Nvidia (NVDA -6.22%) has been among the best-performing stocks of 2024, and it's easy to see why. The company provides the graphics processing units (GPUs) that quickly became the gold standard for powering artificial intelligence (AI) systems. The wave of demand for its chips has pushed the company's market cap to nearly $3.7 trillion as of this writing, making it the world's second most valuable company (as of this writing).
Yet some investors are already looking ahead, as advances in AI these days are coming fast and furious. The first wave of AI was characterized by strict rules-based systems that were limited to specific tasks. The second wave saw the development of machine learning, which ushered in the ability of AI to detect patterns buried within massive datasets and draw conclusions. Generative AI represents the third wave of AI development, and many believe it will be characterized by AI "agents." These next-generation systems will have more contextual understanding and will be able to act independently of human intervention to perform a wide variety of tasks.
Microsoft (MSFT -1.28%) is leading the charge in agentic AI, and I predict the stock will be worth more than Nvidia by 2030.
Image source: Getty Images.
From science fiction to science fact?
Many investors are already familiar with the concept of chatbots, or AI-powered programs best known for their ability to answer questions and have conversations with humans. The novelty of these systems took the tech world by storm over the past few years, as they could provide basic information within defined parameters very quickly.
The next phase of generative AI was exemplified by Microsoft Copilot. This suite of AI assistants was designed to increase productivity in a work setting, prioritizing and drafting emails, creating outlines and presentations, debugging code, creating images, and much more.
However, the holy grail of AI research -- according to Microsoft -- is the development of AI agents that can go far beyond these simple tasks, with the ability to "reliably complete complex, multi-step tasks across a wide range of scenarios people encounter in their daily lives." To that end, the company recently introduced Magentic-One, which it says is "designed to solve such tasks."
The system ties together multiple AI agents -- with Magentic-One as the lead agent or "Orchestrator" -- to enable it to coordinate the tasks of the other agents, track their progress, and recalibrate when there's a problem. These individual agents can perform tasks such as operating a web browser, writing or executing code, or searching local files for data.
This comes on the heels of Microsoft's announcement that customers can create autonomous agents within its Copilot Studio. The company also debuted 10 pre-built autonomous agents for Dynamics 365. For example:
- The Sales Qualification agent researches and prioritizes incoming sales leads and creates personalized messages to potential customers.
- The Supplier Communications Agent works in supply chain management to confirm purchase orders and deliveries.
- The Case Management Agent for customer service automates a number of key tasks within a given case, including ticket creation, resolution, follow-up, and closure.
Since Microsoft introduced AI agents to Copilot Studio in November, the company has attracted more than 100,000 organizations that are creating or editing AI agents. Furthermore, its platform integrates with more than 1,400 third-party systems while giving users access to 1,800 large language models (LLMs) that underpin generative AI. In fact, Microsoft has the "largest AI agent ecosystem -- and no one else is close," according to Venture Beat.
Microsoft has provided testimonials from customers using AI that resulted in savings of $50 million annually or generated productivity gains equivalent to "adding 187 full-time employees." This helps illustrate the value of agentic AI.
Finally, as part of its Copilot Control System, Microsoft has debuted tools that help IT departments measure return on investment (ROI) for their AI spending, removing a key hurdle that has kept some businesses from taking the plunge.
Why it matters
Make no mistake, AI has been a boon to Microsoft, as the company has been working feverishly to capitalize on the potential windfall. In its fiscal 2025 first quarter (ended Sep. 30), Microsoft said that 12 points of its Azure Cloud growth was the result of AI services. It went on to note that "Demand continues to be higher than our available capacity." To meet that demand, Microsoft is on track to spend $80 billion on additional data centers this fiscal year.
Furthermore, while the company doesn't break out its AI revenue, CEO Satya Nadella said, "Our AI business is on track to surpass an annual revenue run rate of $10 billion next quarter, which will make it the fastest business in our history to reach this milestone." Many believe that's just the beginning, with Microsoft's AI strategy generating as much as $100 billion in incremental revenue annually by 2027. If the company comes anywhere close to that benchmark, the stock will likely soar.
To be clear, I'm not betting against Nvidia, particularly given its place in the AI revolution. It's also one of my largest positions, so I'm rooting for the company to succeed. However, given its meteoric rise -- up more than 900% over the past couple of years -- I expect Nvidia's stock to grow at a more moderate pace over the next few years.
At the same time, I think Microsoft's growth will accelerate thanks to its efforts with agentic AI, a strategy that will likely pay dividends for years to come.
It also doesn't hurt that Microsoft is selling for 33 times forward earnings compared to 51 times forward earnings for Nvidia, so it's also a cheaper AI stock.
Taken together, this is why I predict Microsoft will be worth more than Nvidia by 2030.
