3 tech stocks to buy in September

September is historically one of the most difficult months in the market, and the market is down significantly during the year. Moreover, tech-heavy Nasdaq Tech stocks were hit harder as higher interest rates and a post-pandemic growth slowdown created a double-whammy of widespread bad news.

But while many stocks are getting bigger, there are bound to be some great deals, especially given the innovations happening around artificial intelligence, 5G, electric vehicles, robotics and other game-changing applications.

Here are three stocks that will experience short-term pain, but that should grow in the long-term, making them worth buying at today’s low prices.

Amazon

Of course, Amazon (AMZN -7.06%) It may have overbuilt its e-commerce infrastructure during the pandemic, which has slowed growth this year and eroded margins. But that is only a short-term concern.

New CEO Andy Jacey has made major adjustments, including canceling some construction and even leasing some warehouse and distribution space. Moreover, Amazon is growing enough to leverage its logistics footprint in the market and improve its margins.

But taking a broader view, Amazon’s first-party retail business, where it buys and owns its own goods, has gained a lot of attention as perhaps the company’s highest-grossing division. But it’s also the lowest margin, and perhaps not the most profitable part of Amazon.

Amazon’s small businesses are very high-margin and grow quickly. First, Amazon Web Services (AWS) posted strong 33% growth last quarter and a 31% operating margin over the past 12 months. AWS has a first-mover advantage in cloud computing infrastructure, and it’s a utility-like business with a long growth runway. Even in a recession, companies can rely more on cloud computing to avoid the upfront costs of building their own data centers. In fact, given its high margin and growth profile, AWS today is comparable to Amazon’s total market value.

What’s more, Amazon’s up-and-coming digital advertising business is growing well, and considering the margins seen at other large-scale digital advertising companies, it’s likely to be high-margin. And while overall retail is struggling, Amazon’s third-party e-commerce sales, which have higher margins than first-party sales, fared much better, rising 9 percent last quarter, while first-party e-commerce sales fell 4 percent. %

Then there are new innovations at Amazon, which include a new “Just Walk Out” physical retail technology and a new push in the field of robotics. Therefore, the recent picture in the e-commerce business has been affected this year, Amazon’s long-term growth picture is still very unpredictable.

While short-term concerns have led to a 20% selloff this year, and another underperformance in 2021, Amazon stock could be in for another big run as the economy recovers.

Applied materials

While this year has been bad for e-commerce stocks like Amazon, the semiconductor sector is in for an even worse downturn. After consumers loaded up on PCs, phones, tablets and TVs during the pandemic, inflation and interest rates are essentially halting those purchases, which has eclipsed consumer-facing chips.

Applied materials (Really -6.14%) It’s the world’s largest semiconductor equipment maker, so the stock has seen a 38% selloff this year despite its strong year-to-date performance. Now trading at 12.8 times earnings, the worst looks like it could be overpriced.

Keep in mind that last quarter, Applied beat revenue and earnings estimates well, and that demand for its machines far outstripped supply. So what explains the disconnect?

Investors should be careful to distinguish semiconductor device suppliers from chip designers in the consumer space. The memory segment of the market is very weak and chips for consumer devices are very weak, but there are still other market segments that are very strong and even incomplete. This includes automotive and industrial chips, and data center semiconductors also seem to be holding up well.

Meanwhile, a fierce competition is going on between them. Intel, SamsungAnd Taiwan Semiconductor Manufacturing To be a leader in manufacturing the leading edge chip, and leading edge manufacturing is becoming more difficult and capital intensive. So that should benefit Applied Materials, which last quarter made up two-thirds of its revenue from flash and logic customers, compared to just one-third from memory.

If Applied Materials fears a slowdown in this chip, or if it has no earnings and earnings continue to decline, the stock could rise significantly from this decline. Given the above GDP growth for semiconductors over the long term, Applied Materials looks like an excellent long-term bargain today.

Alphabet

Google Parent Alphabet (GOOG -5.86%) (GOOGL -5.90%) It’s pretty cheap by most measures right now, and especially so in 2022. Good thing the company is ramping up stock buybacks this year with $70 billion in approvals.

At current market capitalization, that’s about 5% of the total shareholding. That’s pretty impressive for this growth stock, which has a huge competitive advantage in online search. Even in a quarter that saw a big rebound in digital ad spending, Google Search grew 13.5 percent last quarter and Alphabet’s total ad revenue rose 10.1 percent.

Coming after very strong growth last year and given all the macroeconomic headwinds, this is no bad result. Additionally, Alphabet’s price-to-earnings ratio of 20.5 is cheap compared to years, and actually lower than the multiple. S&P 500 In general, on 21.8. That doesn’t seem fair, since Google is definitely an above-average business and Alphabet is still making losses from its cloud computing and moonshot “other bets” segments. Those losses hurt earnings by roughly 10%, but those units can still have significant positive value. This means the letter is cheaper than it looks.

Overall, Google Search looks resilient, the company’s cloud computing division is showing strong growth, and management is finally ramping up stock buybacks. It’s another tech deal to buy in September.