Silicon Valley’s Next Unicorns: 3 Tech Disruptors to Buy on Weakness

Stocks to buy

In his book “100 Baggers,” investors Christopher Mayer describes rare stocks that return $100 to shareholders for every $1 of capital invested. These type of multi-bagger stocks, or heavy compounders, are often referred to as “unicorns” on Wall Street because they are so rare. However, investors need only put money into one unicorn stock to have a successful investing career. 

The term “unicorn” also refers to start-up companies that are valued at more than $1 billion before going public. The phrase, commonly used in venture capital circles, again refers to rare companies and stocks. While it may seem that most unicorn stocks are already widely known, particularly among the mega-cap tech names, there are still some recently public companies and lesser-known stocks that have the potential to become 100 baggers. Here are Silicon Valley’s next unicorns: three tech disruptors to buy on weakness. 

Astera Labs (ALAB)

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Astera Labs (NASDAQ:ALAB) only went public on March 20, but the stock is already showing promise. In the month since holding its initial public offering, Astera Labs’ stock is up 14%. The company has avoided seeing its share price rise sharply during the first few days of trading only to experience a big selloff as investors take profits and run. Astera Labs went public at a valuation of $5.50 billion, and it now has a market capitalization of $17.50 billion. 

Beyond the successful IPO, other reasons to like ALAB stock include the fact that the company makes semiconductor-based connectivity products and operates in the AI infrastructure market. Customers of Astera Labs include Nvidia (NASDAQ:NVDA) and Advanced Micro Devices (NASDAQ:AMD) among other notable names. While Astera Labs hasn’t reported earnings as a publicly traded company yet, its finances are moving in the right direction. 

The company recorded a net loss of $26.3 million in 2023, which was an improvement from a loss of $58.3 million in 2022. Revenue is growing quickly, climbing 45% year over year in 2023 to $115.8 million.

Arm Holdings (ARM)

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Another chip stock that recently held its IPO that’s worth consideration is Arm Holdings (NASDAQ:ARM). The company went public last September, and some analysts are already saying that the British microchip and semiconductor company could become the next Nvidia. While comparisons to Nvidia might be premature, there’s no doubting the growth trajectory that ARM stock has been on in recent months. Year to date, the share price has gained 39%. Since its IPO a little more than six months ago, the stock is up 50%. 

ARM stock has been trending upward ever since the company reported its first earnings as a public company. For the fourth quarter of 2023, Arm announced a profit and provided bullish guidance. The company reported earnings per share of 29 cents versus the expected 25 cents. Revenue came in at $824 million compared to forecasts of $761 million. Arm, whose chips are used in nearly every smartphone, said it expects earnings for Q1 of this year of 32 cents and revenue of $900 million. 

The guidance trounced Wall Street forecasts that called for earnings of 21 cents and revenue of $780 million.

Palantir Technologies (PLTR)

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Palantir Technologies (NYSE:PLTR) has been a public company since October 2020, but its stock has only really taken off since last spring, which is when the data analytics company turned profitable. Since May 2023, PLTR stock has increased by 185%. In 2024, the stock is up nearly 30%. Gains have been driven by strong financial results and a growing push into AI. In February of this year, Palantir’s stock jumped 19% higher after the company reported a strong fourth-quarter 2023 earnings print.

For the final three months of last year, Palantir reported EPS of 8 cents, which matched Wall Street forecasts. Revenue totaled $608.4 million, topping expectations for sales of $602.4 million. The company’s sales rose 20% from a year earlier. Management attributed the growth to demand for AI. Palantir has been cascading AI across its products and services even as it grows its number of commercial clients, lessening its reliance on government contracts. 

On the date of publication, Joel Baglole held a long position in NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Joel Baglole has been a business journalist for 20 years. He spent five years as a staff reporter at The Wall Street Journal, and has also written for The Washington Post and Toronto Star newspapers, as well as financial websites such as The Motley Fool and Investopedia.

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