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Nvidia overtakes Microsoft in AI market

Nvidia overtakes Microsoft in AI market

Nvidia AI

Nvidia and Microsoft are at the forefront of the AI revolution. Both companies have seen tremendous growth in recent years, with Nvidia’s revenue surging from $6.91 billion in 2017 to $60.92 billion by January 2024. Microsoft’s revenue has also tripled from $96.5 billion in 2017 to $211.9 billion in 2023.

Nvidia’s growth has been exponential, especially in the past year and a half. The company’s net margins have increased from 24% in 2017 to 48.8% now, indicating that it is tightening costs as business booms. Nvidia’s sales come with very high-profit margins, over 78% in gross profit margin, with projections indicating a 97% revenue growth by the fiscal period ending in January 2025.

Microsoft’s growth has been more steady compared to Nvidia’s rocket-like trajectory. The company’s profit margin has jumped from around 26.3% to a solid 34.1% in the past year. Microsoft’s growth momentum has been revitalized through the successful execution of its GenAI monetization strategies, including substantial traction with Microsoft 365 Copilot, its exclusive cloud partnership with OpenAI, and impressive performance from Azure.

Nvidia’s rapid ascent in AI

Wall Street remains optimistic about both companies. Analyst consensus maintains Nvidia as a “Strong Buy,” with 38 out of 41 analysts having a bullish recommendation.

The potential upside stands at 9.35%. Similarly, of the 35 analysts who cover Microsoft, only one has a Hold recommendation, while the rest have reiterated a Buy rating. The potential upside is 10.57%.

While both companies offer compelling investment opportunities, Microsoft’s steady growth and integration strategies make it the more stable choice for long-term investors. Nvidia’s rapid ascent may push its valuation to the limit, whereas Microsoft’s growth has been more linear and sustainable. Ultimately, the choice between Nvidia and Microsoft depends on an investor’s risk tolerance and investment horizon.

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Those looking for explosive growth may favor Nvidia, while those seeking stability and a more diversified portfolio may prefer Microsoft. Regardless of the choice, both companies are well-positioned to benefit from the ongoing AI boom and shape the future of technology.

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