We're a couple of weeks removed from new-year celebrations. Now that 2022 is officially underway, it's time for investors to reset their focus to where the real wealth is built: the long term.
It's no secret that technology moves fast, and each decade seems to bring an even greater acceleration of progress than the last. It seems crazy, but the first Apple (AAPL 0.80%) iPhone was released just 15 years ago, and now we're living in a world with artificial intelligence and the prospect of a virtual existence in the metaverse.
With innovation moving at that pace, most of us would struggle to imagine what life looks like 10 years from now. But if these three companies have anything to do with it, the future will be incredibly exciting. That's why I think they'll be three of the best stock performers between now and 2032.
Image source: Getty Images.
1. The case for Nvidia
Semiconductor innovator Nvidia (NVDA -0.05%) is currently the world's ninth-largest company, rising to prominence thanks to its incredibly powerful graphics computer chips, which are now the most sought-after in the industry. But it's also innovating in other areas, like platform technologies and software, and that's why it's set to climb up the ranks to be one of the biggest stocks by 2032.
The company's largest segment right now is gaming, with consumers clamoring to buy its graphics hardware year after year. Nvidia's GeForce Now gaming platform is an example of how the company has pivoted into new verticals, with 14 million gamers now accessing their favorite titles through the cloud-based service, which frees users from needing patches or updates.
Nvidia's data center segment is a close second by revenue. However, the company's future might not be built on gaming or data centers but instead on a couple of its smaller emerging segments. One of them is automotive, where the company has built an entire ecosystem called Nvidia DRIVE -- a suite of tools to train autonomous technologies through artificial intelligence. It's an end-to-end platform that allows developers to build self-driving tech and maintain it once cars are on the road.
Nvidia's Omniverse is another exciting prospect, which falls under its professional visualization segment. The Omniverse helps companies design and build virtual 3D concepts of products or systems they hope to bring to market in a hyper-realistic environment. With the potential of the metaverse for social applications, Nvidia might have an incredible opportunity ahead of it.
The automotive and professional visualization segments make up just 10% of the company's total revenue right now. Since Nvidia is already highly profitable on the back of its gaming and data center segments, with $4.34 in estimated 2022 earnings per share, it's a great way to gain low-risk exposure to the innovative technologies of the future.
Image source: Getty Images.
2. The case for Microsoft
Most consumers know Microsoft (MSFT -0.05%) for its Windows computer operating system or its Office 365 suite of products -- after all, they're used by billions of people worldwide. But even though Microsoft has been a dominant technology company for decades, its consumer offerings alone aren't enough to keep it on top.
Today, its largest segment by revenue is focused on serving businesses. Microsoft's Azure platform has grown to become the second-largest provider of cloud services in the world, behind Amazon Web Services. Cloud computing, put simply, allows companies to access their applications and data online rather than having them installed locally on individual devices. This allows for a new, collaborative approach to work even if key employees are located in different parts of the world.
Between now and the year 2026, the size of the cloud computing industry is expected to more than double to $947 billion in annual spend so Microsoft has a huge opportunity to leverage its No. 2 ranking to capture even more market share. If that industry estimate rings true by 2026, it means cloud computing as a whole would have grown at an annual rate of 16%. By comparison, Microsoft's cloud segment grew at a rate of 24% in fiscal 2021, suggesting that its slice of the pie is already expanding relative to its competitors.
Microsoft is a $2.3 trillion company at the moment, making it the second-largest in the world behind its direct competitor Apple, and the law of large numbers makes it more difficult to generate growth at this level. Yet Microsoft is delivering, and based on estimated 2022 earnings per share of $9.21, its stock trades at a forward multiple of 34. That's cheaper than the Nasdaq 100 technology index right now, which trades at a multiple of 38.
Microsoft is a reasonably priced stock with a dominant market position and a huge growth runway thanks to its cloud segment. That's why it's set to remain one of the strongest companies in 2032.
Image source: Getty Images.
3. The case for Tesla
Perhaps no company in recent memory has had more doubt cast over it than electric vehicle powerhouse Tesla (TSLA 1.31%). The approach of the company's eccentric CEO Elon Musk isn't to everybody's taste, but there's no denying the incredible progress Tesla has made in advancing electric vehicle technology. Nor can investors deny these cars in general are the future, with governments incentivizing their use all over the world.
Tesla holds the No. 1 spot for electric vehicle sales right now, but many competitors are nipping at its heels. Still, its brand is synonymous with the EV revolution, and its innovation in other areas like renewable energy sets it apart from traditional car manufacturers. In 2016, Tesla acquired SolarCity, which was being run (in part) by Musk, allowing Tesla to enter entirely new markets, including residential energy generation and storage.
Given Musk's involvement in other game-changing enterprises like SpaceX, outside-the-box thinkers might wonder whether Tesla could expand even further into new areas through acquisitions. While unlikely for now, nothing is ever out of the question with Tesla -- it invested over $1 billion into the cryptocurrency Bitcoin, after all.
What is certain, though, is the imminent opening of Tesla's brand-new factories in Texas, U.S., and Berlin, Germany. These will help the company double the production of its electric vehicles, advancing its ability to compete like-for-like with larger automakers who have greater existing capacity. It won't stop there, with rumors flying about new factories in Asia, as well as more in Europe, the U.S., and possibly the U.K.
Tesla has a cash pile of over $16 billion, so it has no shortage of options when it comes to expansion.
Tesla's stock trades at a sky-high price-to-earnings multiple of 163 based on 2021 earnings per share of $6.26. Remember, the Nasdaq 100 trades at a multiple of 38, so Tesla is materially more expensive than the broader market. However, analysts expect the company to grow revenue by 41% in 2022 to over $73 billion, and that growth rate warrants a premium share price.
If Tesla maintains its leadership position in electric vehicles for the next 10 years while also growing its smaller segments, there's no doubt it could be one of the world's top companies in 2032.
