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Anticipated Outcome: A Singular, Unrelenting Artificial Intelligence (AI) Shares will spearhead the "Third Phase" of AI Innovation and Surpass Nvidia's Worth by 2030
Nvidia (NVDA 3.10%) has been among the top performers in the stock market in 2024, and it's not hard to understand why. The company provides the graphics processing units (GPUs) that have become the gold standard for powering artificial intelligence (AI) systems. The soaring demand for its chips has propelled the company's market cap to an impressive $3.7 trillion, making it the world's second most valuable company as of this writing.
Yet, some investors are looking beyond the present, with advancements in AI happening at a blistering pace. The first wave of AI relied on strict rules-based systems for specific tasks. The second wave brought machine learning, enabling AI to detect patterns within massive datasets and draw conclusions. The current wave, known as generative AI, features AI "agents" that will have more contextual understanding and the ability to act independently of human intervention to perform a wide range of tasks.
Microsoft (MSFT 1.05%) is spearheading the agentic AI charge, and I predict its stock will eclipse Nvidia's value by 2030.
AI from Fantasy to Reality
Chatbots, or AI-powered programs capable of answering questions and having conversations with humans, captured the tech world's imagination over the past few years. However, the future of AI lies in more sophisticated AI agents that can complete complex, multi-step tasks in a wide range of daily scenarios.
Microsoft's Copilot suite is evidence of this future. These AI assistants can prioritize emails, draft outlines and presentations, debug code, create images, and more. But the ultimate goal is the development of AI agents capable of reliably completing complex tasks with minimal human intervention and across various scenarios.
Recently, Microsoft unveiled Magentic-One, its answer to this challenge. It's an AI system that coordinates multiple AI agents, tracking their progress, and recalibrating them in the event of problems. Individual agents can execute tasks like operating a web browser, writing or executing code, or searching local files for data.
Magentic-One and the Evolution of AI
Microsoft introduced Magentic-One alongside the Copilot Studio, a platform that allows users to create their AI agents. Over 100,000 organizations are currently creating and editing agents on this platform, which also enables integration with over 1,400 third-party systems and grants access to almost 2,000 large language models.
To support its Copilot Control System, Microsoft released tools to help IT departments measure return on investment (ROI) for their AI spending, removing a significant hurdle for businesses considering AI integration.
The AI agent ecosystem, powered by Microsoft, is rapidly expanding, boasting testimonials from customers that have realized productivity gains equivalent to adding an additional 187 full-time employees or generating $50 million in annual savings.
Why it Matters
Microsoft has been aggressively capitalizing on AI's potential, making the technology central to its business growth. The company reported 12 points of Azure Cloud growth in its first fiscal quarter of 2025 due to AI services and plans to invest $80 billion in additional data centers this fiscal year to meet the rising demand.
Furthermore, Microsoft's AI business is on track to surpass a $10 billion annual revenue run rate, according to CEO Satya Nadella, with AI strategy potentially generating up to $100 billion in incremental revenue annually by 2027.
While I remain bullish on Nvidia, I believe Microsoft's focus on agentic AI will drive accelerated growth for the company in the coming years. The stock's valuation currently stands at 33 times forward earnings compared to Nvidia's 51 times forward earnings, making it a more attractive investment choice for some investors.
In conclusion, Microsoft's relentless pursuit of AI advancements, coupled with its significant investment in research and development, positions the company to dominate the AI market and outperform Nvidia by 2030.
Investors who are looking ahead to the future of AI may find Microsoft's focus on agentic AI and its associated technologies appealing for investment. The company's Magentic-One and Copilot suite are paving the way for the development of AI agents that can complete complex tasks with minimal human intervention, potentially creating significant productivity gains and cost savings for businesses.
Given Microsoft's aggressive investment in AI and its potential to generate substantial revenues, some investors might consider Microsoft a more attractive investment option compared to Nvidia, despite Nvidia's strong performance in the stock market and its key role in powering AI systems with its GPUs.