Nvidia (NASDAQ: NVDA) shares have seen a notable rise since early 2023 related to artificial intelligence (AI), which is not surprising given that the company provides the crucial building blocks needed for the spread of this technology.
Nvidia’s graphics processing units (GPUs) help its customers train and deploy AI models, which explains why there is a huge demand for its chips. As a result, Nvidia’s revenues and profits have grown rapidly in recent quarters, and the good thing is that the company has been able to maintain its impressive momentum as more AI infrastructure is built.
However, there are concerns that any slowdown in demand for AI chips could weigh negatively on Nvidia’s prospects in the long term. That’s why investors should consider buying shares of Microsoft (NASDAQ: MSFT) And Metaplatforms (NASDAQ: META) – both Nvidia customers – as these two companies could prove to be bigger AI beneficiaries than Nvidia decades from now.
1.Microsoft
Like Nvidia, Microsoft is one of the pioneers in the field of AI thanks to its collaboration with ChatGPT maker OpenAI. This partnership has placed Microsoft at the forefront of the AI ​​revolution in multiple fast-growing markets.
From workplace collaboration software to personal computers (PCs) and cloud computing, Microsoft has integrated OpenAI’s expertise in multiple areas to capitalize on the proliferation of AI. For example, Microsoft’s Azure cloud business is now growing faster thanks to improved adoption of the company’s AI-focused tools, which allow customers to use its platform to build and deploy generative AI solutions.
This is evidenced by the fact that of Microsoft’s 53,000 strong Azure AI customer base, a third started using its services in 2023. Additionally, during the company’s earnings conference call in January, Microsoft management pointed out that its Azure cloud business got a 6 percentage point boost from AI, with year-over-year growth of 30%.
It will come as no surprise that Microsoft’s cloud business is gaining traction. That’s because customers can access multiple large language models (LLMs) to build their AI applications without having to invest in expensive hardware. Grand View Research estimates that the cloud AI market could generate nearly $650 billion in revenue by 2030. That’s bigger than the $305 billion the AI ​​chip market is expected to generate by the end of this decade, suggesting Microsoft is on the hook. much greater AI capabilities than Nvidia.
However, this is just one of many AI-related catalysts for Microsoft. For example, the adoption of AI-enabled PCs could provide a major boost to Microsoft’s growth in the future. According to market research firm Canalys, sales of AI-enabled PCs are expected to grow 44% annually through 2028, reaching 205 million units by the end of the forecast period.
Microsoft is looking to capitalize on this opportunity with Copilot Pro, a $20 per month subscription service that gives PC users access to AI tools in multiple applications like Word, Excel, Outlook, and PowerPoint, allowing them to create images with generative AI prompts and gets priority access to popular LLMs. Bloomberg Intelligence estimates that the market for specialized generative AI assistants could be worth $89 billion by 2032, up from just $447 million in 2022, meaning Microsoft’s move to monetize its Copilot would reap rich rewards for the company can deliver.
So even if Microsoft can’t match Nvidia’s stellar growth rate right now, it seems capable of delivering steady growth for a long time to come thanks to increasing adoption of AI in multiple end markets, which could prove to be more lucrative than the AI. chip space.
The good part is that Microsoft’s growth rate is picking up nicely after the advent of AI. That’s why investors would do well to buy this stock, as it currently trades at a reasonable 38 times lower earnings compared to Nvidia’s rich price-to-earnings ratio of 73.
2. Metaplatforms
Digital advertising is another sector expected to benefit from AI adoption, with advertisers using the technology to improve audience targeting so they can increase their return on advertising dollars spent. Bloomberg predicts that spending on generative AI-based advertising will increase from just $57 million in 2022 to $192 billion in 2032.
Meta Platforms is a great way to take advantage of this opportunity thanks to the growing popularity of the company’s AI-focused tools and a huge user base. The company has been introducing generative AI features for advertisers since last year and claims they are delivering solid improvements in advertisers’ returns.
More importantly, the company is looking to push the boundaries with new initiatives such as deploying its Meta AI chatbot on popular platforms such as Messenger, Instagram and WhatsApp, which will bring its AI tools to a much larger user base. Meta AI is a generative AI assistant that answers users’ questions and also allows them to create images with text prompts. Considering that Meta ended 2023 with nearly 4 billion monthly active users across its various apps, the company has a great monetization opportunity.
All this explains why consensus estimates predict an acceleration in Meta’s earnings growth to an annual rate of 26% over the next five years, compared to 10% per year in the previous five years. Meta can sustain such healthy earnings growth for an extended period given the multi-billion dollar opportunity in digital advertising and generative AI assistants.
This is exactly why buying Meta Platforms stock is a no-brainer right now. It trades at just 25 times forward earnings, compared to a forward price-to-earnings ratio of 35, indicating robust net growth. Plus, this AI stock is cheaper than Nvidia and trades at a discount to the Nasdaq-100 index’s price-to-earnings ratio of 27 (using the index as a benchmark for technology stocks), which gives investors all the more reason to buy Meta Platforms, as AI could keep this stock soaring for a long time to come.
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Randi Zuckerberg, former director of market development and spokeswoman for Facebook and sister of Mark Zuckerberg, CEO of Meta Platforms, is a member of The Motley Fool’s board of directors. Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool holds positions in and recommends Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls to Microsoft and short January 2026 $405 calls to Microsoft. The Motley Fool has a disclosure policy.
Two artificial intelligence (AI) stocks that could beat Nvidia in the coming decades were originally published by The Motley Fool
