Two AI Stocks to Buy and Hold for the Next Decade

Key Takeaways

Applied Digital is poised to benefit from the soaring demand for AI-driven data center infrastructure, projecting $7 billion in contracted revenue.
Microsoft is rapidly expanding its cloud services, with significant growth in Azure, securing its competitive edge in AI integration.
Investors might find potential in both stocks, as they cater to different aspects of the booming AI industry despite varying risk profiles.

Applied Digital’s Growth in AI Infrastructure

Rapid advancements in artificial intelligence (AI) are leading to massive investments in data center infrastructure. This trend marks a significant opportunity for Applied Digital (APLD), a data center builder with a current market cap of $3.7 billion. Despite its volatility and recent operating losses, the company’s revenue has surged from $55 million in fiscal 2023 to an expected $215 million in fiscal 2025, showing year-over-year growth of 41% in the last quarter.

Applied Digital’s operations are vital, as demand for data center power continues to rise. Goldman Sachs reports a notable increase in the projected power capacity of data centers, with AI usage forecasted to grow from 14% to 27% by 2027. The company has secured a crucial 15-year lease with CoreWeave for a significant power supply, which is expected to generate around $7 billion in contracted revenue over time. This partnership bolsters confidence in Applied Digital’s ability to capitalize on the AI boom.

Nvidia’s stake in Applied Digital further illustrates industry optimism regarding the company’s strategy amidst the evolving AI landscape.

Microsoft’s Dominance in Cloud Computing

Microsoft (MSFT) is strategically positioned to lead in cloud computing—a key component of AI integration. Currently, with a wide array of familiar software products, Microsoft is set to benefit greatly from the increasing demand for AI capabilities through its subscription services like Copilot.

The company’s cloud platform, Azure, has showcased impressive growth, with a 39% year-over-year increase in revenue during the last quarter, outperforming rival Amazon Web Services. The ongoing shift of data from on-premise servers to cloud solutions is being accelerated by AI adoption, further fueling demand for Microsoft’s services.

In addition to AI, Microsoft is venturing into quantum computing through its collaboration with Atom Computing, aiming to launch quantum solutions on Azure by 2025. This commitment to pioneering technologies complements an impressive financial performance, with the company generating $71 billion in free cash flow on $281 billion in total revenue last year.

Both Applied Digital and Microsoft present unique investment opportunities as they navigate the burgeoning AI sector, albeit with differing levels of risk and growth profiles.

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