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Technology is a highly lucrative industry, with technology stocks gaining popularity and value due to the impact of personal computing, connectivity, and the Internet on our lives. Out of the ten largest companies traded on U.S. exchanges in terms of market capitalization, eight are technology stocks, making it one of the most lucrative sectors in the world.

Despite worries about the broader economic environment, technology stocks have defied expectations and reached new highs in 2023. The tech-heavy NASDAQ 100 index gained 45% between January and June of this year. One of the companies leading the charge is NVIDIA Corporation (NASDAQ: NVDA), a graphics processing unit (GPU) designer. NVIDIA’s shares have soared more than 300% fueled by strong guidance for its second quarter of fiscal year 2023.

The surge in NVIDIA’s shares is part of the overall hype surrounding artificial intelligence (AI). AI technologies leverage high-powered computing systems to generate insights into new data. The adoption of AI has been explosive, with top-level executives from various industries utilizing AI technologies. The technology and telecommunications and financial services industries are the top users of AI, and marketing and product development professionals are the highest users in terms of business roles.

In terms of valuation, one way to assess a stock is through the price-to-earnings (P/E) ratio. Stocks with a P/E ratio below the industry average may be considered undervalued and have the potential for future appreciation. On the other hand, a high P/E ratio can indicate that the price might come down in the future.

Hedge funds are buying undervalued technology stocks, with Avnet, Inc. (NASDAQ: AVT), Gen Digital Inc. (NASDAQ: GEN), and Concentrix Corporation (NASDAQ: CNXC) being among the top picks. These stocks have a P/E ratio of less than 15 and have been purchased by a significant number of hedge funds.

One iconic technology company on the list is Nokia Oyj (NYSE: NOK), known for popularizing cellphones before the smartphone era. The company is currently buying back its own shares and aims to be the first broadband equipment vendor eligible for the Biden Administration’s Buy in America program.

Overall, technology stocks continue to be undervalued and present opportunities for investors, especially those favored by hedge funds.

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