The technology sector has historically delivered superior returns to the broader market. This is the place to find innovative companies that have excellent growth prospects.
If you have $5,000 to invest right now, you could consider splitting your cash between the following tech stocks. These companies have ubiquitous brands and profitable opportunities to deliver excellent returns for decades to come.
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1. Microsoft
One of the first no-brainer tech stocks to consider holding for the long term is Microsoft (MSFT +1.01%). Microsoft has a strong foothold in the burgeoning cloud and artificial intelligence (AI) markets, positioning the company for a prosperous future.
One of the best reasons to stick with leading tech companies like Microsoft is that these companies are financial powerhouses. Microsoft has integrated cloud and AI services across its software products, including Microsoft 365 and Windows, which has benefited its profitability. Over the last year, Microsoft raked in $96 billion in net income on $270 billion of revenue. It pays out a small amount of earnings in dividends every quarter and invests the rest in data centers and technology to drive more growth for shareholders.
NASDAQ: MSFT
Key Data Points
Demand for Microsoft's cloud services is generating strong momentum for the business. Revenue from Microsoft Cloud grew 22% year-over-year on a constant-currency basis last quarter to surpass $42 billion, or 15% of the company's total revenue.
The Azure enterprise service is the foundation of Microsoft Cloud. Azure is gaining share in the cloud market, as companies continue to migrate their data systems from on-premise servers to the cloud. With a lot of data still stored on companies' on-premise servers, there is still a huge opportunity over the long term for leading cloud providers like Microsoft to grow.
The main headwind that could derail its momentum in 2025 is a broader economic slowdown. But as more businesses and consumers use cloud services, Microsoft is in a great position to drive growth over the long term. The company's revenue and earnings are growing at double-digit rates, and analysts expect its earnings to grow at an annualized rate of 12% in the coming years.
2. Alphabet (Google)
Alphabet (GOOG 0.15%) (GOOGL 0.57%) owns some of the most widely used services online, including YouTube, Search, Gmail, and the Chrome Internet browser. It has growing revenue streams from digital advertising, and increasingly, cloud computing and AI that are fueling its momentum in 2025.
With 2 billion users across seven products, Google is a dominant digital advertising business. Ads generate most of its $360 billion in trailing revenue, and this provides profitable growth to invest in AI technology, such as Gemini, which underpins all the company's services.
NASDAQ: GOOGL
Key Data Points
Innovation in AI is also leading to strong demand in Google Cloud. Revenue from Google Cloud grew 28% year-over-year in the first quarter. Enterprises are drawn to Google's offering for app-building tools like Vertex and Google's proprietary AI chips, or Tensor Processing Units, which can provide optimal performance for specific applications over general-purpose graphics processing units (GPUs) from Nvidia.
These profitable revenue streams have turned Alphabet into a financial powerhouse. Over the last year, it generated $111 billion in net profit. It also has ample cash reserves of $95 billion on its balance sheet.
The main risk facing the business is antitrust actions by the U.S. government, where Google's dominance in search has been in the crosshairs of regulatory scrutiny. Google may be forced to sell some of its assets, but the uncertainty around all this seems already reflected in the stock's modest valuation.
The shares currently trade at 18 times 2025 earnings estimates. This seems to undervalue Google's brand, large user base, and opportunities in cloud computing and AI. Analysts currently expect the company's earnings to grow at an annualized rate of 15%.
