Artificial intelligence (AI) turned out to be a hot investing trend over the past year and a half. This is due in large part to the huge amount of capital being poured into this niche. Thanks to AI, companies and governments will be able to derive the huge economic gains that this technology is expected to deliver in the long run.
PwC estimates that AI adoption can boost global productivity and contribute $15.7 trillion to the world economy by 2030. Companies driving the AI boom have seen their stock prices rise rapidly in the past 18 months.
For instance, an investment of $10,000 in shares of Nvidia (NASDAQ: NVDA) at the beginning of 2023 is now worth about $85,080. A similar investment in shares of Microsoft (NASDAQ: MSFT) is now worth roughly $18,920. Both these " Magnificent Seven" stocks play a pioneering role in the proliferation of AI, which is why they could become big winners over time.
Investors looking to construct a million-dollar portfolio would do well to add these tech titans to their holdings. Let's look at the reasons why.
1. Nvidia
The roaring demand for AI chips has supercharged Nvidia's growth in the past year and a half. This is evident from the following chart:
NVDA Revenue (TTM) data by YCharts.
Nvidia's bottom line has grown at a much faster pace than its revenue. That's because of the incredible pricing power it enjoys in the AI chip market. Its market share reportedly ranges between 70% and 95%, according to Mizuho Securities. This dominant position is the reason why Nvidia generates stunning profits on sales of its popular H100 processors.
That trend could continue with the company's new Blackwell architecture-based chips. Independent investment banking firm Raymond James estimates that it costs Nvidia $6,000 to manufacture each unit of its Blackwell B200 graphics processing unit (GPU). Given that the company sells those processors for $30,000 to $40,000 each, its profit margins are likely to remain fat in the future.
Even better, the demand for Nvidia's Blackwell processors is so strong that the company forecasts demand will exceed supply going into 2025. Nvidia's foundry partner Taiwan Semiconductor Manufacturing is expected to increase its advanced chip-packaging capacity by 150% this year and 70% in 2025 to help the graphics specialist meet the robust demand for its new chips.
More importantly, analysts expect Nvidia to maintain its dominant position in the AI chip market. Analyst Beth Kindig of I/O Fund, a technology-focused research provider, estimates that Nvidia's addressable market in AI chips could hit a whopping $1 trillion in 2030, and the company is likely to capture a major share of that market thanks to its solid moat.
Meanwhile, Mizuho analyst Vijay Rakesh expects Nvidia's data center revenue to hit $280 billion in 2027. That would be a huge increase over the $47.5 billion in data center revenue it generated in the previous fiscal year. It is not surprising to see why analysts are so bullish about Nvidia's AI chip dominance. The company exercises solid control over the AI chip supply chain , and it has been pushing the envelope on the product-development front to ensure that it brings new AI chips to the market faster than before.
So, even if Nvidia loses some of its share but continues to remain the bigger player in the AI chip market, it should be able to sustain its impressive growth. Investors looking to buy an AI stock that could help grow their investments significantly and contribute to a million-dollar portfolio would do well to buy Nvidia given that it sports a price-to-earnings-to-growth ratio ( PEG ratio ) of just 0.09.
A PEG ratio of less than 1 suggests that a stock is undervalued for the growth that it is forecasted to deliver, and Nvidia looks attractively valued on that front.
2. Microsoft
Nvidia's chips are being purchased by tech giants such as Microsoft to power their AI models. As a result, Microsoft is accelerating its growth thanks to robust customer demand for its various AI solutions.
For instance, Microsoft's cloud business is gaining share thanks to the growing demand for its Azure OpenAI service. The company points out that more than 65% of Fortune 500 companies use Azure OpenAI to power AI applications. More importantly, Microsoft reports an increase in average spending by Azure AI customers.
On its April earnings conference call , CEO Satya Nadella pointed out that "The number of $100 million-plus Azure deals increased over 80% year over year, while the number of $10 million-plus deals more than doubled."
AI contributed seven percentage points of growth to Microsoft's Azure cloud business last quarter, a small acceleration over the six percentage points of growth it drove in the quarter preceding it. The improving momentum in new contracts suggests that Microsoft's cloud business is likely to get a bigger AI boost in the future.
More importantly, the size of the global cloud AI market is forecasted to hit $396 billion in 2029, growing at an annual rate of 38%. Meanwhile, the overall cloud-computing market could be worth a whopping $1.44 trillion in 2029, according to Mordor Intelligence.
So, there is a whole new growth opportunity for Microsoft to tap as it generated $26.7 billion in revenue from the cloud business last quarter, translating into an annual revenue run rate of just over $105 billion. With Microsoft gaining two percentage points of market share year over year in the global cloud infrastructure market in the first quarter of 2024 and currently controlling 25% of this lucrative space, it could win big from the AI-fueled growth in the cloud market if it continues to win more market share.
Even better, analysts project healthy growth in Microsoft's top line in the current fiscal year and beyond. It is expected to finish the ongoing fiscal year with $245 billion in revenue, an increase of 15% over the previous year.
MSFT Revenue Estimates for Current Fiscal Year data by YCharts.
Microsoft's growth estimates have been heading higher thanks to the growing traction of its AI business. This trend could continue in the future as Microsoft's cloud AI business gets better. Investors looking to add a top tech stock to their portfolios that could deliver robust gains on the back of growing AI adoption would do well to buy shares of Microsoft before it jumps higher and adds to the impressive gains it has clocked in the past year and a half.
Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Microsoft, Nvidia, and Taiwan Semiconductor Manufacturing. 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 .
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