Over the past two decades, the technology sector has consistently been a core driver of growth in the U.S. stock market. From hardware innovation to software services, technology companies continue to reshape business models and lifestyles. Given its unique ability to permeate various industries, the tech sector remains a key area of focus for investors seeking excess returns.
After experiencing market fluctuations in recent years, some high-growth stocks that once soared have now entered long-term value territory. Meanwhile, the valuation appeal of many established and stable technology companies continues to stand out. The following three tech stocks, boasting valuation advantages, have the potential to deliver substantial returns over the long term:
2. Applied Materials (NASDAQ:AMAT)
This IT services provider was spun off from IBM at the end of 2021. IBM divested this business to focus on higher-growth segments, and Kyndryl, operating independently since then, is gradually unlocking its inherent value, with underappreciated growth catalysts worth noting. In 2026, the company lowered its sales and free cash flow guidance and delayed its quarterly report due to an accounting review, leading to a significant pullback in its stock price. Currently, Kyndryl trades at a forward price-to-earnings (P/E) ratio of only about 7.5 times. The uncertainties surrounding its accounting review and performance outlook explain this current low valuation. Should these risk factors improve, the stock has strong potential for a robust rebound.
Applied Materials supplies essential equipment for semiconductor manufacturing. Although the chip industry is characterized by cyclical fluctuations, Applied Materials achieves more stable growth thanks to its unique business model: chip factory construction requires multi-year planning cycles, and subsequent maintenance services for the equipment provide a recurring revenue stream. With surging demand from industrial IoT devices, electric vehicles, and AI technology, the company is poised to grow alongside the global chip manufacturing industry. It consistently maintains high operating margins and returns all its free cash flow to shareholders through dividends and share buybacks.
As a tech giant with a significant economic moat, Alphabet, despite posting considerable gains over the past year, still trades at an attractive valuation. Its Google Search business has shaken off the general pressures facing the digital advertising industry, with operating margins climbing back above 30%. The company utilizes profits from its core business to nurture high-growth segments like YouTube and Google Cloud, while also investing in cutting-edge technologies such as Waymo. As of the end of 2025, its cash and short-term investments (net of debt) stood at approximately $80 billion, ranking among the highest of publicly listed companies. Combined with its powerful product portfolio and long-term growth potential, its forward P/E ratio of 23 times offers a sufficient margin of safety.
