Since early October, the stock market has been a scary place. And the technology sector in particular has struggled greatly.
Tech stocks have soared in the past few years on the promise of continual growth, but interest rates rising and trade disputes getting more heated has been bad news for the sector and continued growth has become anything but a sure thing.
And thus, tech stocks have seemed to be falling off a cliff with some of the biggest names already in bear market territory.
However, there are a few stocks that haven’t followed suit and have climbed higher despite the broader weakness in the sector.
Below are three such stocks.
Microsoft (NASDAQ: MSFT)
Microsoft (NASDAQ: MSFT) may be down -8% since the beginning of October—and down roughly -8% from its all-time highs—but unlike some of its mega-cap tech counterparts, MSFT is not in correction territory.
In fact, the stock is already on its way back up, gaining nearly 7% in the last week and is now worth nearly as much as a struggling Apple (NASDAQ: AAPL), and is running neck-and-neck with the iPhone maker for the title of the world’s most valuable company.
So why has MSFT been so resilient when the FAANG stocks are all in a serious correction or very nearly there? To put it simply, Microsoft just isn’t really up against the same headwinds dragging down other giant tech stocks. Tariffs aren’t tugging at the company’s margins, regulations aren’t threatening its growth in the digital advertising arena, higher interest rates aren’t weighing on its valuation, and the crypto bubble bursting didn’t hammer this stock. The list could go on.
But the even better news for Microsoft is that the things that are still keeping tech stocks somewhat afloat, i.e. massive growth in the AI and data markets, are things that the company is majorly involved in and will be for the foreseeable future. So as long as the company’s cloud business and AI innovations remain strong and the demand in these two areas remains robust, Microsoft is likely to continue weathering the storm the broader tech sector is experiencing.
Tesla (NASDAQ: TSLA)
This has been a rough year for Tesla (NASDAQ: TSLA). The advanced tech carmaker has faced several scandals in 2018, but we didn’t really know the depths of its peril until Elon Musk opened up in an interview with Axios saying the car maker had been “within single digit weeks” of collapsing during the difficult ramp-up of the production its mass market Model 3 sedan.
But the company is now up roughly 10% since October 1 while the broader market has been flailing as the company’s growth fundamentals have improved.
In its last quarter, the company reported that it had finally and successfully accelerated its Model 3 production to record levels, producing enough of the vehicles to meet demand. Tesla also reported something it hadn’t achieved in several years… a profit. Gross margins are moving higher as production ramps-up, and profitability looks to be here to stay.
That’s huge for the company and marks a new chapter for Tesla as it means the company is no longer one that struggles with meeting production targets and bringing in profits. As Tesla continues to improve its production levels and profitability, we will continue to see the stock climb higher no matter what the rest of the market is doing.
Intel (NASDAQ: INTC)
Intel (NASDAQ: INTC) is another blue-chip that’s up while everyone else is down. The stock is up nearly 3% since the beginning of October.
So why is Intel rising while its peers flounder? Valuation certainly has something to do with it. Both AMD and Nvidia were trading at lofty valuations, with AMD trading at roughly 70X forward earnings and Nvidia trading at 40X forward earnings. Comparatively, Intel was trading at 10X forward earnings. So as investors have grown weary of stocks with sky-high valuations, stocks like Intel, with reasonable valuations, have fared far better.
The other thing dragging down Nvidia and AMD that isn’t impacting Intel are the chipmakers’ exposure to the cryptocurrency mining market. As cryptocurrencies have lagged, the mining market has shrunk to nothing, which has helped cause AMD and NVDA to drop as growth decelerates. But Intel was never as exposed to this market and its growth trajectory has recently improved.
Much like Microsoft, Intel is benefiting from tailwinds from the growing data center market, and isn’t being greatly impacted by tariffs and interest rate hikes. And as long as data center demand remains strong, Intel should continue to climb.