Could we be seeing a revival in US tech shares? The so-called Magnificent Seven technology shares, which include Meta, Amazon and Alphabet, have been making a comeback after a difficult year. The rising interest rate environment had hit the shares but they are making a recovery thanks to recent strong results. Shares in Meta saw their best-ever one-day increase in the company’s market value on the day of its fourth quarter results in February, adding $197 billion.

However, some US technology shares are performing better than others. While Meta and Amazon shares have risen strongly off the back of financial results, Apple’s have been hit by disappointing sales in China. Indeed, some analysts think we could see the Magnificent Seven shrink to the Magnificent Three or Four.

Here are what we think may be some of the five best tech stocks to watch. These have been selected for recent market news.

Always do your own research. Past performance is not a guide to future performance.

Best tech shares to watch

1. Apple
2. Microsoft
3. Alphabet
4. Amazon
5. IBM

Apple (NSQ: AAPL)

Apple recently missed analysts’ forecasts for fourth quarter sales of its phones in China by $3 billion, which has hit the shares. The company is experiencing competition there from manufacturers of popular foldable phones and Apple doesn’t currently have a competing product.

However, quarterly revenue rose 2% to $119.6 billion compared to the same period last year, while quarterly earnings per diluted share increased by 16% to $2.18. Free cash flow was strong during the quarter at $40 billion and the company returned $27 billion to investors. What’s more, services revenue hit an all-time high, up 11% to $23.12 billion in sales. This includes Apple TV+, music, the App Store and iCloud storage and the App Store. At $188.85 the shares are worth watching. Analysts at broker Goldman Sachs recently set a price target of $232 for the shares, up from $223.

Microsoft (NSQ:MSFT)

These days Microsoft Corporation is perhaps more like a utility company than a pure-play tech firm, albeit it doesn’t pay as fat a dividend. That said, like an increasing number of tech firms, it does at least pay one.
Recent results were strong, with fourth quarter revenue up 18% to $62 billion (16% at constant currency rates), boosted by Microsoft Cloud sales, while net income increased by 33% to $21.9 billion.

The company is reaping the benefits of its investment in artificial intelligence, which is delivering sales. "We’ve moved from talking about AI to applying AI at scale," said Satya Nadella, Microsoft’s chairman and chief executive officer. "By infusing AI across every layer of our tech stack, we’re winning new customers and helping drive new benefits and productivity gains across every sector.”

Meanwhile, Microsoft’s acquisition of Activision Blizzard has also now been finalised. The shares are up 60% this year to $420.55 but are worth keeping an eye on, given the momentum that has returned to the sector and its success in AI. A handful of brokers have recently upgraded their price targets on the shares - analysts at broker Barclays think they could reach $475.

Alphabet (NSQ:GOOGL)

Shares in the owner of Google have seen a resurgence, rising 57% this year to $149. Alphabet is another company benefiting from the buzz from artificial intelligence and the growth in AI-powered search. Fourth quarter revenues increased by 13% to $86 billion, year over year, while net income rose to $20.7 billion (from $13.6 billion last year). However, this wasn’t enough to impress investors who were disappointed by the company missing its ad revenue targets. Sales of $65.52 billion were lower than analysts’ estimates of $65.94 billion.

Analysts at broker Citigroup recently raised their price target on the shares to $168, while those at Rosenblatt think they could reach $172. Although the shares trade on a relatively expensive price earnings ratio of 26, they continue to be worth watching.

Amazon (NSQ:AMZN)

Online retailer and streaming giant Amazon recently unveiled impressive fourth quarter results, beating analysts’ forecasts. Net sales rose by 14% to $170 billion, compared with $149.2 billion in the same period in 2022 – or 13% at constant currency rates. North America sales increased 13% to $105.5 billion, while net income increased to $10.6 billion in the fourth quarter, or $1.00 per diluted share, compared with $0.3 billion, or $0.03 per diluted share, in fourth quarter 2022.

Like many other tech companies, such as Facebook, Amazon has been cutting its cost base, including making redundancies, as it anticipates AI will reduce future running costs. The shares have had a good run recently and are up 78% this year to $174.45, however they are still a little way off their five-year highs of $188. What’s more, a number of brokers have raised their price targets on the shares. Analysts at broker Royal Bank of Canada, for example, have increased their price target on the shares to $215 from $198.

IBM (NSQ:IBM)

IBM may not be the first stock that comes to mind when you think of artificial intelligence, but the tech firm still looks set to benefit from the trend. IBM’s consultancy arm helps clients integrate AI into their businesses. While sales at its legacy mainframe business fell last year, its consulting arm is enjoying decent growth. In the fourth quarter, revenues grew 4% to $17.4 billion, while consulting revenues rose by 6% or 5% at constant currency rates. Sales growth was “driven by continued adoption of [IBM’s] hybrid cloud and AI offerings,” Arvind Krishna, IBM chairman and chief executive officer told investors. “Client demand for AI is accelerating and our book of business or watsonx and generative AI roughly doubled from the third to the fourth quarter,"

The stock trades on a reasonable price earnings ratio of 18 – lower than many of its peers - and also pays a dividend, yielding 3.6%. The shares are up 34% this year to $183 but analysts at broker BMO Capital Markets recently upped their price target on them to $210.

Past performance is not a guide to future returns.

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