These companies have a long history of growth and consistently outperform Microsoft.
Microsoft (MSFT 0.30%) is a king of reliability and is known for its consistent financial and stock growth. Over the last five years, the company’s stock price has increased 200% while free cash flow has grown 92%.
Microsoft’s steady growth has given the company a market capitalization of over $3 trillion, making it one of the three most valuable companies in the world. In fact, between February and June of this year, Microsoft temporarily surpassed Apple And NVIDIA (NVDA 4.55%) in market capitalization and thus takes the top spot.
Due to market fluctuations, there were several reshuffles in the top five most valuable companies in the world in 2024. Even in August, Nvidia and Microsoft fought for second place almost weekly. In the meantime, Amazon (AMZN 0.52%) seems to be on a high that could overtake the Windows company in the coming years.
Nvidia and Amazon are on exciting growth paths thanks to rapidly increasing profits. These companies dominate their respective industries and benefit from consistent investments in the lucrative artificial intelligence (AI) market.
While Microsoft is known for its consistency, Nvidia and Amazon are expanding at a rate that could allow them to overtake it. So here are two growth stocks that I predict will be worth more than Microsoft in five years.
1. Nvidia: A meteoric rise that is unlikely to slow down anytime soon
Nvidia’s business has achieved record growth since the start of 2023, with its stock up 779%. Its meteoric rise has seen the company steadily climb into the ranks of the world’s most valuable companies, as shown in the chart below.
Data from YCharts
At the time of writing, Nvidia’s market cap is above Microsoft’s. Their positions have swapped multiple times this month, suggesting that there could be another swap by the time you read this. However, Nvidia is included in this list because I would argue that it will have finally overtaken Microsoft and will gain a solid lead within the next five years.
Nvidia has outperformed Microsoft by a wide margin in 2024. Its stock rose 159%, while Microsoft’s gained just 10%. At the same time, Nvidia’s quarterly revenue has risen 18% year-to-date, while Microsoft’s has risen 4%. If things continue like this, Nvidia could secure its place ahead of Microsoft much sooner than five years.
Nvidia’s stellar profits are largely due to its dominance in the AI space. The company is responsible for between 70% and 95% of all AI graphics processing units (GPUs), the chips required to train AI models. Rivals like Advanced micro devices And Intel are working to catch up and are launching competing GPUs this year. However, Nvidia’s lead and its free cash flow of $39 billion (compared to AMD’s $1 billion and Intel’s negative $13 billion) suggest that the company won’t have too much trouble maintaining its lead.
In the field of AI, Microsoft plays a prominent role in cloud computing. However, the other cloud giants Amazon and alphabet are much closer competitors than Nvidia’s rivals in the GPU market.
Nvidia will report its second quarter of fiscal 2025 earnings on August 28. After over a year of above-average quarterly results, the company is likely to continue recent trends and deliver another quarter of impressive growth. The stock could skyrocket, further extending the company’s lead over Microsoft.
2. Amazon: Rising profits and enough money to overtake the competition
Amazon and Microsoft face fierce competition in the cloud industry. In the second quarter of 2024, Amazon Web Services (AWS)’s cloud market share was 31%, while Microsoft Azure’s was 25%. However, Amazon has increased its cloud investments over the past year, which could allow the company to maintain its leadership position in the industry and eventually increase its market capitalization above that of Microsoft.
Data from YCharts
Amazon has consistently outperformed Microsoft over the past year. Solid growth in retail and AWS has helped Amazon’s profits soar and the company has been able to invest billions in its AI efforts.
In March, Bloomberg reported that Amazon plans to invest nearly $150 billion in data centers over the next 15 years to expand AWS’s reach. The company expects explosive demand for AI applications and other digital services that require a more extensive cloud network. The news is in line with several reports in recent months announcing Amazon’s investments in data centers in U.S. locations such as Ohio, Indiana and Virginia, as well as international locations such as Singapore, Spain, Saudi Arabia, India and Taiwan.
The expansion will expand Amazon’s cloud and AI capabilities, while a massive network will allow the company to boost other business areas such as e-commerce, grocery, digital advertising and more using generative technology.
Amazon’s market capitalization is currently $1.8 trillion, but the company’s earnings and stock price are growing so fast that it will likely overtake Microsoft in the coming years.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, former CEO of Whole Foods Market, a subsidiary of Amazon, is a member of The Motley Fool’s board of directors. Dani Cook does not own any of the stocks mentioned. The Motley Fool owns and recommends Advanced Micro Devices, Alphabet, Amazon, Apple, Microsoft, and Nvidia. The Motley Fool recommends Intel and recommends the following options: long January 2026 $395 calls on Microsoft, short August 2024 $35 calls on Intel, and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
