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Tech Stocks: The Best Ones to Buy in January

Tech investors have plenty to ponder as they head into 2022. Here's three investing ideas with strong upside potential.

Tech investors have plenty to ponder as they head into 2022.

Will tech stocks be able to rally in a “risk-off” tape? And are megacaps like Apple  (AAPL) - Get Apple Inc. Report and Microsoft  (MSFT) - Get Microsoft Corporation Report masking significant weakness beneath the surface of the indexes?

The Federal Reserve has set the stage for a fascinating period for financial markets, with the majority of Fed policymakers expecting three interest rate hikes this year. 

This policy pivot will hurt sentiment for certain stocks, as rate changes typically tamp down high-growth sectors, notably tech.

With that said, plenty of tech stocks will undoubtedly play a big role in portfolios over the next year. Both large and small investors tend to put new money to work in January, which means we should see some nice moves this month.

Let’s take a look at some of the best tech stocks to buy in January.

Micron Technology

Semiconductor stocks were some of 2021's biggest winners, and that makes finding quality names that are also undervalued quite difficult.

Difficult, but not impossible.

Micron Technology  (MU) - Get Micron Technology, Inc. Report stands out as a tech stock to consider buying in January thanks to pure momentum, an affordable valuation relative to peers, and plenty of long-term demand for its products.

The Boise, Idaho, company is a global supplier of DRAM, NOR and NAND memory solutions, which are used in an array of electronic devices like personal computers, mobile phones, network servers and more.

When you look at how quickly smartphones are advancing in functionality and applications, it’s easy to understand why Micron is a buy.

The company provides the dynamic random-access memory solutions that power smartphones and enable them to handle data-intensive activity.

The demand for these memory solutions is showing up in Micron’s earnings results.

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For the fiscal 2022 first quarter, Micron reported revenue grew by a third from a year earlier, to $7.7 billion, driven largely by DRAM revenue of $5.6 billion, up 38% year-over-year.

While the company recently warned that a Covid-19 lockdown in the city of Xi'an, China, could delay the supply of DRAM memory chips in the short term, investors should view any weakness in the stock as a buy-the-dip opportunity.

Alphabet 

This megacap tech stock  (GOOGL) - Get Alphabet Inc. Class A Report had a fantastic 2021, and investors have plenty of reasons to expect an encore from the Google parent in 2022.

Consider the Mountain View, Calif., company’s dominance in internet advertising, its growth potential in cloud computing, and its exposure to intriguing long-term technological advances like autonomous vehicles, artificial intelligence, and drone delivery.

It’s also worth noting that Alphabet's valuation is attractive relative to megacap peers. Its forward price-to-earnings multiple of 27 is significantly lower than that of Amazon  (AMZN) - Get Amazon.com, Inc. Report and Microsoft  (MSFT) - Get Microsoft Corporation Report.

Advertising revenue for the company was up 43% year-over-year in Q3 to $53.1 billion. That's an area of the business that has a lot of momentum heading into the new year, especially for investors who think that the economy will continue to recover from the pandemic.

What’s also exciting here is the company's opportunities to monetize its YouTube streaming-video platform, especially considering the rise of connected-TV advertising.

The bottom line here is that Alphabet is a best-in-breed tech stock that has been consolidating beneath the $3,000-a-share level for a few months. It could be poised for a very strong January if it can break above that key level.

PayPal 

According to a recent study by McKinsey, more than four in five Americans used some form of digital payment in 2021.

This statistic is a big reason to consider adding shares of PayPal  (PYPL) - Get PayPal Holdings, Inc. Report in January -- especially considering how far the stock has fallen from its 52-week highs.

PayPal’s innovative payment solutions, including PayPal, PayPal Credit, Xoom, Venmo, and more help facilitate electronic transactions worldwide. And the industry still has plenty of room to grow, particularly in international markets.

Investors are likely overlooking the San Jose, Calif., company’s recent report that it will partner with e-commerce giant Amazon to enable customers to pay with Venmo at checkout. That could offer a payment-volume boost in 2022 and beyond.

Speaking of payment volume, PayPal's Q3 figure grew 26% year-over-year to $310 billion.

PayPal holders have taken a beating over the past several months, but the stock looks to have bottomed. It could be a big beneficiary of the January Effect as some investors rotate out of winners and into areas of the market that offer better upside.