Investment Opportunities: Long-Term AI Stocks Worth Holding for the Remainder of the Coming Decade
In the ever-evolving world of technology, two key players are making significant strides in the realm of artificial intelligence (AI) and cloud computing. Microsoft, a tech giant with a wide array of software products, and Applied Digital, a fast-growing data center builder, are at the forefront of this revolution.
Microsoft recently unveiled its Majorana 1 quantum chip, a promising solution for complex computing problems. The company is also partnering with Atom Computing on a quantum computer built on Azure Elements, which is set to ship to customers by the end of 2025. This move underscores Microsoft's commitment to capitalising on the growing demand for AI.
Meanwhile, Applied Digital, with a market cap of $3.7 billion, has signed a 15-year lease agreement with AI hyperscaler CoreWeave. The agreement, initially for 250 megawatts of power, will supply CoreWeave's Ellendale, North Dakota, data center campus. Recently, this agreement was extended to 400 megawatts, a testament to the growing demand for data center capacity. This lease is expected to generate approximately $7 billion in contracted revenue over the lease term for Applied Digital.
The growth of Applied Digital is impressive, with revenue growing from $55 million in fiscal 2023 to $215 million in fiscal 2025, and a 41% year-over-year increase in the most recent quarter. However, the company's stock has been volatile due to high upfront costs to build new data centers, resulting in large operating losses.
Microsoft, on the other hand, reported a robust performance in the June-ending quarter, with Microsoft Azure experiencing a 39% year-over-year growth. The cloud service is on pace to take the No. 1 market-share position in the cloud-computing market. Microsoft's financials are equally impressive, having generated $71 billion in free cash flow on $281 billion of revenue over the last year.
The growth of AI is considered the biggest opportunity in technology since the internet and PC adoption in the 1990s. Investors who choose wisely among the top companies benefiting from AI adoption could make a fortune over the next decade. Goldman Sachs predicts that by 2027, the global power used by data centers will increase to 84 gigawatts, with AI's percentage increasing to 27%.
The surge in demand across cloud services, software, and semiconductors is not exclusive to Microsoft and Applied Digital. Top tech companies are reporting similar trends, indicating a broader shift towards AI and cloud computing. With the potential for exponential growth, the future of these industries looks promising.
In conclusion, the tech landscape is witnessing a resurgence, driven by the AI revolution. Companies like Microsoft and Applied Digital are at the forefront of this movement, leveraging their strengths to navigate this exciting new era. As the demand for AI and cloud services continues to soar, these companies stand to reap significant rewards.
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