But since then, many top tech stocks have plummeted. In 2022, shares of Meta, Amazon, Google, and Apple are down 41%, 33%, 20%, and 19% respectively. And some analysts are already calling this the next big dotcom crash. 

However, I think this viewpoint is reactionary and shortsighted. The tech market has changed dramatically since the last big crashes in 2000 and 2008. Most major tech companies are mature businesses now, with huge order books and stable revenue streams. And there are several blue-chip tech stocks that present incredible value for my long-term portfolio. Here I look at two companies on my watchlist to invest £1,000 in the coming months. 

Semiconductor supergiant 

Intel Corporation (NASDAQ: INTC) is the world’s largest manufacturer of semiconductor chips. And since 2020, a huge semiconductor shortage has crippled production in over 150 industries across the world. A confluence of macroeconomic factors has hit the industry hard and companies are struggling to meet growing demand.

And I think the tech crash, coupled with processor demand, make Intel a very attractive value investment right now. At US$43 per share, the company is trading at a price-to-earnings (P/E) ratio of 7.2 times with a 3.3% dividend yield.

Over the last decade, Intel has lost out to companies like AMD. But the company might be making a huge comeback. Intel’s latest generation of processors looks excellent. Its 12th gen series has managed to beat competitors in most benchmarking and performance tests.

This has increased Intel’s demand in the market and this is expected to be reflected in this year’s earnings. First-quarter 2022 revenue at $18.4bn exceeded January estimates. And the company is already ramping up production efforts to meet the demand.

With warnings of a recession and increasing inflation, personal computer upgrades and sales could drop. And this is a huge concern for the tech sector right now. But, Intel is an industry leader and looks like one of the best value tech stocks for my portfolio right now. 

Blue-chip UK tech stock 

Avast (LSE:AVST) is one of the largest tech stocks in the UK and is part of the booming cybersecurity industry in the country. The company is one of the most recognised free antivirus programs in the market today. Avast has a huge user base and brand visibility and is branching off into interesting areas right now.

The cybersecurity firm works on a profitable freemium business model. Its new Avast One app includes a firewall for mobile security, a virtual private network (VPN), and protection against crypto hacking attacks.

Avast’s £6bn deal with Norton is an area of concern for me. After the UK-based company accepted the bid, the government put it on hold for six months now citing “competition concerns“. This caused the tech stock to fall sharply and the future of this deal is still uncertain. 

But this also means I can snap up an exciting company at an attractive price. I would consider this tech stock for my portfolio if it falls below 400p. As it is an industry leader offering an increasingly important product, Avast shares look like a great bargain option. 

A Warren Buffett favourite

The first tech stock I’m considering buying is Activision Blizzard (NASDAQ:ATVI). In its own words, its creates “the most epic interactive gaming and entertainment experiences on earth, immersing players in new, unimagined worlds.” The share price is down 17% over the past year.

The business model has been working well in recent years, with the company in the process of being bought out by Microsoft. The deal still needs to go through lengthy regulatory approval, so I’m not buying the stock based on this.

Another investor also sees the appeal in buying this top tech stock, none other than Warren Buffett. The legendary investor revealed recently that via Berkshire Hathaway, he now owns 9.5% of the firm’s shares.

As a risk, Activision Blizzard has suffered reputational damages recently due to alleged cases of sexual discrimination and harassment. I’ll watch closely to see how this unfolds.

A long-time top tech stock

Another top tech stock that I like the look of is Intel (NASDAQ:INTC). The share price is down 24% over the past year, having a particularly bad time last week following disappointing results.

First-quarter revenue was down 7% year-on-year, with the forecast for the rest of the year being somewhat underwhelming. I understand this is a risk, with semiconductor chip shortages being compounded by supply chain issues. The lockdowns in Asia are also hindering production for the tech stock.

However, I’m bullish on the company in the long term. Production issues should ease later this year when lockdown restrictions end. Further, Intel has a well-diversified business with revenue coming from AI, computing, graphics and other divisions.

It’s also a tech stock that isn’t as high-risk as some other growth players that are still trying to reach mass to make a profit. In Q1 alone, Intel generated net income of $8.1bn, with a generous operating margin of 23.7%. Therefore, I don’t see it at any immediate risk of slumping to a loss.

The benefits of investing in tech

Even though I like the above US tech stocks, there are other UK-based options that I also find attractive. The great thing about the tech space is that it’s such a broad and fast growing area. As such, there are always new investing options popping up. Unfortunately, I don’t have an unlimited cash pool to invest in everything!

There’s a great piece that goes into detail on some top UK tech stocks, which can be read here. Some share options include Avast, Darktrace, and Ocado Group.

Background

Nvidia is the leading designer of graphics processing units (GPUs). Its primary markets are gaming computers, data centres, and car entertainment systems. The company’s dominant position in markets that are growing rapidly has pushed revenues and profits higher. As a result, the Nvidia share price has gone the same way.

Intel, by contrast, has been having a difficult time lately. Despite having a bigger research and development budget, the business has struggled to innovate. As a result, it has fallen behind its rival Advanced Micro Devices in terms of design capacity. This has led to the company losing market share and the Intel share price has struggled accordingly.

The technological gap to AMD is reportedly huge. So in order to try and right the ship, Intel CEO Pat Gelsinger is attempting to pivot the company towards manufacturing. The shift is a risky one, involving substantial capital investment. But it’s the centrepiece of the Intel plan to stay relevant in the semiconductor boom.

Nvidia and Intel

The idea that Nvidia might be open to using Intel’s manufacturing facilities (known as foundries) is significant for both companies. For Nvidia, having Intel produce its chips would allow it to diversify its manufacturing base. Adding Intel to its foundry list would decrease its reliance on Taiwan Semiconductor Manufacturing and would also give it the capacity to manufacture chips in the US.

For Intel, the news that Nvidia might be willing to use their facilities goes some way towards justifying the company’s move to investing huge amounts in manufacturing facilities. Intel is involved in designing chips as well as manufacturing. An immediate concern is whether rival chip designers would be willing to use Intel’s facilities for fear of giving away their trade secrets. Yesterday’s announcement goes some way towards assuaging these concerns.

Conclusion

For me, investing in either stock involves too much risk. I think that the Nvidia share price is very high at the moment. While I view the company as impressive, I’m not convinced that it can grow its earnings fast enough to justify an investment at these levels. With Intel, the opposite is true. The Intel share price seems low. But the issue there is that I’m not sure that the company can grow its earnings at all. Intel has a lot of capital expenditure ahead of it and the question of whether or not it will pay off seems uncertain to me. As a result, I’d prefer to take a much lower-risk strategy in buying into semiconductor stocks. 

Autonomous driving is an exciting sector, so it’s understandable why the Intel share price rose on the news. It does suggest that Mobileye was being undervalued by the market before the announcement of the planned initial public offering (IPO). Indeed, Intel stock has slumbered recently. Rival US companies AMD and Nvidia are both up in double-digits over one year, compared to less than +4% for Intel.

Does this mark a turning point for the Intel share price? Let’s take a look.

The business

Intel is best known for designing and manufacturing CPUs (central processing units). In fact, it’s a co-founder, Gordon Moore, whose now-famous law ‘Moore’s Law’ has driven the development of the computer chip industry for decades.

Today, Intel generates the majority of its revenue from selling advanced CPUs into the personal computing market. It also sells chips to the expanding data centre sector.

The IPO

The Intel share price was up over 6% at one point on Tuesday when the IPO for Mobileye was revealed. Apple recently announced plans to launch its own autonomous vehicle, so there’s a lot of interest in the sector.

I think Mobileye is potentially a better way to gain exposure to the expanding driverless car market in my portfolio. The company says over 40m cars have Mobileye technology already installed.

Intel said it will retain a majority stake in the business after the IPO, and use some of the proceeds it raises from selling Mobileye to build more manufacturing plants. This should really help its cash flow, and potentially lead to share buybacks.

I also view the share price rally as the market beginning to realise the value of Mobileye. As mentioned, Intel stock has stayed in single-digits this year as rival companies’ share prices have soared. It’s one of the cheapest stocks in the S&P 500 right now, on a forward price-to-earnings ratio of 10.

Is Intel stock a buy?

I’ve always viewed Intel as a quality company. It achieves operating margins of 30%+ and double-digit returns on its capital, two characteristics I look for when buying shares.

But the issue has been its poor growth, or complete lack of it. For example, revenue for this year is expected to decline by over 5%, and to stay approximately flat in 2022.

For additional context, Intel’s revenue forecast for this year is $74bn. This is almost three times Nvidia’s revenue forecast of $27bn. However, at time of writing, Intel’s market value is almost $214bn, and Nvidia’s is $810bn. Nvidia’s much higher forecast growth rates mean its market value is far higher than Intel’s. 

Intel has, therefore, struggled to grow in its core CPU market. This is a key risk to the business.

The IPO of Mobileye is a positive development, though. I’ll be taking a deeper look at this when it lists. But for now, Intel is staying on my watchlist until its growth rate improves.

The semiconductor shortage

One of the biggest global trade problems right now is the global semiconductor (chip) shortage. Initially this was caused by the rapidly increased demand for computer hardware to aid remote workers throughout the pandemic. And the homeworking transformation seems here to stay. But the shortage is now causing car plants worldwide to slow production. The problem is acute as electric cars are the fastest growing sector in the market, and they require double the chips of a standard carbon-fuelled car. There’s shortages of virtually every electronic device, from mobile phones to PlayStation 5’s. The demand for chips is higher than its ever been. And the industry hasn’t been able to keep up with the increased demand.

Why is this important for the Intel share price?

Intel is the largest semiconductor manufacturer in the world by revenue. It’s also the developer of the x86 series of microprocessors which are found in almost all personal computers. At first glance, I’d have thought that the heightened demand for chips would have sent its sales and share price soaring. However, I think the Intel share price has remained flat as it has only been able to maintain a steady supply in the face of this vastly increased demand. But next year, I suspect its output will rise, and revenues with it. 

On Thursday, the company will release its Q3 results. Its Q2 results reported adjusted earnings per share of $1.28, some 22 cents higher than analyst expectations of $1.06. Revenue increased 2% year-over-year to $18.5bn. However, competition from Advanced Micro Devices has put a dent in its performance this quarter. It expects an adjusted gross margin in Q3 of 55%, far below the 59.2% seen in Q2. Moreover the average selling price of its chips used in laptops fell 17% year over year. While the demand for semiconductors remains high, the competition for sales is also fierce. Its strategy of price reductions to maintain competitivity is suppressing the Intel share price.

A brighter tomorrow

Intel is developing technology to manufacture significantly smaller chips. This will give it a competitive edge as it will be able to fit more chips onto the same sized area, leading to increased efficiency and performance. In fact, these new Intel 4 chips will increase performance per watt by 20%. It’s also confident that it can increase their computing power another 18% by 2023. 

The company is heading into 2023 with a price-to-earnings ratio of just 12. With a new competitive advantage and huge demand for its product, I don’t think the share price is going to stay where it is for much longer. And this constant demand also makes it a good defensive pick for my portfolio in case of a stock market crash. Of course, AMD won’t just be sitting on the sidelines. But I think it’ll be some time before the competition catches up.

Intel on the march

Those individuals warning that ARM’s dominance of the tablet PC and smartphone-component markets may be coming to an end took the high ground last week when US rival Intel Corporation (NASDAQ: INTC) released its latest set of results.

Intels blasted its 2014 shipping target of 40 million tablet processors in 2014 with a total of 46 million, a figure that propelled the firm’s market share from 5% in 2013 to 28% by the third quarter of 2014, broker Liberum Capital noted.

The company’s Mobile division was once again a blight on an otherwise perky financial update, the result of poor product development in recent years. But Intel has since got its act together and plans to launch two major products this year, a situation which could significantly hamper sales growth at ARM — the British company sources around 75% of all revenues from the phone and tablet sectors.

Diversification to deliver delicious returns?

Still, Cambridge-based ARM is responding to mounting competition across its core markets by diversifying into other high-growth tech sectors, and is chucking vast sums into developing its presence in the networking and servers markets.

Indeed, the company’s development of low-power, 64-bit server chips is gathering increased interest from the world’s biggest tech giants. HP announced in September plans to roll out two brand new ARM-based servers as part of its ProLiant range, while Microsoft has been trialling a Windows Server running on ARM’s hardware in recent months, according to reports.

Premium product demand remains worrisome

But such products represent a very small part of the pie for ARM, of course, which remains beset by fears of slowing sales of premium smartphones. With Western demand for top-end devices apparently at saturation point and consumers increasingly opting for lower priced models, royalties projections for the microchip builders are coming under increased scrutiny.

The roaring success of Apple’s iPhone6 in the autumn has gone some way to assuaging fears that shipments of premium phones are poised to fall off a cliff. But with sales of expensive devices at Samsung still falling through the floor, sceptics are on the lookout for more convincing evidence that the market is not in terminal decline.

Payouts set to pound higher

Of course the tech sector is not a natural hunting ground for those seeking gigantic dividends — the capital-sapping nature of developing the next line of gadgets leaves very little cash for companies to reward their shareholders with.

But ARM is a rare exception, and remains committed to delivering spectacular payout expansion in line with earnings. The chipbuilder has raised the annual dividend at a compound annual growth rate of 18.4% during the past five years, and City analysts expect this to head still higher.

For 2014 ARM is anticipated to deliver a 6.5p per share payment, up 14% from the previous years. But dividends are expected to accelerate thereafter in line with earnings, and rewards of 8.4p and 10.4p are pencilled in for 2015 and 2016, up 29% and 24% respectively.

So although yields register at just 0.8% for 2015 and 1.1% in 2016, these figures should stomp higher if ARM can keep the bottom line ticking along.

Intel gathering pace inside key segments

Chip designers like ARM Holdings are having to face up to the reality slowing smartphone and tablet PC growth rates, with product saturation in key Western geographies prompting doubts over the extent of new product uptake in the coming years.

As well as having to contend with this significant demand shrinkage, the Cambridge-based firm is also battling against rising competition in these critical sectors. So reports in recent days that tech rival Intel (NASDAQ: INTC.US) is due to have its technology implanted in Samsung’s newest smartphone, slated for release later this year, will come as a major blow to the company if realised.

According to South Korean newspaper DDaily, the world’s biggest mobile phone manufacturer is set to launch its latest model using Intel’s impressive Moorefield processors, technology which packs impressive memory speeds, exceptional graphics capabilities and blistering application performance even when the battery is running low.

The American microchip manufacturer has long lagged its peers in the mobile device market, but the company’s Silvermont architecture formally announced in May last year appear to have finally launched Intel into the big leagues.

Indeed, these efforts culminated in the unveiling of the company’s Moorefield and Merrifield chips at the Mobile World Congress in February, technology which the firm feels confident will court huge interest from the likes of Samsung, Apple et al.

And Intel underlined its aggressive strategy to take on ARM Holdings and Qualcomm — which has long been Samsung’s go-to parts provider — in their own backyard by offering to sell its hardware at just $7 per chip, marginally above the cost of production.

Back in the tablet market, Intel is also looking to supercharge its exposure to this segment — particularly in the growth hotspot of China — and is seeking to place its components in more than 40 million devices in 2014, up from 10 million last year.

City analysts expect ARM Holdings to post earnings growth of 14% and 22% in 2014 and 2015 correspondingly, readings which result in bloated P/E multiples of 37.4 and 30.6.

These figures shoot considerably above the watermark of 15 which represents reasonable value, and like all entities dealing on lofty readouts, I believe that the business is in jeopardy of a severe price correction should its earnings prospects come under the spotlight.

WASHINGTON, DC — ARM Holdings (LSE: ARM) (NASDAQ: ARMH.US) often sees a good deal of excitement around its smartphone and tablet opportunities, and many talk up the potential of ARM-based servers. But the biggest opportunity for ARM from a unit-growth perspective is the micro-controller/embedded space. This is ARM’s bread and butter, a market that ARM claims has been growing at a 40% compound annual growth rate over the last several years.

At the Intel Developer Forum, Intel (NASDAQ: INTC.US) announced a new product category that it claims is aimed at the so-called “Internet of things.” Cutting through the marketing hype, it is clear that Intel intends to enter the low-cost micro-controller space. While this may seem like a negative for ARM, the underlying end markets are growing so quickly, and ARM so experienced at these types of chips, any long-term threat may be a long way off.

Quark still needs a lot of work

The first iteration of Intel’s Quark chip doesn’t look all that impressive; it’s essentially a port of Intel’s 1989, top-of-the-line i486 PC design in a system-on-chip built on Intel’s 32-nanometer manufacturing process. It’s small, and it is low-power, but reusing an ancient PC chip design is unlikely to yield an optimal solution.

Going forward, Intel will probably do a ground-up redesign in a similar vein to what investors saw the company do with its smartphone/tablet processor cores. While many investors believe that the success or failure of a chip is based solely on the manufacturing technology, a targeted design is necessary in order for a product to be successful on a technical level.

Intel isn’t the only competition

Will Quark eventually be competitive with ARM’s Cortex-M and R series processors? If Intel takes this space seriously, then there is no reason why it couldn’t be. However, while some may think that Intel is the biggest problem for ARM here, a much more pervasive architecture is MIPS. MIPS designs are already used by many players, including Microchip, in the low-power CPU/micro-controller space, so competition for ARM isn’t new here.

Foolish bottom line

While Quark may open new avenues of growth for Intel and introduce further competitive pressures against ARM and its partners, this is much more of a longer-term concern than any near-term worry. Quark isn’t good enough to compete with ARM’s designs in this market today, but with a redesign and a deeper focus on research and development in this space, it could be a longer-term concern if the end market stops growing so quickly.

WASHINGTON, DC — The first eight months of 2013 were a little slow for Apple (NASDAQ: AAPL.US) investors. Thanks to shifting its product cycle in 2012 and concentrating announcements in the fall, Apple went for a much of this year with no product unveilings. Apple kicked off the festivities last month by introducing two new iPhone models, and has now followed up with its iPad event.

Here’s everything Apple had to say today.

In other news

Apple likes to give various updates at the beginning of its presentations. The company said that 64% of devices are already running iOS 7. There are now 20 million users of the new iTunes Radio service, up from 11 million last month. Pandora shares actually spiked on that revelation, so the figure may not have been as high as Pandora investors feared. The cumulative developer payout has now jumped to $13 billion, as iOS app monetisation continues to accelerate.

Taking jabs at Microsoft

Apple took numerous jabs at longtime rival Microsoft (NASDAQ: MSFT.US) during the event. Apple is making OS X Mavericks free for everyone, removing the negligible pricing hurdle that could be holding back possible adopters on the fence. Apple doesn’t really need the extra $20 to $30, and would rather have more users unify in one version. The days of paying upwards of $199 for software upgrades are over, Apple asserted while displaying Windows 8 Pro.

The free software doesn’t end there. Apple is also making iWork on OS X free, following a similar move for the iOS version. Again, Apple took a chance to poke at Microsoft Office 365, which costs $99 per year.

Intel Inside, at last

While other PC vendors have already begun to upgrade to the latest Intel (NASDAQ: INTC.US) Haswell chips, Apple has been a bit slow getting the newest processors into its MacBook Pro lineup. Apple added them in the MacBook Air over the summer, but many have been anxiously awaiting the professional lineup to follow suit. Apple is also aggressively dropping the entry-level price of the 13-inch Retina MacBook Pro to $1,299, while the larger version saw a $200 price drop as well.

MacBook Pro with Retina Display. Source: Apple.

Apple also quietly killed the 15-inch non-Retina MacBook Pro, signaling its intent on consolidating under Retina models eventually. As the costs of Retina display panels come down, Apple hopes to spur adoption by reducing prices.

Without further ado

Of course, the feature presentation of today’s event was the iPad. Apple says it has now sold a cumulative total of 170 million iPads. Through the June quarter, Apple had sold 155.1 million iPads, which implies that it likely sold nearly 15 million iPads in the September quarter that just closed. That would represent no sequential slowdown from the 14.6 million units sold in the June quarter — impressive, considering how widely publicized Apple’s upgrades are.

iPad Air. Source: Apple.

Apple is borrowing its Air branding from the Mac lineup and has now renamed its full-sized tablet the iPad Air. As expected, the device takes design cues from the iPad Mini, and maintains the same pricing strategy as before.

Perhaps more interesting, the use of the “Air” moniker also suggests that Apple is looking to segment the tablet market. We’ve been hearing a lot about a possible 12.9-inch iPad in the works, which could easily become the iPad Pro. That possible device could have considerable interest in the enterprise, especially if Apple released a first-party hardware keyboard accessory.

The iPad 2 lives to fight another day. Originally released in 2011, Apple is still keeping the device around at the $399 price point despite its aging hardware. Localytics just released data suggesting that the iPad 2 remains the most popular model, so keeping it around may still be the right call. That’s especially true if it comprises bulk purchases within educational and enterprise environments where cost matters more than raw performance. For instance, the thousands of iPads that American Airlines has just deployed are all iPad 2 models.

Things get a little more interesting when we turn to the iPad Mini, which did indeed get a Retina display. When the original iPad Mini launched, it had the internals of the iPad 2 stuffed inside a smaller form factor. That meant saving on costs by using older components in order to price the device at $329 while maintaining Apple’s margin profile. This time around, the iPad Mini with Retina display is getting the latest and greatest A7 chip alongside the high-resolution panel.

The net result is that Apple is increasing the price to $399. Displays are always the most expensive component, typically comprising around 40% of the bill of materials, so Apple is passing along this cost increase to the consumer. Google and Amazon have both raised prices of their own tablets, in part because of the shift to high-resolution displays. However, the first-generation iPad Mini is also sticking around, while moving down to $299.

Here’s the new lineup.

Source: Apple.

There have been reports that Apple is facing supply constraints with the iPad Mini with Retina display. These appear to be true, as Apple’s only indication of availability is “coming later in November,” while the iPad Air ships on Nov. 1. There also was no mention of a gold option, which some rumors had suggested.

Also absent was the Touch ID fingerprint sensor in any of the iPads. This makes sense, as yields on these sensors are reportedly low and Apple is still behind on catching up with iPhone 5s demand (Apple currently quotes shipping times of two to three weeks). Allocating scarce supply of these sensors to the highest-margin product available is the right move to make.

Stop me if you’ve heard this one before

iPad unit growth has seemingly decelerated in recent quarters. It’s important to note that the full-sized iPad has been using the same design since early 2011, so some amount of demand stagnation is expected. By giving the larger version a redesign, Apple can reinvigorate demand for its high-end offering.

At $399, the iPad Mini with Retina Display is priced at a considerable premium to comparable devices, and the seemingly low production rates won’t make things any easier. This might sound familiar, but Apple’s biggest challenge over the holiday shopping season will probably be its ability to make enough stuff for everyone.