In the past couple of years, artificial intelligence (AI) emerged as one of the key investment themes on Wall Street. The frenzy surrounding AI is not without reason -- it presents a set of technological tools and innovations that transform entire industries and functional disciplines. Wall Street had to jump on this bandwagon, and subsequently, many AI-powered stocks soared to dizzying highs.
Some of these stocks are still going strong and can generate impressive returns in the next few years, especially for investors with around $50,000 to spare now (which is not required for regular expenditures or contingencies).
Here's what I consider a hypothetical $50,000 investment portfolio should look like.
Nvidia
Chip giant Nvidia(NASDAQ: NVDA) will account for the biggest chunk or 40% ($20,000) of my hypothetical $50,000 investment portfolio.
The company is the undisputed leader in the global AI market thanks to its focus on offering a complete end-to-end AI platform comprising technologically superior chips (graphics processing units or GPUs, data-center products, and DGX systems); software ecosystem (CUDA, a parallel computing platform); Nvidia AI Enterprise software and data-center specific accelerated-software solutions; advanced-networking components; and servers.
Nvidia's stock soared 2,900% in the past five years (after adjusting for the 10:1 stock split in June 2024). Yet, the company still has the potential to grow even higher in 2025 mainly driven by the surging demand for its next-generation Blackwell platform, which is far outpacing supply. Nvidia expects to ramp up production of Blackwell systems and record billions of dollars in Blackwell revenues in the fourth quarter of fiscal 2025 (ending Jan. 31, 2025). Reports also indicate that these Blackwell systems sold out for the next 12 months, implying the company will enjoy solid pricing power.
In the face of a tight Blackwell supply, Nvidia may continue to see robust demand for its Hopper chips from data center and enterprise AI segments in the coming quarters. Additionally, the company's software solutions are proving to be a major competitive edge, since they help boost the adoption and functioning of the company's hardware products. As the CUDA-compatible graphics processing unit (GPU)-installed base grows from millions to tens of millions in the AI market, Nvidia expects demand for Nvidia AI Enterprise software to grow significantly in the coming months. The company expects its software business to reach an annual run rate of $2 billion by the end of fiscal 2025, thus emerging as a major-revenue catalyst in the next few years.
Considering the many tailwinds, Nvidia has lots of upside potential.
Microsoft
Technology behemoth Microsoft(NASDAQ: MSFT) will make up 30% or $15,000 of my hypothetical $50,000 investment portfolio.
Microsoft's partnership with ChatGPT developer OpenAI proved transformational and played a pivotal role in enabling the company to build AI-optimized hardware and software stacks rapidly. The demand for Microsoft's AI infrastructure, which includes Azure AI services (cloud-native suite of AI applications focused on areas such as data analysis, machine learning, and deep learning), CoPilots (AI agents integrated into various applications), and custom AI chips, has been far outpacing supply.
The increasing adoption of AI services is also driving the usage of Microsoft's data services. The number of Azure AI customers using the company's data services grew by almost 50% year over year in the fiscal 2024 Q4 (ending June 30, 2024). Microsoft Fabric, the company's AI-powered next-generation data platform, had more than 14,000 paying customers at the end of the fourth quarter. Microsoft's Azure Arc service, a multicloud and on-premise management solution, was also adopted by nearly 36,000 customers at the end of quarter, up 90% on a year-over-year basis.
Microsoft's Azure cloud-computing business is also a major growth catalyst. Azure is a key beneficiary of the ongoing migration of on-premise enterprise data to the cloud. Furthermore, the company's cloud-based data-integration service, Data Factory, enables clients to connect their on-premise data estate to Azure services and Fabric services even before full-data migration.
Cybersecurity is another major growth avenue, with the company boasting a customer base of 1.2 million for its security offerings at the end of Q4. Over 800,000 large customers were using four or more of the company's security workloads, up 25% on a year-over-year basis. This implies that Microsoft's products are tightly integrated into many of their customers' operations, making it difficult for the latter to switch to competitors.
Clearly, Microsoft has several growth drivers that can have a very positive impact on its financial and share-price performance in fiscal 2025.
In summary, Microsoft may be a smart buy for astute investors.
Meta Platforms
Social media giant Meta Platforms(NASDAQ: META) will account for the remaining 30% or $15,000 of my hypothetical $50,000 investment portfolio.
Accounting for a 21.3% share of the U.S. digital-advertising spending, Meta demonstrated an exceptional ability to effectively monetize its Family of Apps (Facebook, WhatsApp, Instagram, and Messenger). This is evident based on the steady improvement in the cost per impression paid by advertisers for advertising on Facebook and Instagram since January 2024.
Meta leverages multiple AI technologies to improve content recommendations across its social media applications, which in turn helps add new users and boost overall user engagement. The company also helps advertisers create more targeted advertisement campaigns with its AI-powered Advantage+ suite of solutions. All these initiatives translate into higher returns for advertisers, which increase the attractiveness of Meta's social media applications.
Meta has nearly 3.2 billion people using at least one of its applications in the fiscal 2024 Q2 (ending June 30, 2024). The huge user base and broad geographical reach generated a powerful network effect since more users make the platform even more attractive for advertisers, who then offer additional avenues for user engagement. Subsequently, Meta enjoys significant pricing power for its digital assets. Furthermore, the user base gives the company access to more data, which helps it improve its content recommendation and ad-targeting algorithms.
Meta's Reality Labs business is not yet profitable. However, the company views it as a solid long-term investment. Plus, based on the strength of its core digital-advertising business, Meta seems to be a smart pick now.
Should you invest $1,000 in Nvidia right now?
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Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Microsoft, and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
