One compelling reason to own tech stocks is that some of them have the ability to tap into fast-growing trends that help shape the future. One current example of a major trend that has the potential to build the future is artificial intelligence (AI), which is quickly being adopted by many companies to further their services.
But identifying these trends is just the first step -- finding great companies that will actually benefit from them is much harder. To help you with this process, here are three companies -- Nvidia (NVDA 3.46%), Microsoft (MSFT 2.22%), and Tesla (TSLA 0.66%) -- that are shaping the future with their current moves.
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1. Nvidia
One compelling reason to consider investing in Nvidia is the company's position in the ever-expanding cloud computing market. Nvidia's graphics processors are used by many leading tech companies for complex data processing in their servers, which has helped the company's data center segment to grow rapidly.
Data center revenue now accounts for 60% of the company's total sales, and in the fourth quarter, the segment's sales jumped 11% to $3.6 billion -- representing a 90% increase in sales from just two years ago. High-powered cloud computing apps aren't going away anytime soon, and Nvidia's early moves in the space are paying off and could continue to do so for years to come.
But that's not all that Nvidia has going for it. GPUs are rather good at processing artificial intelligence tasks, and companies including Microsoft, Alphabet, Amazon, and Meta Platforms use some of Nvidia's chips specifically for that purpose.
And while Nvidia's potential to benefit from AI has been known for years, the recent release of the large language model ChatGPT is likely to accelerate this opportunity. Microsoft has already invested billions of dollars into ChatGPT's parent company, OpenAI, and Google is focusing its attention on this market with its Bard chatbot.
In short, the AI race has begun, and it will help Nvidia benefit from what it believes is a total addressable market of $150 billion. As more companies need high-powered servers to provide advanced AI services, they'll likely rely on some of Nvidia's GPUs to do it.
2. Microsoft
Like Nvidia, Microsoft is also helping to build the future of cloud computing and AI, though the company is doing it from a services and software angle instead of through its hardware.
Anyone who's been following Microsoft over the past few years has likely noticed the company's meteoric rise in the cloud computing space. About five years ago, Microsoft's Azure cloud services held only 15% of the cloud infrastructure market, and now it has 23%, as it's eaten away at some of Amazon's dominance. And while some of its white-hot growth slowed over the past few years, Azure's recent sales are still impressive, increasing 31%.
Microsoft doesn't break out the dollar amount for Azure sales, but when combined with the company's other cloud services, the company's Intelligent Cloud segment increased sales by 18% to $21.5 billion.
In addition to its cloud opportunity, Microsoft is also going all-in on AI as well. Microsoft has invested an estimated $10 billion into ChatGPT's OpenAI and has already begun integrating the bot into its Bing search, Microsoft 365 software, and some Azure services.
While the dust certainly hasn't yet settled on which large tech company will win the AI fight, Microsoft is generally viewed as being ahead of the curve right now as rival Alphabet tries to catch up. And this lead could eventually be lucrative for Microsoft, as the company taps into the vast AI software market that will be worth an estimated $850 billion by 2030.
3. Tesla
Tesla isn't exactly a tech company in the same vein as the other stocks on this list. However, the company has developed some of the most popular electric vehicles on the market and continues to dominate in this fast-growing industry, so it certainly deserves a spot here.
An estimated 67% of all new vehicles sold globally in 2030 will be EVs, and Tesla is doing its part to bring about an electrified future. In the most recent quarter, the company produced 440,808 vehicles, a very impressive 44% increase from the year-ago quarter. Tesla's deliveries were also very strong, reaching 422,875, which was up 36% year over year.
The company's revenue increased by 24% to $23.3 billion, but some investors got worried when they saw that net income fell by 20%. That drop was fueled by a series of price cuts that Tesla implemented over the past several months to spur demand. While falling margins aren't great to see, Tesla can handle the decline, as the company still enjoys enviable automotive margins.
Smaller EV rivals are struggling right now, as the era of cheap money is over, inflation is elevated, and a potential recession is on the horizon. Tesla isn't immune to macroeconomic conditions, of course, but at a time when EV demand is soaring, the company's production prowess puts it several steps ahead of the competition.
Be patient while waiting for the future
Tech stocks have been a bit unsteady lately, and there's no guarantee that these companies' share prices will outpace the market. But Nvidia, Microsoft, and Tesla have all proven that they can stand out in crowded markets and focus on tapping into new trends like AI.
