The growth of artificial intelligence (AI) has emerged as one of the most significant technological advancements since the internet and personal computer revolutions of the 1990s. As companies across various sectors scramble to leverage AI technologies, investments in the related domains have the potential for remarkable returns over the next decade. Among the numerous stocks poised to benefit, two standout options are Applied Digital and Microsoft.
### Applied Digital
With a market capitalization of approximately $3.7 billion, Applied Digital (APLD) specializes in building data centers essential for storing and processing the massive amounts of data generated by AI applications. As AI technology continues to advance, the demand for data center infrastructure is set to skyrocket.
Applied Digital has demonstrated impressive growth, with revenue jumping from $55 million in fiscal year 2023 to $215 million in fiscal year 2025. This represents a staggering year-over-year growth of 41% in its most recent quarter. However, investors should also note that the company has experienced substantial operating losses due to the high capital expenditures associated with constructing data centers, reporting a loss of $26 million in the most recent quarter.
Despite this volatility, the long-term outlook remains promising. Goldman Sachs estimates that global power used by data centers will reach 84 gigawatts by 2027, with AI accounting for up to 27% of that usage. This opens up substantial opportunities for companies like Applied Digital, which recently secured a 15-year lease agreement with AI hyperscaler CoreWeave. The contract will supply 250 megawatts of power for CoreWeave’s data center campus, potentially generating around $7 billion in revenue over its term.
Another endorsement of Applied Digital’s potential comes from Nvidia, the AI chip leader, which held a significant stake in the company during the second quarter. Nvidia’s confidence reinforces the belief that Applied Digital is well-positioned to capitalize on the burgeoning data center market.
### Microsoft
On a more established note, Microsoft (MSFT) offers a reliable investment avenue amidst the volatility associated with smaller companies like Applied Digital. With a strong foundation as a highly profitable business, Microsoft is also a frontrunner in the burgeoning cloud-computing sector. The company is rapidly positioning itself to capture the No. 1 market share in this space.
Microsoft’s extensive suite of software products, including Windows, Office, and Teams, gives it an edge in converting existing users into customers for its AI tools. The company’s Azure cloud services are experiencing substantial growth, with revenue surging by 39% year over year in the recent quarter. This growth trajectory is particularly noteworthy compared to competitors like Amazon Web Services, which have seen slower growth rates.
The acceleration in Azure’s performance—up from a previous growth rate of 33%—indicates that businesses are increasingly migrating to the cloud to utilize advanced AI features that can boost efficiency. As AI adoption continues to grow, Microsoft’s investment in cloud infrastructure ensures that it will be in a favorable position to meet future demand.
Moreover, Microsoft’s vision doesn’t stop at conventional cloud services. The company is also investing in quantum computing, another horizon of growth that could redefine computing capabilities. Collaborating with Atom Computing, Microsoft aims to deliver quantum computer solutions via Azure by the end of 2025. The introduction of the Majorana 1 quantum chip this year underscores its commitment to innovation in solving complex computing challenges.
### Comparison and Conclusion
In evaluating these two opportunities, it’s evident that both Applied Digital and Microsoft provide distinct advantages for investors. Applied Digital, as a burgeoning player in data center construction, offers significant upside potential in a rapidly growing segment of the AI economy. However, this potential comes with inherent volatility and risks usually associated with smaller companies.
Conversely, Microsoft represents a more stable investment, backed by extensive resources and a diverse portfolio of products. With solid cash flow—reporting $71 billion in free cash flow against $281 billion in revenue over the past year—Microsoft’s ability to weather market fluctuations makes it an attractive hold for the long term.
For investors looking toward the next decade, a diversified approach may be beneficial. A combination of Applied Digital’s high-growth potential and Microsoft’s strong market position could create a balanced investment strategy that capitalizes on the ongoing AI boom.
In summary, as AI continues to transform the technological landscape, both Applied Digital and Microsoft stand out as compelling options. While Applied Digital’s rapid growth makes it a candidate for high returns, Microsoft’s established market presence and continued innovation offer a reassuring hedge against the volatility that accompanies emerging technologies. By focusing on both companies, investors may well position themselves to reap significant rewards from the transformative power of AI in the coming decade.
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