platform to allow farmers to manage commercial activities. It serves customers primarily in Africa. It is also listed on the Nasdaq under the ticker TIO. Tingo Group's stock plunged 80% on June 6 after short-seller Hindenburg Research accused the company of being "an exceptionally obvious scam." The company responded, calling the report "misleading and libelous."
• Viasat Inc.: Viasat provides high-speed satellite broadband and networking services.
• Avnet Inc.: Avnet provides supply chain and logistics services, distribution, and design support for electronic components. Avnet shares are down more than 9% over the past year as the broader semiconductor industry faced supply chain issues.
• Nokia Oyj: Nokia is a Finnish-based operator of networking infrastructure.

Fastest-Growing Tech Stocks

These are the top tech stocks as ranked by a growth model that scores companies based on a 50/50 weighting of their most recent quarterly year-over-year (YOY) percentage revenue growth and most recent quarterly YOY earnings-per-share (EPS) growth.

Both sales and earnings are critical factors in a company’s success. Therefore, ranking companies by only one growth metric makes a ranking susceptible to the accounting anomalies of that quarter (such as changes in tax law or restructuring costs) that may make one figure or the other unrepresentative of the business in general. Companies with a quarterly EPS or revenue growth of more than 1,000% were excluded as outliers.

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• Canadian Solar Inc.: Canadian Solar designs, builds, and sells solar equipment for residential, commercial, and industrial customers. The company's products include solar modules, inverters, and system kits. Canadian Solar's revenue climbed by more than a third for the most recent quarter, driven by gains in its solar module and storage manufacturing unit.
• Gen Digital Inc.: Gen Digital is a cybersecurity software and services company. Its EPS and revenue climbed in the latest quarter in part because of its merger with Avast, which was completed in September 2022.
• ZoomInfo Technologies Inc.: ZoomInfo offers a cloud-based sales and marketing platform that enables users to connect with their target customers. ZoomInfo's EPS and revenue grew substantially in the first quarter as it integrated generative artificial intelligence (AI) into several products.
• Shoals Technologies Group Inc.: Shoals provides electrical balance of systems services. It serves solar, energy storage, and electric vehicle charging infrastructure projects. Revenue at its System Solutions unit nearly doubled in the first quarter of the year, driving company-wide recor d revenue and earnings.
• SolarEdge Technologies Inc.: SolarEdge Technologies builds and distributes equipment and technology for photovoltaic arrays. In addition, the company provides optimization services as well as monitoring solutions for photovoltaic systems.

Tech Stocks With the Most Momentum

Momentum investing is a factor-based investing strategy that involves investing in a stock whose price has risen faster than the market as a whole. Momentum investors believe that stocks that have outperformed the market will often continue to do so because the factors that caused them to outperform will not suddenly disappear.

In addition, other investors, seeking to benefit from the stock’s outperformance, will often purchase the stock, further bidding its price higher and pushing the stock up further. These are the tech stocks that had the highest total return over the past 12 months.

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• Super Micro Computer Inc.: Super Micro Computer, or Supermicro, manufactures energy-efficient servers and storage systems, and provides worldwide support services. Supermicro shares skyrocketed in recent months as it has become a leading server provider for AI platforms.
• Aehr Test Systems: Aehr is a California-based company that offers systems for use in screening semiconductor chips. The company's stock rose most recently after it announced a new semiconductor customer order.
  
• Bel Fuse Inc.: Bel Fuse manufactures and distributes electronic components for use in many different fields, such as aerospace, military, telecommunication, computing, and transportation industries. Bel Fuse shares rose this past year as the company's earnings results have improved over several quarters.
• First Solar Inc.: First Solar designs and manufactures photovoltaic solar power systems and solar modules.
• Rambus Inc.: Rambus is a fabless semiconductor company that designs and sells memory microchips for use in data centers. Rambus stock has steadily risen since July 2022, but it really took off in early 2023 as excitement around AI, and the computing power it requires, lifted semiconductor stocks.

The Impact of Inflation on Technology Stocks

Technology stocks historically have underperformed other sectors during periods of rising inflation. Conversely, the group typically outpaces the broader market during times of falling inflation.

For example, the technology bull market between 2009 and 2021 coincided with an annualized historically low inflation rate of 1.7%. However, the tech sector led broad market declines in 2022 amid rising inflation, which reached a 40-year high of 9.1% in June of last year.

Why are technology stocks so sensitive to inflation? It all relates to interest rates. Rising inflation indicates that the Federal Reserve will likely increase its federal funds rate to taper demand.

Higher rates affect technology companies in two ways. First, consumers and businesses will have less income to buy products and services, which has the effect of slowing corporate earnings. Second, technology companies borrow heavily to fund startup costs, patents, and innovation expenses, and the cost of servicing that debt increases when interest rates rise. 

The opposite happens when inflation declines. The Fed will likely lower interest rates then, which spurs consumer demand and reduces technology companies' borrowing costs.

Advantages of Technology Stocks

Investing in Innovation: Investing in technology stocks allows investors to back revolutionary ideas that have the potential to improve people’s lives. Technology companies of all sizes continually push boundaries to be first to market with game-changing technology, whether it be Apple Inc. (AAPL) with a new health feature for its watch or a startup developing a game-changing semiconductor for the automotive industry.  

Growth Potential: Technology stocks offer the potential for sizable gains, with investors usually prepared to pay a premium for future growth.

For instance, as of June 5, 2023, the technology sector traded at almost 44 times earnings. By comparison, the energy and financial sectors had price-to-earnings (P/E) ratios of about 6 and 13, respectively.

Although the biggest gains can be found in small-cap technology stocks, even mega-cap tech titans such as the original FANG members—Meta Platforms Inc. (META), Amazon.com Inc. (AMZN), Netflix Inc. (NFLX), and Alphabet Inc. (GOOGL)—had an annualized return of almost 25% over the past decade.

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As of the date this article was written, the author does not own any of the stocks listed above.