Two noteworthy tech shares to consider purchasing in January
Tech companies have been thriving lately, with key drivers like strong cloud infrastructure and artificial intelligence (AI) spending. Gartner predicts a 9.3% increase in global IT spending for 2025, reaching $5.74 trillion, compared to a 7.2% rise estimated for 2024. Software spending is projected to grow at an even faster pace of 14% in 2025, reaching $1.23 trillion, mainly due to AI-focused projects.
The hardware sector is also poised for growth, thanks to investments in AI servers and devices. Data center spending is projected to surge by 15.5% in 2025, while device spending could accelerate to 9.5% from 6.2% in 2024. Two tech stocks that seem like strong buys this year are Taiwan Semiconductor Manufacturing (TSM) and Datadog (DDOG).
1. Taiwan Semiconductor Manufacturing
Known as TSMC, this foundry giant enjoyed a great 2024 with a 34% revenue increase. The company's fourth-quarter revenue grew by 39% YoY, outperforming analyst expectations. With growing IT hardware spending on cloud infrastructure and devices, as well as smartphones and personal computers (PCs), 2025 could be another impressive year for TSMC.
TSMC manufactures chips for various applications, including CPUs, smartphone chips, and data center segments. Top clients such as AMD, Qualcomm, Nvidia, Broadcom, Micron Technology, and Marvell Technology expect strong growth in 2025. TSMC is enhancing its manufacturing capacity to meet these rising demands and plans to build 10 new facilities worldwide in 2025. This expansion could lead to a 26% revenue increase and a 29% earnings jump for TSMC in 2025, potentially boosting its stock price by 41% to $294.
2. Datadog
Datadog provides cloud observability and monitoring solutions, assisting customers in tracking the performance of their applications and infrastructure. With the forecasted 21.5% increase in public cloud spending by end-users in 2025, this sector's growth should provide a significant boost to Datadog.
Datadog ended Q3 2024 with over 29,000 customers, an almost 9% year-over-year growth, with the number of high-spending customers also rising. The company anticipates a 10% CAGR growth in total addressable opportunities in the cloud observability market, up to $51 billion by 2027. Strong customer spending, increasing product usage, and the potential impact of AI on cloud adoption all suggest robust top- and bottom-line growth for Datadog in 2025 and beyond.
Given the projected growth in IT and software spending, particularly in cloud infrastructure and AI-focused projects, investing in technology companies like Taiwan Semiconductor Manufacturing (TSM) and Datadog could yield substantial returns. TSMC, with its strong client portfolio and planned expansions, is projected to see a 29% earnings jump in 2025, driven by rising demands for chips in various applications, including data centers.
With the forecasted surge in public cloud spending, Datadog, offering cloud observability and monitoring solutions, is poised to benefit significantly. The company's customer base and product usage are expected to grow, reflecting its potential for strong top- and bottom-line growth in 2025 and beyond, driven partly by AI integration in cloud adoption. In essence, these tech stocks present promising investment opportunities in the finance sector, where money can be invested for potential gains.
