The tech industry is undergoing a rapid revolution, with AI leading the way. The robust demand for advanced AI solutions coupled with cutting-edge innovations to cater to the demand is opening wide opportunities for the market worldwide.
Given the industry's rosy prospects, it could be wise to watch fundamentally strong tech stocks Microsoft Corporation (MSFT), NVIDIA Corporation (NVDA), and Alphabet Inc. (GOOGL) investing heavily in AI.
In the era of technology, Artificial Intelligence (AI) is reshaping the functioning of various industries and markets, including automotive, healthcare, banking and finance, manufacturing, food and beverages, logistics, and retail with offerings like cloud-based AI services, cost advantages, and automating business operations.
The market for AI surged over $184 billion this year, reflecting a significant growth compared to the prior year. The global AI market is expected to grow at a CAGR of 32.4% to reach a value of $30.13 trillion by 2032.
Further, AI bears the incredible potential to benefit the global economy as is expected to contribute upto $15.7 trillion to the global economy by 2030, higher than the current output of China and India combined.
Given these encouraging trends, let's delve deeper into the fundamentals of top tech stocks, MSFT, NVDA, and GOOGL.
Microsoft Corporation (MSFT)
MSFT develops and supports software, services, devices and solutions worldwide. The company operates in Productivity and Business Processes; Intelligent Cloud; and More Personal Computing segments. It offers office, exchange, SharePoint, Microsoft Teams, office 365 Security and Compliance, Microsoft viva, and Microsoft 365 copilot, and office consumer services.
On May 8, MSFT announced a broad investment package designed to strengthen the role of Southeast Wisconsin as a hub for AI-powered economic activity, innovation, and job creation. The investments include $3.30 billion in cloud computing and AI infrastructure, creating the country's first manufacturing-focused AI co-innovation lab, and an AI skilling initiative.
On May 1, MSFT, Brookfield Asset Management Ltd. (BAM), and Brookfield Renewable Partners L.P. (BEP) entered into a global renewable energy framework agreement to help MSFT achieve its goal of having 100% of its electricity consumption with zero-carbon energy purchases by 2030.
On April 29, MSFT and Axel Springer SE expanded their multifaceted partnership across advertising, AI, content and cloud computing. The strategic cooperation aims to leverage cutting-edge innovation to support independent journalism worldwide.
The partnership expanded the existing cooperation of the companies on different levels where they can leverage each other's strengths in digital publishing and technology to accelerate growth in the era of AI.
Also, on the same day, MSFT announced an innovation initiative with Conduent Incorporated (CNDT), a global technology-led business solutions and services company, to utilize Microsoft Azure OpenAI Service to bring the power of generative AI to drive quality, productivity and faster cycle times for Conduent's global clients.
MSFT's total revenues increased 17% year-over-year to $61.86 billion for the third quarter that ended March 31, 2024. The company's operating income grew 23.4% from the year-ago value to $27.58 billion. Its net income and EPS came in at $21.94 billion, and $2.94, indicating growth of 19.9% and 20% from the prior year's quarter, respectively.
In addition, the company's total assets were $484.27 billion as of March 31, 2024, versus $411.98 billion as of June 30, 2023.
Street expects MSFT's revenue and EPS for the fourth quarter (ending June 2024) to increase 14.6% and 9% year-over-year to $64.37 billion and $2.93, respectively. Furthermore, the company surpassed the consensus revenue and EPS estimates in each of the trailing four quarters, which is impressive.
Shares of MSFT have surged 20.4% over the past six months and 34.8% over the past year to close the last trading session at $449.78.
MSFT's robust growth prospects are reflected in its POWR Ratings. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a B grade for Stability, Sentiment, and Quality. Within the B-rated Software - Business industry, MSFT is ranked #19 out of 41 stocks.
Click here to access additional ratings of MSFT for Growth, Value, and Momentum.
NVIDIA Corporation (NVDA)
NVDA provides graphics, computing, and networking solutions internationally. The company operations in two segments: Compute & Networking; and Graphics. It offers GeForce GPUs for gaming and PCs, the GeForce NOW game streaming service and related infrastructure, and solutions for gaming platforms.
On June 18, NVDA and Hewlett Packard Enterprise (HPE) announced NVIDIA AI Computing by HPE, a portfolio of co-developed AI solutions and joint go-to-market integrations that enable enterprises to accelerate adoption of generative AI.
The new lineup marked the expansion of a decades-long partnership and reflects the substantial commitment of time and resources of both companies.
On June 17, NVDA unveiled NVIDIA Omniverse Cloud Sensor RTX™, a set of microservices that allow physically accurate sensor simulation to accelerate the development of fully autonomous machines of every kind.
The innovations will enable developers to easily build large-scale digital twins of factories, cities, and even Earth, helping accelerate the next wave of AI.
For the first quarter that ended April 28, 2024, NVDA's revenue increased 262% year-over-year to $26.04 billion. Its non-GAAP gross profit grew 328.1% from the prior year's quarter to $20.56 billion. The company's non-GAAP operating income of $18.06 billion indicates growth of 491.7% year-over-year.
Furthermore, the company's non-GAAP net income came in at $15.24 billion or $6.12 per share, up 461.7% and 461.5% from the previous year's quarter, respectively. Its free cash flow increased 465.9% from the year-ago value to $14.94 billion.
According to the company's outlook for second quarter of fiscal 2025, NVDA expects revenue of $28.0 billion, plus or minus 2% for the period.
Analysts expect NVDA's revenue and EPS for the second quarter (ending June 2024) to increase 109.9% and 134.7% year-over-year to $28.35 billion and $0.63, respectively. Also, the company has topped the consensus revenue and EPS estimates in all of the trailing four quarters.
NVDA's shares have gained 158.4% over the past six months and 194% over the past year to close the last trading session at $126.57.
NVDA's sound fundamentals are reflected in its POWR Ratings. The stock has an A grade for Quality and a B grade for Sentiment and Growth. Within the Semiconductor & Wireless Chip industry, NVDA is ranked #24 among 92 stocks.
In addition to the POWR Ratings we've stated above, we also have NVDA ratings for Momentum, Value, and Stability. Get all NCDA ratings here.
Alphabet Inc. (GOOGL)
GOOGL provides various products and platforms globally. The company operates in Google Services; Google Cloud; and Other Bets segments. It provides products and services, including ads, Android, Chrome, devices, Gmail, Google Drive, Google Maps, Google Photos, Google Play, Search, and YouTube.
On May 2, GOOGL and MongoDB, Inc. (MDB) collaborated to optimize Gemini Code Assist to provide enhanced suggestions for application development and modernization on MongoDB, the industry-leading developer data platform for business-critical applications. Gemini Code Assist allow developers to accelerate application development and modernization.
Through this strategic collaboration, Gemini Code Assist can assist developers get answers and information about MongoDB code, documentation, and best practices and more quickly prototype new features and accelerate application development.
During the first quarter, which ended March 31, 2024, GOOGL's revenues rose 15.4% year-over-year to $80.54 billion. Its income from operations increased 46.2% from the year-ago value to $25.47 billion. The company's net income of $23.66 billion, reflects growth of 57.2% from the prior year's quarter. Its EPS for Class A, B, and C stock came in at $1.89, up 61.5% year-over-year.
Analysts expect GOOGL's EPS for the second quarter (ending June 2024) to increase 27.5% year-over-year to $1.84 and its revenue is estimated to increase 12.6% year-over-year to $84.01 billion for the current quarter. Moreover, the company surpassed the consensus EPS and revenue estimates in each of the trailing four quarters.
GOOGL's stock has soared 27.9% over the past six months and 49% over the past year to close the last trading session at $179.63.
GOOGL's POWR Ratings reflect its robust outlook. The stock has an overall rating of B, which translates to a Buy in our proprietary rating system.
GOOGL has a B grade for Sentiment and Quality. It is ranked #10 among the 51 stocks in the B-rated Internet industry.
Click here to access additional GOOGL ratings for Value, Growth, Momentum and Stability.Top of Form
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
MSFT shares were trading at $449.76 per share on Monday morning, down $0.02 (0.00%). Year-to-date, MSFT has gained 20.04%, versus a 15.20% rise in the benchmark S&P 500 index during the same period.
About the Author: Rjkumari Saxena
Rajkumari started her career as a writer but gradually shifted her focus to financial journalism, leveraging her educational background in Commerce. Fascinated by the interplay of business and economic shifts in equities, she aspires to evolve as an analyst. With a knack for simplifying complex financial concepts, her mission is to empower investors with insights that lead to profitable decisions.
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