Which Tech Stock Is Wall Street’s Best Pick Right Now?

Tech stocks, especially those trading at high valuations, have plunged significantly this year amid a challenging macro environment. Recent remarks by Federal Reserve Chair Jerome Powell about slowing down the pace of rate hikes provided some relief to investors. However, Powell cautioned that the monetary policy could stay restrictive until there are signs of inflation coming under control.

Tech stocks and the broader stock market might continue to be volatile due to macro uncertainty, Russia’s invasion of Ukraine, trade tensions between the U.S. and China, and demand concerns due to the Covid-19 resurgence in China. However, the dip in some tech stocks provides an opportunity to buy them at attractive valuation levels.

Bearing that in mind, I used TipRanks’ Stock Comparison Tool to pit the following prominent tech companies against each other and select the stock that Wall Street finds most promising at current levels.

Amazon (AMZN)

E-commerce giant Amazon’s (NASDAQ:AMZN) sales growth rate improved to nearly 15% in the third quarter from 7.2% in the second quarter. Also, the company generated market-beating earnings per share of 28 cents in Q3 after reporting losses in the first two quarters. The profitability of the Amazon Web Services (AWS) division helped offset the weakness in the retail business.

Nonetheless, investors were spooked by the company’s outlook for the crucial holiday quarter. Amazon expects sales growth in the range of 2% to 8%, reflecting the impact of macro challenges and inflation.

The company is streamlining its operations by reducing costs through various actions, including layoffs. It is lowering its capital expenditure in fulfillment and transportation networks following aggressive investments made during the pandemic to support robust demand.

Nonetheless, Amazon continues to invest in growth areas, especially AWS. The company expects its technology infrastructure expenditure to increase by $10 billion this year to support the continued expansion of its AWS business. Aside from AWS, Amazon’s advertising business also looks promising, though it currently accounts for a small proportion of the overall revenue. In Q3, advertising revenue grew 25% to $9.5 billion.

For JPMorgan analyst Doug Anmuth, Amazon is one of the best picks for 2023. He expects the company to benefit from the continued transition toward cloud and e-commerce. Anmuth stated, “Amazon is the most diversified mega-cap across revenues and profit and has numerous large growth opportunities.” Anmuth has a “buy” rating on AMZN stock and a price target of $145.

Overall, Wall Street has a “strong buy” consensus rating for Amazon stock based on 33 buys and two holds. The average AMZN stock price target of $140.50 suggests 57% upside potential.

Apple (AAPL)

Apple’s (NASDAQ:AAPL) results for the fourth quarter of fiscal 2022 (ended Sept. 24, 2022) reflected strong execution despite a challenging operating environment. Apple’s revenue grew 8% year-over-year to $90.1 billion, while EPS was up 4% to $1.29. Except for iPad, the company reported higher sales across all its key products and the Services division.

Nonetheless, investors are concerned about the slowdown across key revenue sources, like iPhone and services. Apple cautioned investors that it expects revenue growth to decelerate in the December quarter compared to the September quarter.

The December quarter is anticipated to be hit by currency headwinds, macro challenges and a significant decline in Mac sales. This is largely due to tough comparisons with the prior-year quarter, which benefited from the launch of the newly redesigned MacBook Pro with M1 chips.

Furthermore, the worker unrest and Covid-led disruption at the Zhengzhou, China plant of Foxconn, Apple’s largest iPhone supplier, is also expected to be a major headwind for the December quarter.

Piper Sandler analyst Harsh Kumar lowered his December quarter’s revenue estimate to $119 billion from $127.3 billion on the assumption that Foxconn shipped about 9 million fewer iPhone 14 units due to the protests at the Zhengzhou plant. Nonetheless, Kumar remains bullish about Apple, calling it a “formidable” brand.

All in all, the “strong buy” consensus rating for Apple stock is backed by 23 buys and four holds. At $180.10, the average AAPL price target suggests 26.9% upside potential.

Advanced Micro Devices (AMD)

Advanced Micro Devices (NASDAQ:AMD) and other semiconductor companies are under pressure due to weakness in key end markets, mainly the personal computers (PC) market, following a strong run due to pandemic-induced demand. Despite the distressed PC market, AMD’s Q3 revenue increased 29% to $5.6 billion, fueled by strength in the Data Center, Embedded and Gaming segments.

AMD expects its fourth-quarter revenue to increase by nearly 14%, driven by growth in the Embedded and Data Center segments. The robust demand for the company’s EPYC server processors is expected to drive the growth of the Data Center segment. Additionally, the launch of the fourth-generation EPYC processors (code-named Genoa) is anticipated to boost revenues.

Meanwhile, the Embedded segment is benefiting from the Xilinx acquisition and is expected to capture growth opportunities in the automotive, networking, communications, aerospace and defense markets.

Recently, Baird analyst Tristan Gerra upgraded AMD stock from “hold” to “buy” and raised the price target to $100 from $65. The analyst noted that supply-chain checks indicate solid reception of AMD’s Genoa (5nm Zen 4) chips at data center original equipment manufacturers.

Gerra added, “Genoa’s very significant performance step up should translate into an acceleration in market share gains for AMD in 2023, along with significantly higher pricing and a higher gross margin profile, reinforcing AMD’s EPYC performance leadership for years to come.”

The Street’s “moderate buy” consensus rating for AMD is based on 20 buys and seven holds. The average AMD price target of $84.30 implies 20.86% upside potential.

To conclude, near-term challenges could continue to be a drag on all of these tech stocks. Nonetheless, Wall Street analysts remain highly optimistic about the long-term prospects of Apple and Amazon. Meanwhile, they are cautiously optimistic about AMD due to the slump in demand in the PC and gaming markets. Analysts see the steep pullback in Amazon as a good opportunity to build a position.

On the date of publication, Sirisha Bhogaraju did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.