Many technology stocks make great growth investments, as illustrated by 2023's rise of artificial intelligence. Numerous tech companies delivered strong revenue gains last year, and the AI market is predicted to enjoy years of growth, expanding from 2023's $208 billion to nearly $2 trillion by 2030.
To capitalize on the AI boom, here's a trio of tech stocks offering investment opportunities in key areas of the AI space. For starters, there's Nvidia (NVDA +1.67%), a leader in the kinds of semiconductor chips needed to deliver the computing power to execute AI's complex tasks.
AI software also requires quick access to mountains of online data to use in making accurate decisions. This access necessitates a fast, reliable internet network, and that's where Cloudflare (NET +1.83%) comes into play.
Lastly, the data needed by artificial intelligence, as well as the AI tech itself, is housed in cloud computing services, such as that offered by Microsoft (MSFT +0.60%). Here's why each of these businesses makes a good long-term investment now.
1. Nvidia: Semiconductor chips
NASDAQ: NVDA
Key Data Points
Nvidia experienced stellar revenue growth in 2023, and it's well-positioned to continue that growth over the long term. That's because its graphics processing units (GPUs) are a popular choice for computing systems running AI technology.
This popularity translated into record revenue of $18.1 billion, up 206% year-over-year, in the company's fiscal third quarter (ended Oct. 29). Nvidia expects its impressive revenue growth to extend into the fourth quarter, forecasting around $20 billion in sales, a massive jump from the prior year's $6 billion.
Revenue growth could decelerate in 2024 due to new U.S. government restrictions on AI-related semiconductor sales to China, which Nvidia already expects to impact Q4 sales. Even so, this is a short-term headwind.
Demand for Nvidia's GPUs remains strong, helping to offset some of its anticipated sales losses in China. For example, the United Kingdom's government plans to use Nvidia technology to construct one of the world's fastest AI supercomputers.
Moreover, Nvidia is making chip adjustments to comply with these new government restrictions. So, over the long term, sales to China should pick back up, helping the company's revenue growth to remain strong.
2. Cloudflare: Digital content delivery
NYSE: NET
Key Data Points
Cloudflare (NET +1.83%) specializes in optimizing the delivery of online content. The company ensures this content loads fast by storing it throughout a network of global data centers. This allows Cloudflare to pull from the server closest to the person requesting the digital content to maximize speed.
And speed is important to businesses employing AI capabilities. Since AI software crunches tons of data to execute tasks, it needs a fast network to quickly access this data, run its processes, and deliver results without any apparent lag to the people using the AI tech.
Cloudflare's network can do this task. In fact, the company prepared its infrastructure for the advent of AI years ago. This is why CEO Matthew Prince stated they have "a pipeline of customers interested in putting hundreds of billions" of AI tasks onto Cloudflare's infrastructure every month.
Its impressive network has enabled Cloudflare to consistently grow revenue. Since its IPO in late 2019, sales have seen double-digit year-over-year growth.
In Q3, Cloudflare's revenue rose 32% year over year, hitting $335.6 million. Moreover, the company expects to wrap up 2023 with $1.3 billion in annual sales, exceeding 2022's $975.2 million.
3. Microsoft: Cloud computing
NASDAQ: MSFT
Key Data Points
Tech stalwart Microsoft (MSFT +0.60%) is riding a rocket ship of rising revenue thanks not to its ubiquitous Windows and Office products but rather to cloud computing and AI. In its fiscal first quarter, which ended Sept. 30, the company saw revenue jump 13% year over year to $56.5 billion while net income soared 27% to $22.3 billion.
Its Azure and other cloud computing products experienced 29% year-over-year growth. These products generated $22.3 billion, nearly half of Microsoft's fiscal Q1 revenue.
The company expects its sales success to continue, forecasting double-digit second-quarter revenue growth across many of its products, including Azure. In the words of Microsoft CFO Amy Hood, "With our strong start to FY24, I am confident that as a team, we will continue to deliver healthy growth in the year ahead driven by our leadership in commercial cloud and our commitment to lead the AI platform wave."
Microsoft is infusing AI across many of its products. Currently, over 18,000 organizations use Microsoft's artificial intelligence technology. And with its acquisition of Activision Blizzard in late 2023, Microsoft's gaming division is positioned to grow revenue in 2024 and beyond.
Before its acquisition, Activision Blizzard achieved $4.6 billion in sales through the first half of 2023, more than 30% year-over-year revenue growth. This new income source will add to the rising sales in Microsoft's Xbox gaming division, which enjoyed a 13% year-over-year revenue increase in fiscal Q1.
Investments in Microsoft, Cloudflare, and Nvidia provide diversity in your holdings and exposure to key sectors of the AI market. Each is enjoying a track record of success entering 2024, and with the share prices of all three retreating from 52-week highs due to the broader stock market's pullback, now is a good time to buy this trio of prosperous tech companies.
