3 Top Computer Stocks to Buy in 2017 – Motley Fool

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In the first quarter of 2017 the PC market reported its first growth in the past five quarters, but just barely. PC sales, which include desktops, notebooks, and workstations, hit 60.3 million units in the first quarter, up 0.6% year over year according to research from IDC. 

Despite this snail-like growth, there are still several solid opportunities for investors looking to snatch up the best computer stocks this year. Apple (NASDAQ:AAPL), Adobe (NASDAQ:ADBE) and NVIDIA (NASDAQ:NVDA) are all longtime players in the computer market, and each is poised to benefit in its respective segment this year. 

Four Macbook laptops next to each other.

Image source: Apple.

Apple

Apple reported Mac unit sales of 4.2 million in its fiscal second quarter 2017, an increase of 4% year over year, and said the net revenue from those sales hit $5.8 billion, up 14% year over year.

Apple’s PC sales pale in comparison to its iPhone business, but that doesn’t mean Apple should be written off as a solid computer investment. 

Two Macbooks lined up up back to back.

Image source: Apple.

Apple CEO Tim Cook said on the earnings call that its new Macbook Pro helped spur Mac revenues in the quarter, and that Mac business has generated over $25 billion of revenue over the past four quarters. “We’re investing aggressively in its future, and we are very excited about the innovation we can bring to the platform,” Cook added. 

Apple will likely keep the good times rolling for its Macs this year when it releases updates to both the Pro and regular Macbook lineups next month. The company is expected to bring new, 7th-generation Intel Kaby Lake chips into both the Macbook and Macbook Pro lineups, which should boost processing speeds and increase battery life.

Apple is the fourth-largest PC vendor in the world. It just raised it’s dividend by 10.5% in the second quarter, and continues to prove that incremental upgrades to its Macs and other devices are more than enough to drive more growth from this longtime computer stock. 

Abobe

Pivoting to the software side of computer stocks, Adobe is a great example of a company transitioning from one-time software sales to recurring revenue through a subscription-based model — and it’s paying off enormously for the company. 

Adobe just reported its strongest first quarter ever, with revenue up 21.6% year over year to $1.68 billion and GAAP net income jumping 56.7% to $254.3 million. The company’s Digital-media segment, driven by subscriptions to Creative Cloud and Document Cloud, deserve most of the credit for the stellar quarter, as it grew 22% year over year. 

Adobe's Creative Cloud graphic showing hot air balloons carrying a house.

Image source: Adobe.

Even with sales of PCs slowing down, Abobe is proving there is still substantial need for creative software that users are willing to pay for on an ongoing basis. Adobe CFO Mark Garrett indicated in a press release that there’s likely more for investors to look forward to this year as well.

Our solid execution and business momentum combined with strong market tailwinds give us confidence in our ability to continue to deliver strong financial results. We remain bullish about our prospects for the rest of 2017 and beyond.

NVIDIA

NVIDIA may not be what you consider a traditional computer stock, but the company makes the vast majority of its revenue — about 53% — from sales of its graphics processing units (GPUs) that go into PCs, which, I think, is a solid computer stock bonafide.

NVIDIA has caught the attention of investors for its growing opportunities in driverless cars and virtual reality, but the company’s GPUs are also being used to power complex data centers for artificial intelligence and machine learning capabilities. 

NVIDIA's DGX-1 supercomputer.

Image source: NVIDIA.

Intel may dominate the server business right now, but NVIDIA’s chips are already helping Facebook, Alphabet, and others take the next step into visual computing and neural network learning. NVIDIA’s DGX-1 supercomputer is a prime example of this — it can learn 12 times faster than the company’s previous machine learning computers. 

Aside from AI computing, NVIDIA’s GPUs are the go-to choice for PC makers’ graphics processing needs for gaming and virtual reality. That bodes very well for NVIDIA, as IDC has noted that PC gaming growth is helping to stabilize the broader PC market and VR is shaping up to be a nearly $34 billion business by 2022. 

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Chris Neiger has no position in any stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), Apple, Facebook, and Nvidia. The Motley Fool recommends Adobe Systems and Intel. The Motley Fool has a disclosure policy.