Wednesday, November 6, 2024

The Best AI Investment: Nvidia, Microsoft, or Google?

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In this analysis, I’ll leverage TipRanks’ Stock Comparison Tool to closely examine three leading AI investment opportunities. Although Nvidia (NVDA) has delivered an impressive five-year return of 2,524%, compared to under 200% for Microsoft (MSFT) and Google (GOOGL), I’m not convinced it represents the best long-term choice at this stage. Microsoft and Google, by contrast, offer greater medium- to long-term stability. Consequently, I am more bullish on these established Big Tech giants than on the newer AI-focused semiconductor player, Nvidia.

I’m currently neutral on Nvidia, even though it has delivered remarkable returns in recent years. Nvidia has experienced nearly 200% year-over-year revenue growth and a net income margin of 55% over the past 12 months (up from a five-year average of 31.4%). While 2025 is expected to be strong, with the new Blackwell GPU already sold out, the company is approaching a potential inflection point. Those familiar with semiconductor investments will recognize their cyclical nature.

Although it’s uncertain when Nvidia might see a revenue contraction, I believe it’s likely in the medium term. As Big Tech companies eventually taper their AI capital expenditures, Nvidia could experience a typical cyclical downturn. While future AI infrastructure spending cycles are expected, it’s unlikely the current upcycle will continue without significant demand fluctuations—especially if the first AI downturn coincides with a broader economic recession.

I believe Nvidia stock still has room for gains over the next couple of years, though I find its risk profile concerning. Market volatility could affect the stock heading into 2026, with 2027 and especially 2028 likely to be more challenging. For now, however, my rating is a Hold, with a conservative October 2025 price target of $155 and a bull-case target of $175.

Wall Street remains highly bullish on Nvidia, with an average NVDA price target of $153.86, indicating a 13.6% upside. The consensus rating is a Strong Buy, based on 39 Buy ratings, three Holds, and no Sells. This supports the case for holding Nvidia until a potential medium-term downturn becomes clearer.

See more NVDA analyst ratings

I’m particularly bullish on Microsoft, viewing it as a long-term buy-and-hold investment rather than just a short- to medium-term play like Nvidia. As the AI leader in Big Tech, Microsoft is well-positioned for sustained growth without the heavy cyclicality facing AI semiconductor companies like Nvidia. Instead of relying on Big Tech capital expenditures, Microsoft benefits from recurring revenues through its AI-driven cloud subscription services.

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