It is not without reason that investor interest in artificial intelligence (AI) has increased explosively in the past year. Companies positioned to benefit most from this breakthrough technology are experiencing robust demand that could lead to attractive returns for shareholders.
The good news is that investors don’t have to make risky bets to earn great returns. Here are two of the world’s most profitable companies that could deliver spectacular profits for long-term investors.
1. Nvidia
Investor interest around Nvidia (NASDAQ: NVDA) has increased exponentially in recent years in tandem with stock performance. Demand for the company’s data center chips has driven its stock price up 3,000% in the past five years.
Nvidia has dominated the graphics processing unit (GPU) market for years, especially among gamers who buy the GeForce line of GPUs to play video games. But GPU systems designed for high-performance data centers evolved into an incredible growth opportunity as data center operators scooped up the powerful H100 enterprise chips needed for AI training.
Most importantly, Nvidia shows no signs of being a high-flyer that will disappear. It is a very profitable business. Last year the company made a profit of $30 billion on revenue of $61 billion. Demand for expensive data center chips continues to drive tremendous profit growth. Nvidia reported a 628% year-over-year increase in net profit in its most recent quarter.
It’s also important to note that Nvidia offers more than just GPUs. It also sells network components and software solutions needed to build and run data centers. Nvidia’s network revenue grew 242% year-over-year last quarter. This complete data center solution gives Nvidia an edge over competitors that provide AI-optimized chips.
Growing revenue from GPUs and other products indicates broad demand for AI infrastructure. Nvidia will continue to benefit from the initial increase in corporate investment in AI infrastructure, but as AI models become increasingly smarter and more complex over the coming decades, Nvidia should see sustainable growth through constant upgrades to hardware and other data center components.
2.Microsoft
Nvidia is the face of AI in the hardware field, but Microsoft (NASDAQ: MSFT) fulfills that role on the software side. Although not many people recognized its importance at the time, Microsoft’s investment in ChatGPT owner OpenAI in 2019 is, in retrospect, one of the most important strategic partnerships in the history of technology. The company’s share price has tripled in the last five years and is in a great position to deliver greater returns.
The OpenAI deal paved the way for Microsoft to bring AI services to cloud customers in Microsoft Azure while leading the rollout of the Copilot generative AI assistant on Windows. From subscription services in Microsoft 365 to enterprise offerings in Azure, Microsoft has several ways to monetize AI.
Copilot is already available on nearly 225 million Windows PCs, where Microsoft can supplement its revenue with monthly subscriptions to use the AI assistant in Word, Excel and other apps. Copilot will be a long-term growth driver for these Office apps, especially on the enterprise side, where Office 365 commercial revenue grew 15% year-over-year last quarter.
But the cloud computing opportunity still exists for the software giant. Azure and other cloud services posted a 31% year-over-year revenue increase last quarter, with demand for AI accounting for seven percentage points of that increase.
Microsoft is also gaining market share in online search as it rolls out AI search features to Bing and its Edge web browser. Microsoft’s search and news advertising revenue exceeded management expectations last quarter and represented a new channel for AI monetization.
Microsoft is a relatively safe way to invest in AI because of the recurring revenue streams from various software services. The company’s $86 billion in net revenues have more than doubled over the past five years, and the company has good prospects to continue this trend.
Should You Invest $1,000 in Nvidia Now?
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John Ballard has positions at Nvidia. The Motley Fool holds positions in and recommends 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.
2 Best Artificial Intelligence Stocks to Buy Now was originally published by The Motley Fool
