Tech Stocks to Consider: Opportunities and Caution
Mid-Year Market Insights
As we enter the latter half of the year, it’s prime time for product launches and seasonal market activity. This year particularly benefits several tech companies, driven by an anticipated refresh cycle in the Personal Computer (PC) sector, with expectations of an artificial intelligence (AI) component accompanying it.
Key Trends to Watch
- End of Windows 10: Microsoft is concluding support for Windows 10.
- Shift in Refresh Cycles: Due to bulk purchases during the 2020 pandemic, the usual five-year PC refresh cycle has been pushed to 2025.
- AI Demands: Growing AI workloads require updated hardware with enhanced memory capacities.
Investing in Advanced Micro Devices (AMD)
The aforementioned trends position Advanced Micro Devices (NASDAQ:AMD) as a compelling investment. Its Ryzen CPUs have allowed AMD to capture market share from Intel. According to reports, AMD’s market share for desktop CPUs increased by 4.1 points to 28% and its laptop CPU share rose by 3.2 points to 22.5% in Q1 2025.
Potential for Growth
Historically, AMD’s Computing and Graphics segment was its main revenue driver, but in 2024, its data center segment surpassed it. A PC refresh cycle could greatly enhance AMD’s revenue. Moreover, the new AMD Instinct MI350 Series launched for hyperscalers could further elevate its data center revenue, making AMD a strong contender for substantial gains.
Consider Descartes Systems
Another company to keep an eye on is Descartes Systems (TSX:DSG). Although it faced a decline in June due to cost-cutting measures, the latter half of the year holds seasonal growth potential, especially with e-commerce companies likely to accumulate PCs for upgrades ahead of the holiday sales.
Cautionary Notes on Other Stocks
While AMD and Descartes are promising, some tech stocks may not be as strong. For instance, Dye & Durham (TSX:DND) has lost 56% of its value, while Lightspeed Commerce (TSX:LSPD) has dropped 39% since late 2024. These stocks have struggled primarily due to significant losses from acquisitions during the pandemic.
Final Thoughts
While AMD and Descartes show promising growth potential, investors should be cautious with stocks like Dye & Durham and Lightspeed, which have demonstrated substantial long-term declines and management issues. A careful approach is warranted when navigating this volatile market landscape.
