The tech sector has had its fair share of ups and downs in recent years.
Higher interest rates, valuation concerns, and questions about artificial intelligence (AI) have all put pressure on parts of the market. But that does not mean investors should ignore the sector.
For example, the two ASX tech shares in this article are solving important problems, building sticky customer relationships, and expanding into large markets. Here's why they could be top buy and hold picks:
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Pro Medicus Ltd (ASX: PME)
Pro Medicus is one ASX tech share that has been an extraordinary performer over the long term.
It provides medical imaging software to hospitals, radiology groups, and healthcare networks. Its Visage platform helps customers view, manage, and distribute medical images quickly and efficiently.
That is a niche but important market. Medical imaging volumes continue to grow as healthcare systems rely more heavily on scans to diagnose and manage patients. This creates a need for fast, reliable, and scalable imaging technology.
Pro Medicus has built a strong reputation in this area, with its software consistently being selected by a number of major healthcare institutions. This speaks to the quality of its platform and the importance of performance in this field.
The company also benefits from a highly attractive business model. Its contracts can be large, long-term, and sticky. And once a customer is using Pro Medicus' software across critical workflows, switching to another provider is not a simple decision.
Its valuation is often demanding, and investors should expect volatility if market expectations shift. But Pro Medicus has a rare combination of global growth potential, high margins, and mission-critical software.
Xero Ltd (ASX: XRO)
Xero is already a well-known ASX tech share, but its growth story is far from over.
The company's software sits at the centre of small business finance. Once a business has its invoicing, payroll, bank feeds, reporting, payments, and adviser relationships connected to one platform, switching becomes a hassle.
That gives Xero an attractive level of customer stickiness. It also gives the company room to expand beyond basic accounting software.
The bigger opportunity is to become a broader financial operating system for small businesses. That means helping customers manage more of the work that sits around accounting, including payments, payroll, insights, automation, and compliance.
This is important because small businesses often have limited time and resources. Tools that save time, reduce admin, and improve financial visibility can be valuable even in tougher economic conditions.
Xero also has international growth potential. The company estimates that it has a global addressable market in the region of 100 million small to medium sized businesses. This arguably gives Xero a multi-decade growth runway.
