The S&P 500 index is widely considered the yardstick when measuring stock market performance. It's having a strong year, delivering a return of over 26% with more than a month still left.

But two powerful growth stocks have run circles around the broad index in 2021. Microsoft's (NASDAQ:MSFT) stock price has risen 54%, while semiconductor giant Advanced Micro Devices (NASDAQ:AMD) has returned an even more impressive 58%. 

Both companies have strong catalysts that point to a repeat in 2022 and beyond. Let's explore them.

A person sitting at their home office desk using a laptop computer.

Image source: Getty Images.

1. The case for Microsoft

Microsoft is currently the largest public company in the world, slightly edging out its longtime rival in the consumer products space, Apple. It's also one of the most recognizable brands in the world, with its Windows 10 operating system active on over 1.3 billion devices, and its Office 365 document suite a staple among households and businesses alike. 

Its roaring success in software hasn't stopped it from innovating in other areas. Microsoft owns the Xbox gaming platform, and the much newer Surface line of notebooks and tablets, both of which are billion-dollar consumer hardware brands in their own right. It also owns LinkedIn, the professional network that delivered 42% revenue growth in the fiscal first quarter, with record user engagement.

But cloud computing is where the company is really shining. Microsoft Azure is a cloud services platform that caters to businesses, and it's the second largest in the industry behind Amazon Web Services. It hosts over 40 different solutions, including an innovative artificial intelligence product that can be used for speech and image recognition. 

Azure revenue has consistently outperformed Microsoft's total revenue, and in the first quarter delivered 48% growth year over year.

Spending on cloud computing globally is expected to grow at an annual rate of 18% through 2026, so Azure's outsize performance hints at a future with increased market share for Microsoft, which should translate to a buoyant share price.

From a risk perspective, investors are buying a highly profitable business with a suite of brands that are very difficult for new competitors to disrupt. Microsoft's dominant market position, while also playing a leading role in innovation, makes it a bankable stock to beat the market next year. Its price has soared 465% over the last five years compared to the S&P 500's 114% gain. 

A robotic arm in a semiconductor production facility holding a computer chip.

Image source: Getty Images.

2. The case for Advanced Micro Devices

This has been a boom year for all things semiconductor-related. The pandemic triggered production shutdowns across Asia, which led to a crippling shortage of the advanced computer chips that power our most prized consumer devices and the digital features inside new cars, among other things.

You can find AMD's chips inside consumer product royalty like Sony's PlayStation 5, Microsoft's Xbox, and the future infotainment centers in Tesla's Model S and Model X electric vehicles. The popularity of AMD's semiconductors has allowed the company to charge higher prices amid the shortages, boosting gross margins, and setting up its most profitable year ever. 

The company's enterprise segment is the highlight at the moment, with the recent third quarter marking its sixth consecutive quarter of record server-processor revenue. AMD is the producer of choice for cloud computing behemoths like Microsoft Azure and Alphabet's Google Cloud, whose appetite for data center chips continues to soar. The broad enterprise, embedded, and semi-custom segment generated 69% year-over-year revenue growth in the third quarter, outpacing the company's 54% total revenue growth.

Spending on cloud infrastructure is expected to exceed $74 billion this year, and AMD has already acquired some of the largest customers in the industry. 

But as another interesting carrot for investors, AMD is investing in graphics products to power the metaverse. With trillion-dollar giant Meta Platforms (formerly Facebook) drawing significant amounts of attention to this new virtual world, AMD could find itself reaping billions of dollars in new revenue. Its chips are already used with Meta's Oculus virtual reality hardware.

AMD's return has been 14 times greater than the S&P 500 over the last five years, so it's not a stretch to expect another blockbuster year in 2022, especially with the exciting things the company is working on. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.