Nvidia vs Microsoft: Which Stock Offers More Upside?

TLDR

Table of Contents

Nvidia is investing up to $100 billion in OpenAI to secure its position as the main supplier of AI chips and infrastructure
Microsoft made an early investment in OpenAI that gave it exclusive access to integrate AI models into Azure cloud services and Office products
Nvidia’s investment creates a cycle where OpenAI becomes a guaranteed long-term customer for Nvidia’s graphics processing units
Microsoft’s Azure OpenAI Service and Copilot AI assistant generate new revenue streams, with Copilot priced at $30 per month per user
Analysts rate both stocks as Strong Buy, with Nvidia trading at $185.04 and a price target of $218.14, while Microsoft trades at $523.98 with a target of $629.22

Nvidia and Microsoft have both made major investments in OpenAI, but their strategies target different parts of the AI market. Nvidia is investing up to $100 billion to secure its role as the primary hardware provider for AI systems. Microsoft invested earlier and used its partnership to build AI features into its cloud platform and software products.

Nvidia’s investment focuses on the infrastructure layer of artificial intelligence. The deal creates a business relationship where OpenAI becomes a major long-term customer for Nvidia’s graphics processing units. This arrangement helps Nvidia maintain its position against competitors like AMD and Broadcom who are trying to enter the AI chip market.

The partnership gives Nvidia direct insight into the computing requirements of advanced AI models. This information helps the company design future chips that match the specific needs of AI workloads. Nvidia’s CUDA software platform has been the standard for AI development since 2006, and its NVLink technology allows multiple GPUs to work together as one system.

Microsoft took a different approach by investing in OpenAI at an earlier stage. The company gained preferred access to OpenAI’s language models before competitors. This early access allowed Microsoft to create the Azure OpenAI Service, which lets business customers use OpenAI’s models on Microsoft’s cloud infrastructure.

Azure Growth Driven by AI Services

Azure has experienced rapid growth due to demand for AI capabilities. Last quarter, Azure revenue increased 39% despite facing capacity constraints. The Azure OpenAI Service has become a major driver of this expansion as companies adopt AI tools for their operations.

Microsoft integrated OpenAI technology into its Office products through Copilot. The AI assistant works across Word, Excel, and Outlook to help users write documents, analyze data, and write code. Copilot costs $30 per user per month and represents a new revenue source for Microsoft’s productivity software business.

The early partnership gave Microsoft advantages in speed and cost when deploying new AI features. The company can release tools faster than competitors who don’t have the same level of access to OpenAI’s technology. This head start has helped Microsoft establish itself as a leader in enterprise AI software.

Different Roles in AI Market

Nvidia builds the hardware foundation that makes AI systems possible. Microsoft creates the software products that businesses use to apply AI technology. Both companies are positioned in the AI market but serve different functions in the overall ecosystem.

Nvidia’s investment secures its position as the infrastructure provider for AI computing. The company supplies the chips that power AI data centers and research facilities. Its partnership with OpenAI reinforces this role by ensuring one of the largest AI developers remains a customer.

Microsoft’s investment turned AI technology into products that generate immediate revenue. The company’s cloud services and productivity software now include AI features that customers pay for. This integration has driven growth in both Azure and Office product lines.

Stock Performance and Analyst Views

Both companies hold Strong Buy ratings from analysts. Nvidia stock trades at $185.04 with an average price target of $218.14, representing potential upside of 17.89%. Microsoft stock is priced at $523.98 with analysts targeting $629.22, reflecting potential gains of 20.08%.

Nvidia has a Smart Score of 9 compared to Microsoft’s 8. The Smart Score reflects analyst sentiment and institutional investor activity. Both stocks remain among the most favored AI investments on Wall Street based on their growth in artificial intelligence and cloud technology.

Stay Ahead of the Market with Benzinga Pro!

Want to trade like a pro? Benzinga Pro gives you the edge you need in today's fast-paced markets. Get real-time news, exclusive insights, and powerful tools trusted by professional traders: