Finding stocks that are nearly set-it-and-forget-it options is nice for many investors. Instead of buying a broad index fund and accepting market-average returns, identifying stocks that have the potential to beat the market over the next decade can be a phenomenal investment strategy. The key is to find companies that have long-term growth plans that position them to meet your return requirements. I think I've identified three such stocks in Nvidia (NVDA +0.15%), Microsoft (MSFT +0.11%), and Amazon (AMZN 1.24%).
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Nvidia may be the most controversial stock on this list, but I think it's worth an inclusion. It makes graphics processing units (GPUs) that are the primary computing units deployed in data centers for artificial intelligence (AI) workloads. There have been investor worries since the start of the AI infrastructure build-out about what will happen to Nvidia's stock when this phase of the cycle wraps up. However, I think investors are looking at it the wrong way.
In 2026, the four AI hyperscalers plan to spend a record-setting total of $650 billion on data center capital expenditures. Next year, Nvidia estimates that the figure will reach $1 trillion. By the end of 2030, Nvidia expects $3 trillion to $4 trillion in annual global data center capital expenditures. That's huge growth and will create a massive footprint of cloud infrastructure. However, the computing units being installed during this build-out phase won't last forever.
AI processors in data centers are run aggressively and often burn out after a handful of years of service. By the time 2030 rolls around, there will be countless GPUs in use that will be more than five years old and need replacing. That will create another revenue stream for Nvidia, and allow it to continue succeeding long after the core infrastructure build-out is complete.
As a result, I think Nvidia is a stock that investors can confidently buy and hold over the next decade. With the impressive growth rates that it's expecting over the next few years, it just might get all of the returns it needs to outperform in the market for a decade in just a few years.
On the surface, Microsoft and Amazon may appear to occupy two completely different positions in the tech sphere. However, they have one business line in common that makes both of them solid, long-term investments: cloud computing. Each operates a thriving cloud computing platform (Amazon Web Services and Microsoft Azure) that heavily influences their overall results.
Cloud computing will also be how these two monetize AI for years to come. Because most AI companies don't have the means, desire, or technical wherewithal to build their own data centers, they rent the capacity they need out from cloud computing providers like AWS or Azure. The pricing on this is usually determined by usage, so as long as AWS and Azure's clients continue using computing resources (a very likely bet), these two businesses will have solid subscription-like revenue streams.
Furthermore, these two should experience monster growth over the next few years. Both Amazon and Microsoft are spending hundreds of billions of dollars on building new data centers, and once they come online, that will eventually translate into growth for their cloud computing wings. That will result in much higher overall growth rates for each business, which should boost the stocks to market-crushing status.
The major investments Microsoft and Amazon are making right now will have multiyear payoffs, so investors should also have a long-term mindset when it comes to their stocks. While the amount of capital being spent to achieve this growth is scary, Amazon CEO Andy Jassy pointed out in his annual shareholder letter that the faster AWS grows, the more money the company has to spend to sustain it. That can be said for all cloud computing providers, so soaring capital expenditure bills shouldn't scare you; they should excite you.
Keithen Drury has positions in Amazon, Microsoft, and Nvidia. The Motley Fool has positions in and recommends Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.
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