Nvidia(NASDAQ: NVDA) and Microsoft(NASDAQ: MSFT) are pioneers in artificial intelligence (AI) as both companies played a central role in bringing this technology into the mainstream.
Although Microsoft-backed OpenAI started the AI craze when it launched the wildly popular ChatGPT in November 2022, the chatbot might not have seen the light of day without Nvidia’s graphics processing units (GPUs), which were used to train a large-scale language model (LLM ) runs ChatGPT. As other big tech giants joined the AI race, demand for Nvidia’s chips skyrocketed, leading to a surge in revenue and bottom line.
Meanwhile, the impact of artificial intelligence on Microsoft’s business has been gradual. The company is spending billions building its AI data center infrastructure — benefiting Nvidia in the process — and believes its AI-focused investments will “support monetization over the next 15 years and beyond.” This explains why Nvidia’s stock has outperformed Microsoft’s by a huge margin over the past few years.
But will Nvidia continue to outperform Microsoft in 2025? Let’s find out.
As mentioned above, Microsoft is gradually using AI. The company’s fiscal 2024 revenue (which ended June 30) rose 16% year-over-year to $245 billion. Its adjusted earnings rose 20% year over year to $11.80 per share. The company’s estimated revenue growth rate of 14% for fiscal 2025 to $278.6 billion isn’t exactly great, while its earnings are expected to increase 10.5% to $13.04 per share.
Forecasts for fiscal 2026, which will begin in July 2025, also do not point to much improvement. Consensus estimates call for a 14% increase in Microsoft’s revenue next fiscal year, along with a 15% jump in earnings.
A chart of MSFT’s revenue estimates for the next fiscal year
On the other hand, Nvidia is expected to end the current fiscal year (which ends in January 2025) with a remarkable 112% increase in revenue to $129 billion, followed by a 52% increase in the next fiscal year to $196 billion. Nvidia’s profits are also expected to jump an impressive 128% in the current fiscal year, followed by a 50% jump in the next.
All of this indicates that Nvidia could continue to grow at a much faster pace than Microsoft over the next year. Moreover, the 12-month median price target for both companies suggests that Nvidia’s stock could rise 33%, while Microsoft is expected to post a 20% gain. So the odds look in favor of Nvidia surpassing Microsoft in 2025, which isn’t surprising given that the chip maker continues to witness high demand for its AI data center GPUs.
However, investors would do well to note that several concerns could weigh on Nvidia’s stock. From potential restrictions that could be imposed on the sale of its AI chips to foreign countries to a costly valuation to efforts by major Nvidia customers to reduce their reliance on its chips, there are a number of reasons why Nvidia’s stock may remain under pressure.
Moreover, the company’s growth rate — while still impressive — is gradually slowing. These are the reasons why Nvidia’s stock could lose its luster in 2025. Microsoft, on the other hand, is slowly but steadily stepping up its game in key AI-focused niches that could give it tremendous growth in the long term.
The tech giant is already gaining market share in cloud computing thanks to artificial intelligence. Microsoft’s revenue from Azure cloud and other services grew 33% in the first quarter of fiscal 2025, with AI contributing 12 percentage points to that growth. More importantly, AI is helping Microsoft build a solid revenue pipeline by driving an increase in the number of large contracts the company signs for its Azure cloud solutions.
This is evident from the 22% increase in Microsoft’s remaining operating obligations (RPO) in fiscal first quarter 2025 to $259 billion. Faster growth in RPO compared to revenue is a good sign for Microsoft, as this metric refers to the total value of the company’s unfulfilled contracts. Microsoft expects to recognize 40% of its RPO as revenue over the next 12 months, which would be an increase of 17% year-over-year.
As a result, the possibility of Microsoft growing at a faster pace than Wall Street’s expectations in the coming year cannot be ruled out. A similar story could be unfolding at Nvidia, and the company could overcome the adversity it is currently facing.
While the outgoing administration’s potential restrictions on Nvidia’s chip exports could threaten its significant revenue growth — 56% of revenue comes from customers outside the US — investors should note that the rules will apply in 120 days, giving the incoming administration time to consider the new rules.
On the bright side, Nvidia’s focus on significantly increasing the production capacity of its latest Blackwell AI processors to meet the hot demand from its customers, coupled with the huge increase in AI infrastructure spending by US customers, could be enough to help the company grow at an impressive pace again in 2025. As such, the possibility of Nvidia’s stock maintaining its mojo despite the potential challenges it faces cannot be ruled out.
The uncertainties surrounding Nvidia could tempt investors to put their money into Microsoft stock to capitalize on the AI boom, especially given the latter’s valuation. After all, Microsoft trades at a much lower 34 times earnings compared to Nvidia’s 52 times earnings.
However, Nvidia’s future earnings of 31 are in line with Microsoft’s, which is not surprising given the remarkable growth expected from the company. That makes Nvidia an attractive AI stock to buy right now, and investors may consider using the negative press surrounding it as a buying opportunity given that its huge addressable market could be enough to help it overcome any potential regulatory challenges.
But at the same time, even Microsoft looks like the best AI stock to buy for the long haul given the huge opportunities in cloud computing and workplace collaboration that could accelerate its growth.
So investors can consider buying either of these two AI stocks right now, depending on their risk appetite, and there’s a good chance they might not go wrong in 2025, as well as in the long run, since both Microsoft and Nvidia are sitting on lucrative end markets. thanks to AI.
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Sharp Chauhan has no position in any of the listed stocks. The Motley Fool has positions and recommends Microsoft and Nvidia. The Motley Fool recommends the following options: long $395 January 2026 calls on Microsoft and short $405 January 2026 calls on Microsoft. The Motley Fool has a disclosure policy.
