Stock Analysis & Ideas

2 Disruptive Technology Stocks That Can Thrive in 2023

Story Highlights

Microsoft Corporation and Texas Instruments seem attractive despite the short-term challenges faced by the two companies. Enduring competitive advantages are at the center of the investment thesis for both Microsoft and Texas Instruments.

Tech stocks took a massive hit in 2022. Similar to what happened back in 2008 and 2001, investors seem to be distancing themselves from disruptive, high-growth stocks in fear of a possible recession that could further destroy the value of growth companies. Empirical evidence suggests that this could be a costly mistake.

With the tech sector receiving a beating, the S&P 500 Information Technology sector is down 18% in the last 12 months. This lackluster performance has wiped billions of dollars from the market value of some of the leading tech companies in the world but, at the same time, created many new opportunities for growth investors to grab from both hands. Microsoft Corporation (NASDAQ:MSFT) and Texas Instruments, Inc. (NASDAQ:TXN) are two disruptive technology stocks to consider owning this year, and I am bullish on both these companies.

Microsoft’s Growth Will Come from Multiple Avenues

Microsoft is well-known for the products and services the company offers from its personal computing segment, but the cloud business is the crown jewel of the company today. In the September quarter, the Intelligent Cloud segment reported $20.32 billion in revenue, accounting for over 40% of company revenue.

Microsoft is one of the leading players in the global cloud computing market alongside, Inc. (NASDAQ:AMZN) and Alphabet Inc. (NASDAQ:GOOGL) (NASDAQ:GOOG), and the company enjoys healthy operating margins of over 44% from its cloud business. In comparison, Google is yet to see profits from its cloud business, while Amazon’s operating margin from the cloud business hovers around 25%.

Microsoft, therefore, is not just a leader in the cloud computing market but also a profitable business, which leaves ample room for the company to aggressively expand in the coming years.

Microsoft-owned LinkedIn remains under-monetized, but the company has made steady progress in monetizing LinkedIn over the last few years. In Q3, LinkedIn reported 16% year-over-year revenue growth to $3.66 billion.

LinkedIn is increasingly becoming the platform of choice among both recruiters and job candidates in all major regions of the world, and the company has introduced several value-added services and subscriptions such as LinkedIn Learning, LinkedIn Recruiter, LinkedIn Sales Navigator, and other premium membership tiers to monetize a daily active user base of more than 134.5 million.

In the coming years, LinkedIn is likely to become a major growth driver for Microsoft as it establishes itself as the go-to platform for B2B sales and headhunting.

Microsoft’s future growth will also come from the expected expansion of its subscription business and the potential gains from its investment in OpenAI, the developer behind the wildly popular ChatGPT bot. Microsoft invested $1 billion in OpenAI back in 2019, and the company recently announced a multibillion-dollar investment plan in OpenAI.

Texas Instruments is a Category Leader

The semiconductor industry is cyclical, which makes investing in chip stocks like TXN a difficult task for many investors due to the underlying volatility in earnings and stock prices. However, strategically investing in chipmakers that enjoy durable long-term competitive advantages could help investors beat the market in the long run.

Texas Instruments is the undisputed leader in the global analog semiconductor market with a market share of around 20%, and the company’s size and scale make it extremely difficult for a rival to dethrone Texas Instruments.

The company serves some of the largest companies in the world and benefits from intangible assets spanning from high customer switching costs to customized chip designing capabilities. These competitive advantages will help Texas Instruments earn economic profits for the foreseeable future.

The global digitalization drive is expected to gather pace once the global economy enters the recovery phase, and semiconductors will play a massive role in this movement, as high-performance chips are the key to the digitalization of many business sectors.

Although many investors focus on digital chipmakers, analog chips are essential components in helping digital chips function properly. Analog chips are widely used in sectors such as automobile and industrial manufacturing, and Texas Instruments is strategically well-positioned to drive earnings growth with the recovery of these two business segments.

Should You Buy MSFT and TXN? Analysts Weigh In

With Microsoft laying off thousands of employees and the tech sector coming under pressure in general, both Microsoft and Texas Instruments have come under the scrutiny of analysts. However, not all analysts are bearish on the prospects for these two companies. Wedbush Securities recently named Microsoft as one of its top stock picks for 2023. Based on the ratings of 29 Wall Street analysts, the average Microsoft price target is $282.16, which implies upside potential of 16.3% from the current market price.

Goldman Sachs (NYSE:GS) strategist David Kostin recently wrote that Texas Instruments will be one of the biggest winners from China’s reopening. Nonetheless, based on the ratings of 19 Wall Street analysts, the average Texas Instruments price target is $178.18, which suggests the company is fairly valued in the market today.

Takeaway: MSFT and TXN Shares Look Attractive

Tech stocks have made a strong recovery in 2023 so far on the back of a forgettable 2022. Microsoft and Texas Instruments seem poised for strong growth in the next few years, and both companies feature highly-attractive characteristics.

Join our Webinar to learn how TipRanks promotes Wall Street transparency


Tired of arriving late to the Big Returns Party?​
Most investors don’t have major gainers like TSLA or NVDA on their radar from the start.
The profusion of opinions on social media and financial blogs makes it impossible to distinguish between real growth potential and pure hype.
​​For the past decade, we have developed and perfected technology designed to help private investors, just like you, find the best opportunities, with the greatest upside potential, in any financial climate.​
Learn More