10 Best Tech Stocks for the Next 5 Years

4. Alphabet (NASDAQ:GOOGL)

Market Cap: $3,412.31 billion

Number of Hedge Fund Holders: 275

Alphabet owns Google Search, YouTube and Google Cloud, and it designs its own AI chips and models. Investors like that the cloud and AI side is now growing fast, while the shares have dropped to their lowest earnings multiple in more than a decade, according to Yahoo Finance.

Third-quarter revenue rose 25% to $127.6 billion, the 13th straight quarter of double-digit growth. Google Cloud revenue climbed 103% to $30.7 billion on demand for AI infrastructure, and Chief Executive Officer Sundar Pichai pointed to strong demand for its TPU systems from a wide range of customers. The Gemini app reached one billion users, which Alphabet called the fastest growth of any product in its history, and Search query growth was the highest in five years. Together, those results show the AI business reaching beyond Search into products and customers of its own.

The company backs that growth with a 33.33% operating margin over the past 12 months, and earnings per share grew 29.82% a year over the past five years. Our analysis of whether Alphabet’s valuation reflects the potential of Waymolooks at one more source of upside.

3. Microsoft (NASDAQ:MSFT)

Market Cap: $3,876.25 billion

Number of Hedge Fund Holders: 273

Microsoft sells cloud computing through Azure, business software such as Microsoft 365, and the Copilot AI assistant built into it. Investors like it because its AI spending is turning into faster cloud growth.

In its fiscal first quarter, revenue came in at $92.28 billion, ahead of the $90.63 billion Bloomberg estimates called for, and earnings per share of $4.89 beat the $4.73 forecast. Azure revenue grew 48% to $33.17 billion. Chief Financial Officer Amy Hood expects Azure growth of 49% to 50% next quarter and said better engineering efficiency helped Microsoft meet more demand with the capacity it had. That growth reflects customers buying more AI and cloud capacity from a vendor they already use. Chief Executive Officer Satya Nadella said the number of customers with 50,000 Copilot seats rose eightfold from a year earlier.

The business behind that growth is highly profitable, with a 47.10% operating margin over the past 12 months. Earnings per share grew 17.38% a year over the past five years. Our analysis of whether security bundles can earn Microsoft more profit per customer looks at another way to grow from customers it already has.