Microsoft (NASDAQ: MSFT) is a king of reliability, known for its consistent financial and stock growth. Over the past five years, the corporate’s share price has risen 200%, while free money flow has climbed 92%.
Microsoft’s regular growth has secured it a market cap above $3 trillion, allowing it to stay on the earth’s top three most beneficial firms. In truth, from about February to June of this yr, Microsoft temporarily surpassed Apple and Nvidia (NASDAQ: NVDA) in market cap, taking the highest spot.
Market fluctuations have seen the world’s top five most beneficial firms reshuffle multiple times in 2024. Even throughout August, Nvidia and Microsoft have been duking it out for second place on an almost weekly basis. Meanwhile, Amazon (NASDAQ: AMZN) appears to be on a bull run that might surpass the Windows company in the approaching years.
Nvidia and Amazon have been on exciting growth paths because of skyrocketing earnings. These firms dominate their respective industries and are making the most of consistent investment within the lucrative artificial intelligence (AI) market.
While Microsoft is understood for consistency, Nvidia and Amazon are expanding at a rate that might allow them to overtake the corporate. So, listed below are two growth stocks I predict shall be value greater than Microsoft in five years.
1. Nvidia: A meteoric rise that’s unlikely to slow any time soon
Nvidia’s business has delivered record growth because the start of 2023, with its top off 779%. Its meteoric rise has seen it steadily climb through the ranks of the world’s most beneficial firms, as seen within the chart below.
As of this writing, Nvidia’s market cap is above Microsoft’s. Their positions switched multiple times this month, suggesting could swap again by the point you read this. Nevertheless, Nvidia is included on this list as I’d argue that it is going to have surpassed Microsoft for good and gained a solid lead inside the following five years.
Nvidia massively outperformed Microsoft in 2024, with its top off 159% in comparison with Microsoft’s 10% rise. Meanwhile, Nvidia’s quarterly revenue is up 18% yr thus far, with Microsoft’s up 4%. At this rate, Nvidia could even secure its spot ahead of Microsoft much before five years.
Nvidia’s stellar gains are primarily because of its dominance in AI. The corporate is liable for between 70% and 95% of all AI graphics processing units (GPUs), the chips crucial for training AI models. Competitors like Advanced Micro Devices and Intel are working to catch up, launching rival GPUs this yr. Nevertheless, Nvidia’s head start and $39 billion in free money flow (in comparison with AMD’s $1 billion and Intel’s negative $13 billion) suggests it won’t have an excessive amount of trouble maintaining its lead.
In AI, Microsoft has a outstanding role in cloud computing. Nevertheless, fellow cloud giants Amazon and Alphabet are much closer competitors than Nvidia’s rivals within the GPU market.
Nvidia will report its second quarter of fiscal 2025 earnings on Aug. 28. After over a yr of beating quarterly earnings, the corporate will likely proceed recent trends and deliver one other quarter of impressive growth. Its stock could soar, furthering its lead on Microsoft.
2. Amazon: Soaring earnings and the money to surpass its rivals
Amazon and Microsoft are in steep competition within the cloud industry. As of Q2 2024, Amazon Web Services (AWS) cloud market share stood at 31%, while Microsoft Azure’s was at 25%. Nevertheless, Amazon ramped up its cloud investment during the last yr, which could allow it to carry onto its lead within the industry and eventually push its market cap above Microsoft’s.
Amazon consistently outperformed Microsoft during the last yr. Solid growth in retail and AWS has seen Amazon’s profits soar, allowing it to sink billions into its AI efforts.
In March, Bloomberg reported that Amazon plans to spend nearly $150 billion on data centers over the following 15 years to expand AWS’ reach. The corporate anticipates an explosion of demand for AI applications and other digital services, requiring a more extensive cloud network. The news aligns with multiple reports in recent months that announced Amazon’s data center investment in U.S. locations including Ohio, Indiana, and Virginia, in addition to international spots resembling Singapore, Spain, Saudi Arabia, India, and Taiwan.
The expansion will increase Amazon’s cloud and AI capabilities. Meanwhile, an enormous network will allow it to spice up other areas of its business with the generative technology, resembling e-commerce, grocery, digital promoting, and more.
Amazon’s market cap currently sits at $1.8 trillion. Nevertheless, its earnings and stock are expanding at a rate that may likely see it overtake Microsoft in the approaching years.
Do you have to invest $1,000 in Nvidia immediately?
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Suzanne Frey, an executive at Alphabet, is a member of The Motley Idiot’s board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Idiot’s board of directors. Dani Cook has no position in any of the stocks mentioned. The Motley Idiot has positions in and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Idiot recommends Intel and recommends the next options: long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Idiot has a disclosure policy.
Prediction: 2 Growth Stocks That Will Be Value More Than Microsoft in 5 Years was originally published by The Motley Idiot