The technology sector has produced some of the biggest winners in the stock market in recent decades, and artificial intelligence (AI) promises big rewards for investors who hold the right stocks.
If you have $3,000 to invest right now, the following companies are competitively positioned to deliver excellent returns over the long term, as they already have over the past decade. Splitting your cash equally in these stocks will cover your bases across the hardware and software side of the AI market.
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1. Nvidia
The computing horsepower of graphics processing units (GPUs) is essential for training computer models to think and respond to human inquiries in natural language. Nvidia‘s (NVDA -0.62%) GPUs are the gold standard. The company is experiencing explosive demand that makes the stock’s recent dip a great buying opportunity.
Nvidia’s data center revenue more than doubled last year, and now comprises almost 90% of its business. Investors are counting on the company’s new Blackwell computing system to drive an estimated 54% revenue increase for the current fiscal year.
Blackwell was designed to bring significant performance improvements over the previous Hopper generation of chips for AI tasks. AI models from OpenAI, xAI, and others are getting increasingly sophisticated in their ability to solve complicated problems and logically converse with a human on a number of topics. The computational power to improve the next generation of AI models will be up to 100 times more per task, which should benefit Nvidia.
Some of Nvidia’s customers, including OpenAI, are investing in their own custom AI chips, which poses a risk. This is one reason why Nvidia stock has fallen year to date, but these concerns are likely overblown.
Nvidia isn’t just selling chips to model makers for specific workloads. Its GPUs can be used for a wide variety of computing purposes. For example, the Mayo Clinic is building a state-of-the-art digital pathology lab to speed up the diagnosis and treatments in healthcare using Nvidia’s DGX computing platform.
Nvidia offers solutions like this for several industries, which is a competitive advantage. This advantage can be seen by its stellar profit margin. Last year, Nvidia earned $73 billion in net income on $130 billion of revenue.
The consensus analyst estimate has the company’s earnings growing at an annualized rate of 35% over the next few years. These prospects make Nvidia stock an attractive value at current share prices, trading at just 26 times this year’s earnings estimate.
2. Microsoft
Companies are increasingly turning to the cloud and AI services to improve productivity, and Microsoft (MSFT 0.07%) is one of the top providers they are turning to. It’s a top brand in software, with more than 1 billion devices running Windows. The company’s latest quarterly update shows it gaining momentum.
Microsoft’s revenue grew 15% year over year on a constant-currency basis last quarter, with earnings up 19%. Growth was driven across every segment, most notably in the cloud, with Microsoft Azure posting an impressive 35% year-over-year increase.
AI has become an essential investment by big businesses, as AI services contributed nearly half of Azure’s growth last quarter. This is more than double the revenue contribution of AI just a year ago. Microsoft saw accelerating demand, noting that Abercrombie & Fitch, Coca-Cola, and ServiceNow recently expanded their business with Azure.
Microsoft stock sold off earlier this year, as the company’s earnings growth didn’t meet the expectations implied by its premium valuation. However, the largest data center operators, including Microsoft, are in a great position to meet growing demand for AI services over the long term. These large tech giants have massive resources to invest in technology, which is widening their competitive moats.
Microsoft reported that hundreds of thousands of customers across industries are using its Copilot AI assistant. This is up threefold from this time last year, and management says the size of new Copilot deals for enterprises continues to grow.
Microsoft is a no-brainer tech stock to buy and hold. It’s rock-solid financially, with $96 billion generated in net income on $270 billion of revenue over the last year. Analysts expect earnings to grow at an annualized rate of 12%, which should lead to comparable shareholder returns.
John Ballard has positions in Nvidia. The Motley Fool has positions in and recommends Microsoft, Nvidia, and ServiceNow. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
