It’s time to buy technology again. Here are 20 stocks.

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One of the brutal truths the stock market confirmed last week is that it’s silly to try to bottom out in tech stocks.of

Nasdaq Composite
A terrible September (down 10.5% compared to September) makes bottom fishing in the summer seem unwise. As I said before, the first drop in technology earlier this year was all about valuations. This new phase of decline is all about softening earnings. When it comes to price/earnings ratios, the market faces a denominator problem.

Market downturns, economic downturns, and some pandemic-era trend reversals have exposed weaknesses in companies’ business models, including:

Peloton Interactive

(Ticker: PTON),

zoom video communication

(ZM),

Shopify

(shop),

Check holdings

(AFRM), and

snap

(SNAP), investors have adjusted their valuations accordingly. But there are still some strong long-term trends that will ultimately lift tech stocks. Investors with a long-term view and a strong stomach may consider entering the market. I have some ideas of where to look.

Start with the cloud. One thing to watch in the upcoming third quarter earnings report is signs of a slowdown in the big three cloud computing services.

Amazon.co.jp

(AMZN),

microsoft

(MSFT), and

alphabet

(Google). All three public cloud services posted strong growth in the June quarter, with little apparent impact from macroeconomic weakness. However, cloud computing services generally operate on a consumption model, and customers in slowing businesses such as video streaming, online retail, and social media may be able to moderate their cloud spending in Q4. There is a nature. If so, I expect a short market freakout. But that would be shortsighted.

Redburn analyst Alex Haissl wrote in a research note last week that by 2022, the three major cloud players will have wasted a third of global information technology spending. And the numbers get even more impressive from here. He estimates that Amazon Web Services, Microsoft Azure, and Google Cloud together will generate about $160 billion in revenue this year. That’s less than 4% of his IT spending of $4.5 trillion, Gartner’s 2022 forecast. But he predicts that by 2030, hyperscalers will account for more than 30% of total IT spending.

All three of these companies have other significant businesses, but over time they will start to look like pure bets on the cloud. Could their stock go down from here? of course. But if you keep them hidden for 2030, the rewards should be plentiful.

There are other ways to take advantage of cloud computing trends. MoffettNathanson analyst Sterling Auty wrote in a recent note that began covering his software sector enterprise that it’s time to start getting back into the group. He reports that the average bear market in software stocks lasted three months, and now he’s ten, making it “the longest software bear market on record.” In his view, demand is likely to remain strong as companies continue their “digital transformation,” especially as tight labor markets push up wages and heighten the urgency to boost productivity. is said to be high.

Auty acknowledges that estimates and guidance may gradually decline over the next few quarters, but believes valuations are down enough to make software stocks interesting. “I’m not saying we can pinpoint the bottom or the top of software, but our experience over the years is that when things are far from ‘typical’, it’s best to start moving in the opposite direction. I understand,” he wrote. “We are not suggesting that the macro environment will suddenly turn around.In fact, the headwinds are likely to continue and could affect estimates for several more quarters, but sentiment is already priced into stocks. We believe that the software sector will start to see higher growth compared to other sectors and the performance of the software sector will improve.”

Auty set Outperform ratings across numerous software stocks.

cloud strike

(CRWD),

data dog

(DDOG),

intuition

(INTU),

reincarnation

(IOT),

cloudflare

(Net),

ring central

(RNG),

smart seat

(SMRT),

snowflake

(snow), and

Zuscaler

(ZS).

He’s not the only one on Wall Street who thinks it’s time to take a bite. Portfolio of Goldman Sachs Sung Cho, his manager and help run his two technology funds at the company, recently announced that his fund is growing more than 20% a year in a handful of his SaaS (services as a service). Software) said it has acquired a stake in the company. appraisals have fallen significantly. Here are his fund recommendations:

Atlassian

(team),

Palo Alto Networks

(PANW),

hubspot

(hub), and

snowflake

(snow).

Cho also believes strongly in another long-term trend: the growing importance of the auto industry to the semiconductor sector. Mr. Cho has avoided chip stocks with exposure to PCs and other consumer markets, but has built positions in various semiconductor companies, including auto companies.

ON Semiconductor

(ON) – his favorite – but also

NXP Semiconductors

(NXPI),

Infineon

(IFNNY),

wolf speed

(WOLF), and

ST Microelectronics

(STM).

“We own all the automotive-related chip names,” he says. “The demand is exploding.” Chips play a big role not only in electric vehicles and self-driving cars, but also in digital cockpit displays and connecting cars to the web. Have these stocks bottomed out? I have no idea. Will it be higher in 10 years? I’m sure they will.

write destination Eric J. Savitz eric.savitz@barrons.com