Nvidia (NVDA -3.00%) has become the second-largest company in the world with a market capitalization of $3.3 trillion as of this writing, with the terrific demand for artificial intelligence (AI) chips playing a key role in helping the chipmaker achieve this position.
The semiconductor giant’s impressive rise can be justified by the phenomenal increase in its revenue and earnings over the past couple of years thanks to the dominant position it has built for itself in the market for AI chips. After all, Nvidia reportedly controls somewhere between 80% to 85% of the market for AI chips.
More importantly, it has been diversifying into additional avenues so that it can keep growing at a healthy rate over the next 10 years.
Nvidia is setting itself up for solid growth in the coming decade
Nvidia’s terrific share puts it in a solid position to maintain its impressive growth in the coming years considering that the AI chip market is expected to generate $621 billion in revenue by 2032, according to market research provider SNS Insider. However, the growing competition within AI chips as well as efforts being undertaken by major cloud companies to reduce their reliance on Nvidia by developing in-house chips could pose challenges for the company in the long run.
Of course, Nvidia has the potential to remain the top player in the AI chip market since it is focused on staying ahead of its rivals by building a robust supply chain and maintaining a technological advantage. At the same time, the company’s expansion into additional verticals such as enterprise software, AI agents, autonomous vehicles, cloud gaming, and a massive opportunity created by the shift to accelerated computing indicates that Nvidia has an addressable market that’s worth well over $1 trillion.
Nvidia is expected to finish its ongoing fiscal year 2025 with an estimated revenue of $129 billion, which would be a 112% increase from the previous year. So, its huge addressable opportunity tells us that the chipmaker still has a lot of room for growth. However, there is another company that may be able to overtake Nvidia in the coming decade thanks to its already-established position as a leader in multiple lucrative end-markets -- Microsoft (MSFT -1.32%).
We will now take a look at Microsoft’s growth drivers for the next decade to know why its market cap could be higher than Nvidia after 10 years.
Microsoft is well-placed to win from bigger AI-related opportunities
Microsoft is the third-largest company in the world, just behind Nvidia, with a market cap of $3.11 trillion. Now, its growth is nowhere near Nvidia’s when we consider that Microsoft’s revenue in the ongoing fiscal year 2025 is expected to increase by 13% to $278.6 billion, as per consensus estimates, while earnings are forecast to jump by 10.5% to $13.04 per share.
However, as the following chart tells us, Microsoft’s growth is expected to pick up over the next couple of years.
MSFT EPS Estimates for Current Fiscal Year data by YCharts
It is not surprising to see why analysts are expecting this Magnificent Seven company’s growth rate to accelerate. After all, Microsoft has been investing aggressively in AI infrastructure and is building “long-lived assets that will support monetization over the next 15 years and beyond.” Though there have been concerns regarding the payoff of Microsoft’s AI investments, savvy investors would do well to note that the company is serving multiple AI-focused markets that are on track to become humongous over the next decade.
For instance, Goldman Sachs estimates that the global cloud computing market could generate $2 trillion worth of revenue by 2030 thanks to the deployment of generative AI-focused offerings. The investment bank forecasts a compound annual growth rate of 22% for the cloud computing market from 2024 to 2030. If we assume even a 10% annual increase in cloud spending over the next five years, the size of this market could exceed $3.2 trillion.
Microsoft is the second-largest player in the cloud computing market with a 20% share, according to Synergy Research. The good part is that it has been gaining ground in this market thanks to AI, with management pointing out that AI contributed 12 percentage points to the growth of its Azure cloud service last quarter.
Assuming Microsoft could increase its cloud market share to 25% after a decade, it could generate $800 billion in revenue from this segment alone (based on the $3.2 trillion addressable market calculated above). That would be a massive increase over the $105 billion revenue Microsoft’s Intelligent Cloud business generated in fiscal 2024.
Meanwhile, the market for AI agents is another budding area that could be a big driver for Microsoft in the coming decade. Roots Analysis estimates that AI agents could clock 40% annual growth through 2035, generating an annual revenue of nearly $217 billion. This market is currently in its early phases of growth, but it is expected to gather solid momentum in the future.
That’s because agentic AI systems are expected to witness widespread adoption as they can solve complex problems autonomously. AI agents absorb huge amounts of data from several sources, and they can analyze and solve problems, execute tasks, and even construct business strategies. Microsoft is already in a nice position to capitalize on this opportunity.
The company has already deployed its Copilot generative AI assistant for both enterprise and individual customers, workplace collaborators, and developers. On its October 2024 earnings conference call, Microsoft management remarked that “nearly 70% of the Fortune 500 now use Microsoft 365 Copilot, and customers continue to adopt it at a faster rate than any other new Microsoft 365 suite.”
Though Microsoft doesn’t spell out the number of Copilot users it has, third-party reports indicate that the generative AI assistant was used by 28 million active users in 2024. That’s impressive considering that Microsoft started rolling out this service in November 2023. And now, Microsoft is looking to push the envelope further with Copilot Studio, a platform that will allow users to “easily create, manage, and connect agents to Copilot.”
The company launched autonomous agents for supply chain, sales, service, and finance professionals in October last year, and it points out that it will be creating more agents in the future as well. Considering that Microsoft is the leader in computer operating systems globally with an estimated market share of over 67%, it already has a solid base of users to whom it can sell its Copilot offerings.
All this indicates why Microsoft has the potential to become a bigger company than Nvidia in the coming decade. A massive addressable market such as cloud computing where it is capable of cornering a higher market share, along with emerging opportunities such as AI agents where it is already setting itself up for success could power its growth for the next decade. And as Microsoft is trading at a cheaper 35 times earnings as compared to Nvidia’s earnings multiple of 54, it seems worth buying for the long haul based on the points discussed above.
