In the last twelve months, Nvidia (NASDAQ: NVDA) has been a prominent topic in financial circles, emerging as one of the top-performing large companies in the stock market. Renowned for designing cutting-edge graphics processing unit (GPU) technology crucial for artificial intelligence (AI) applications, Nvidia has experienced a remarkable surge in both revenue and earnings.
In the third quarter, we witnessed an impressive 206% year-over-year increase in sales, accompanied by a staggering 593% rise in non-GAAP (adjusted) earnings. Anticipating continued momentum, Nvidia projects a remarkable 231% sales growth in the fourth quarter.
Despite this outstanding performance, some investors may find Nvidia’s rapid stock gains and the cyclical nature of the semiconductor industry need to be more manageable. Potential challenges include restrictions on advanced chip sales to China and upcoming performance comparisons, which could reveal uneven results due to prior Chinese customers frontloading GPU orders ahead of regulations.
While Nvidia remains a promising long-term investment, another standout AI stock, part of the “Magnificent Seven,” may offer a more balanced risk-reward profile. Microsoft (NASDAQ: MSFT) seems like a tempting option for investors who have a solid financial basis and want to invest $1,000 or more in a strong leader in artificial intelligence.
Microsoft leads the AI domain.
Microsoft, currently competing with Apple for the title of the world’s largest company by market capitalization, possesses the qualities of a long-term leader. Despite facing macroeconomic challenges and one-time tax liabilities in the past year, Microsoft maintained consistent sales growth and robust profits. The positive performance trend is now gaining momentum once again.
In the realm of AI growth stocks, Microsoft stands out, backed by reliable businesses and formidable competitive moats. Due to its resilience and capacity for continued expansion, the company is positioned to be a wise investment option for the ensuing ten years.
In the quarter ending in September, Microsoft showcased robust financial growth, with a 13% year-over-year increase in revenue, reaching an impressive $56.5 billion. The company’s operational strength was evident in a 25% rise in operating income, reaching $26.9 billion, and a substantial 27% increase in net income, reaching $22.3 billion.
Central to Microsoft’s soaring profitability is its Azure cloud infrastructure platform. This platform has become a focal point for AI developers, utilizing Microsoft’s cloud services to create, launch, and scale their applications. The momentum behind this trend is just beginning, indicating further growth potential.
Microsoft is strategically integrating AI into its operating systems and productivity software. The introduction of Copilot software positions the company as a leader in the dynamic AI personal assistant space, with vast potential for expansion. Notably, Microsoft is also venturing into the development of its own AI chips, underscoring its commitment to innovation.
Every facet of Microsoft’s business appears well-positioned to capitalize on the benefits of artificial intelligence. Beyond internal initiatives, the company holds a significant stake in OpenAI, which is renowned for applications like ChatGPT and DALL-E. This diversification makes Microsoft a comprehensive and compelling choice for investors seeking exposure to the AI sector.
Microsoft is willing to compensate you for holding its stock
Fueled by robust profitability, Microsoft has consistently paid dividends since 2003, consistently increasing payouts for 18 consecutive years. Although the current yield stands at around 0.7%, which may not immediately attract investors seeking substantial payouts, it’s crucial to recognize Microsoft as a dividend growth stock. It makes it an ideal “set-it-and-forget-it” portfolio component.
Microsoft’s business stands out for its substantial profitability and significant potential for long-term expansion. Beyond the positive impact on the company’s share price, the profits derived from AI initiatives are poised to boost further Microsoft’s capacity to increase shareholder dividends.
Backed by vital business momentum, a plethora of untapped AI opportunities, and an attractive income return component, Microsoft emerges as a top choice for investors seeking powerful AI stocks.
