Many hypergrowth tech stocks lost their luster over the past two years as rising interest rates squeezed their valuations and drove investors toward more conservative investments. But with interest rates set to decline in the near future, it might be smart to shop around for a few hypergrowth plays before the bulls rush back.
If you're looking for a good hypergrowth stock to buy and hold for the next few years, you should focus on market leaders with wide moats or smaller companies developing disruptive technologies. I believe these three companies make the cut: artificial intelligence (AI) chipmaker Nvidia(NASDAQ: NVDA), automated warehouse robot producer Symbotic(NASDAQ: SYM), and quantum computing company IonQ(NYSE: IONQ).
Image source: Getty Images.
1. The AI play: Nvidia
Nvidia is already one of the world's most valuable tech companies, but it's still a hypergrowth chipmaker. It's the world's largest producer of discrete GPUs, which are used to process high-end graphics and accelerate AI applications.
Nvidia previously generated most of its revenue from the PC market, but the rapid expansion of AI turned its data center segment into its largest, fastest-growing business. Nvidia's high-end GPUs for data centers can be used to accelerate complex machine learning and AI tasks, and all the world's leading AI companies -- including Microsoft, OpenAI, and Alphabet's Google -- scrambled to buy its chips.
That's why Nvidia's revenue and adjusted EPS soared 126% and 288%, respectively, in fiscal 2024 (which ended this January). From fiscal 2024 to fiscal 2027, analysts expect its revenue and earnings to increase at a compound annual growth rate (CAGR) of 50% and 56%, respectively, as the booming AI market continues to expand. Those are stellar growth rates for a stock that trades at 38 times forward earnings.
Nvidia faces some unpredictable challenges -- including tighter export curbs, competition from other AI chip producers, and a potential bust in AI spending -- but it's still reasonably valued and could have plenty of room to run before those headwinds kick in.
2. The robotics play: Symbotic
Symbotic produces automated warehouse robots. Its top investor and customer is Walmart, but it also serves other retail giants like Target, Albertsons, and C&S Wholesale. It claims a $50 million investment in just one of its modules -- which bundle together its robots and automation software -- can generate $250 million in lifetime savings over a 25-year period.
Symbotic has grown rapidly since its public debut two years ago. Its revenue surged 136% to $593 million in 2022 and grew another 98% to $1.18 billion in 2023. From 2023 to 2026, analysts expect its revenue to grow at a CAGR of 40% to $3.2 billion. They even expect it to turn profitable in 2025 and more than double its EPS in 2026.
Those growth rates are stunning, and its stock still looks reasonably valued at 6 times this year's sales. Its valuations are being compressed by some concerns about its near-term spending, recent secondary offering, and heavy dependence on Walmart, but this little robotics company might still generate some big long-term gains for its patient investors.
3. The quantum computing play: IonQ
IonQ serves up quantum computing power as a cloud-based service. Unlike traditional computers, which process data in binary bits of zeros and ones, quantum computers store those zeros and ones simultaneously in qubits.
Quantum computing units (QPUs) are much faster than traditional CPUs, but they're also bigger, more expensive, and more prone to make mistakes, as they process large amounts of data. IonQ is trying to address those challenges with its "trapped ion" technology, which miniaturizes the width of QPUs from several feet to just a few inches.
IonQ has struggled with several setbacks since its public debut nearly three years ago. It lost its co-founder and chief scientist Chris Monroe, it was hit by troubling accusations from a prolific short seller, and other companies criticized its usage of a proprietary "algorithmic qubit" (AQ) metric that wasn't widely recognized by its industry peers.
Yet IonQ continued growing as it gained more government contracts. Its revenue surged from $2 million in 2021 to $11 million in 2022, doubled to $22 million in 2023, and it expects 72% to 91% growth to $38 million to $42 million this year. From 2023 to 2026, analysts expect its revenue to grow at a CAGR of 88% to $145 million.
It's still unprofitable, and its stock isn't cheap at 18 times next year's sales, but IonQ could still have plenty of upside if it successfully scales up its business.
Should you invest $1,000 in Nvidia right now?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Leo Sun has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Alphabet, Microsoft, Nvidia, Target, and Walmart. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
