There’s no doubt that the stock market has been crazier than usual lately. In 2021, investors have become accustomed to stocks like GameStop and AMC jumping 20-30% in a day. But recently, even billion-dollar tech companies are moving like this. For example, Meta Platforms fell 20% after reporting Q4 2021 earnings. On the other hand, Snap Inc jumped 60% after reporting earnings. As a general rule, massive information technology stocks like Meta are supposed to be relatively safe. Due to their immense size, their stock prices should not be so volatile. At this point, investors should start to wonder if information technology stocks are still considered safe.
Information technology is defined as anything businesses use computers for. This includes building communication networks, storing data, sharing information, etc. As you can imagine, this definition casts a pretty wide net. And just about any company that deals with technology can be considered an information technology stock.
You are probably already familiar with the three IT stocks listed below. There isn’t much new information about these companies that investors didn’t already know. Instead, I’m going to take a deeper dive into each stock. In doing so, I’ll break down exactly what makes these companies so reliable. The dominance of each company is mainly linked to its economic gap. A company’s “moat” is its unique competitive advantage. These advantages prevent other companies from copying it. For example:
- Walmart’s gap is its ability to offer the lowest price.
- Nike’s moat is the strength/popularity of its Swoosh brand.
- Disney’s moat is its huge portfolio of intellectual property.
These three information technology stocks below have some of the widest moats in the world.
Information technology stocks to buy
#3 Microsoft (Nasdaq: MSFT)
Microsoft’s fluke lies in the strength of its Office brand. It also has a strong cloud computing division. In fact, Microsoft has a few different moats. This is mainly due to its product portfolio. Microsoft divides its business into three divisions:
- Productivity and business process
- smart cloud
- personal computing
There are so many products to discuss that it’s easier to break down the highlights. Here are some key takeaways from Microsoft’s business:
- Its cloud computing division, Azure, is the second largest in the industry.
- He now owns Activision Blizzard, LinkedIn and Xbox.
- Its hardware and software divisions lead their respective industries.
- He is constantly releasing new products. So much so that he needs a separate 13-page document to account for it.
It’s a safe bet that 99% of people reading this have used Microsoft Office (or Office 365) before. For years, its office suite was completely dominant. In fact, Word, PowerPoint and Excel were basically synonymous with personal computers. To date, Microsoft still holds 75% of the desktop OS market. He extended this Office suite to Office 365. Now he can scale his solutions up or down. In recent years, Google has become a major competitor. Other than that, Microsoft Office is what makes Microsoft one of the top three IT safe havens.
More recently, Microsoft expanded its business by creating Azure. Azure is the cloud computing division of Microsoft. It currently holds around 21% of the market share. This puts it only behind Amazon Web Services. Azure is a major revenue generator for Microsoft. This turnover allows it to develop in new markets. A few new markets include AR, VR, games, metaverse and more.
Microsoft’s main competitors are also safe havens in information technology.
Amazon No. 2 (Nasdaq: AMZN)
Amazon’s moat comes from its distribution network. This distribution network is the result of more than 15 years of intense customer focus. It all started with Amazon Prime. This is Amazon’s membership network. Prime was Jeff Bezo’s idea to put his best customers first. In exchange for an annual fee, Prime promises free 2-day shipping (among other perks). The program currently has around 200 million members. Amazon Prime creates intense customer loyalty. This isolates Amazon and is what makes it one of the best information technology stocks.
To deliver on its “free 2-day delivery” promise, Amazon operates 175 fulfillment centers around the world. These centers are run with the help of around 200,000 robots. Besides being one of the best IT stocks, Amazon is also one of the safest warehouse stocks. For another company to be competitive, it would have to buy and operate its own centers.
In the long run, Amazon wants to deliver products to you, not just an address. Amazon perfectly masters the business of logistics. In fact, it probably does a better job than a company whose entire business is logistics. The fact is, Amazon is much more than a logistics company.
In addition to its distribution network, Amazon owns Amazon Web Services (AWS). AWS is the cloud computing arm of Amazon. It currently holds around 41.5% of the cloud computing market. AWS is Amazon’s for-profit pup and earned around $71 billion in 2021. It’s used by organizations of all shapes and sizes. To name a few: the CIA, AirBNB, J&J, Netflix, Facebook, Kellogg’s, Shell and many more.
AWS alone is more successful than most companies will ever be. In addition to this, Amazon has also created the most extensive distribution network in history. This is why many investors believe in never betting against Amazon.
Alphabet #1 Information Technology Stock (Nasdaq:GOOGL)
The Google gap is the fact that you probably used Google to find InvestmentU. Google’s core business is search. Since the 1990s he has built this business by cataloging the World Wide Web. Today, Google controls approximately 91% of searches worldwide. No other company really comes close to competing with Google. In fact, the second largest search engine in the world is YouTube. YouTube is owned by Google.
Jeff Bezo summed up Google’s dominance quite succinctly in The Everything Store. He said, “Treat Google like a mountain. You can climb the mountain, but you cannot move it.
Google has such a head start when it comes to organizing the world’s data. At this point, it’s honestly hard to imagine any other company catching up. That is, of course, unless Congress intervenes. At this point, Google is investing millions of dollars a year in artificial intelligence. This AI allows Google to perform faster, more relevant searches with greater accuracy. Honestly, Google probably has the biggest moat of any company in the world. This makes it one of the best safe-haven information technology stocks for your portfolio.
Google’s business sectors are divided into:
- Google Services: This includes Ads, Android, Chrome, Hardware, Google Maps, Google Play, Search, and YouTube.
- Google Cloud: This includes infrastructure and platform services, collaboration tools and other services for enterprise customers.
- Other bets: It is the combination of all the other operating segments of Google.
Most of Google’s revenue comes from its Google services division. These are mainly advertisements, in-app purchases and app sales. In the fourth quarter of 2021, this division accounted for 93% of its revenue.
I hope you enjoyed learning more about these three information technology safe havens to add to your portfolio. As usual, please invest based on your own research and due diligence.
A graduate of the University of Miami, Teddy studied marketing and finance while playing four years on the football team. He has always had a passion for business and has used his experience from a few personal projects to become one of the top rated business writers on Fiverr.com. When he’s not pounding words on paper, you can find him pounding notes on the piano or traveling to a random location.