MW 10 tech stocks that could rally up to 41% - and make good use of your money

By Laila Maidan

Nvidia is among the tech sector's leaders in return on equity. Other AI players crack the list as well.

Tech stocks entered 2025 in choppy waters after leading the stock market for the past two years, but investors who have conviction in their bets can separate the noise from the data and even use pullbacks to add to their positions.

To find companies that can survive volatility, it's helpful to look for solid business models and management teams that are making the most of investors' money, despite how their stocks move on a day-to-day basis.

One metric that tracks this is a company's return on equity. This measures profitability or net income relative to shareholder equity, which is a metric that captures what shareholders actually own in a company. Readings over 15% often suggest management is delivering a good return on investor money.

We screened S&P 500 SPX companies in the technology sector, as well as those in the communications sector with tech-focused businesses, to find companies with solid ROEs that still have sizable upside potential relative to the average analyst price target. To zero in on quality names, we also looked at stocks for which at least 70% of analysts polled by FactSet have bullish ratings. Below are the 10 with ROEs of at least 20% and upside of at least 20%, based on FactSet average targets for the next 12 months.

   Company                   Ticker  Return on Equity  % Upside to Average Price Target 
   Nvidia Corp.              NVDA    113.46%           40.99% 
   Trimble Inc.              TRMB    29.81%            32.88% 
   Applied Materials, Inc.   AMAT    34.45%            31.52% 
   Western Digital Corp.     WDC     28.45%            29.62% 
   Omnicom Group Inc.        OMC     36.5%             26% 
   NXP Semiconductors NV     NXPI    26.02%            25.80% 
   Motorola Solutions, Inc.  MSI     189.18%           24.12% 
   Arista Networks, Inc.     ANET    31.94%            22.91% 
   Alphabet Inc. Class A     GOOG    34.79%            22.83% 
   Lam Research Corp.        LRCX    53.14%            21.89% 

Many of the names on the list are artificial-intelligence stocks. For example, Nvidia Corp.'s stock has the most upside of those that came out of our screening, and it ranks second by return on equity. Analysts see big potential for the stock, despite concerns over tariffs or a possible cutbacks in artificial-intelligence spending.

As Nvidia's stock has fallen in recent months, the average analyst price target has dropped as well, but not as steeply, so the potential upside has increased substantially. Analysts saw only about 10% upside at the start of November, but now the average target implies room for the stock to rise 41%.

Semiconductor-equipment provider Lam Research Corp. is strategically positioned to benefit from the buildout of AI data centers, with some of its customers being large chipmakers, including Micron Technology Inc. Analysts see ample upside relative to where the stock traded Tuesday afternoon, near $73. The average price target listed on FactSet is $90.

Google's parent company Alphabet Inc. rang in solid first-quarter earnings, showing continued strength in its advertising businesses as it continues to build out and lead the cloud storage space, a high-margin businesses. Analysts on average see room for the stock to run another 23% higher.

Shares of Trimble Inc., a software and hardware provider for the geospatial, agriculture and construction sectors, have among the greatest upside potential of the stocks that met the screening criteria. While the stock recently changed hands just south of $64, analysts polled by FactSet believe it should be trading closer to $85 - or about 33% higher.

-Laila Maidan

This content was created by MarketWatch, which is operated by Dow Jones & Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

May 06, 2025 16:15 ET (20:15 GMT)

Copyright (c) 2025 Dow Jones & Company, Inc.