I Have $5,000 to Start Investing—Should I Put It in Microsoft or NVIDIA?

With companies pouring billions into Artificial Intelligence, smart investors know that this is where the money lies. If you want to invest in tech stocks, look at the top companies today.  It is expected that the global AI market will reach $3.68 trillion by 2034 and the sector will continue to reshape the industry. This will lead to soaring valuations and immense competition amongst tech companies.

Deepseek did bring about volatility in the industry but the long-term outlook of tech stocks is bullish. Nvidia remains a dominant player in building AI chips and infrastructure. Investors who brought NVIDIA Corp. (NASDAQ: NVDA) during its early days have already made massive gains. As tech companies continue to fight for market share, retail investors like you and me face a big decision: Should you put $5,000 in Microsoft (NASDAQ:MSFT) or Nvidia? As a beginner investor, $5,000 is not a small amount and this decision should be carefully taken after weighing the pros and cons of each company. Let’s dive into it.

Key points in the article:

• AI is only getting started and companies are pouring billions into the industry.
• Both Microsoft and Nvidia are top industry players with a massive upside potential. 
• Between these two companies, Microsoft is ideal for low-risk investors while Nvidia will suit investors who can take some amount of risk.
• If you’re looking for more a stocks with a massive upside potential, get your hands on a free copy of our “The Next NVIDIA” report.  We’ve identified AI stocks with 10x potential.

Microsoft Corporation

A tech dinosaur, Microsoft has been around since 1981 and has become a powerhouse today. The company has steadily launched products and services that cater to the needs of individuals and businesses. For many of us, it is hard to imagine life without Microsoft and its AI investment has paid off well. With a market cap of $3.05 trillion, the company is one of the major tech players in the world. 

The stock is exchanging hands for $410, down 1% over the year, and has been trading in the range of $400 to $450 over the past six months. It recently launched Phi-4, a new generative AI model that will help expand its cloud offering. We could see continuous growth in Azure, driven by AI workloads and a growing AI market. 

Microsoft reported a stellar quarter with a revenue of $69.6 billion, a 12% year-over-year jump, and the earnings per share stood at $3.23. One of its biggest growth drivers, the Microsoft cloud segment saw a 19% jump in revenue and generated $25.5 billion. Deepseek fears are overblown and I believe Microsoft will see steady returns on its AI investment. Its remaining commercial performance obligations stand at $298 billion, which is up 34% year over year. This shows that the future revenue from outstanding contracts will remain steady.

Additionally, commercial bookings also increased by 67% year over year. The company has committed to invest about $80 billion in AI in 2025. The concerns over increased spending have led to worries about short-term profitability which led to a dip in the stock. These are short-term challenges that could be temporary and do not speak about the company’s ability to maintain its position in the industry.

Analysts are bullish on the stock and project steady double-digit growth in revenue and EPS in 2025. Microsoft stock has a strong buy rating with an average price target of $510, a 24% upside from the current level. 

Nvidia Corporation (NVDA)

An undisputed leader in the AI space, Nvidia is dominating the market and holds a strong global position. With a market cap of $3.25 trillion, the company is ahead of Microsoft. Investors are well aware of Nvidia’s stock rally. It has been extraordinary, to say the least. The stock has generated over 1,700% returns in the past five years and was up 83% in the year. Trading at $132, the stock is down from the 52-week high of $153. NVDA stock is trading at half the price of Microsoft right now. The company split stock last year and rewarded shareholders while Microsoft hasn’t split stock since 2003.

Nvidia enjoys massive demand for its AI chips which has led to impressive data center segment growth. In the third-quarter, the company reported a revenue of $30.8 billion, up 112% year over year. Its total revenue for the quarter stood at $35.1 billion, up 94% year-over-year. The EPS was $0.78, up 111% year-over-year.

The EPS was $0.78, up 16% from the previous quarter and up 111% from a year ago. For the fourth quarter, the company is aiming for a revenue of $37.5 billion and is on the path of steady expansion. The company has recently announced the most advanced consumer GPUs for developers, gamers, and creators which will be powered by Nvidia Blackwell architecture.

This GPU will have 92 billion transistors and will provide 3,352 trillion AI operations per second of computing power. Nvidia is set to expand its portfolio of partners this year and has partnered with a global real estate firm CBRE to tap into the data center solutions expansion opportunities in the U.S., Africa, the Middle East, and Europe.

Despite the volatility caused by Deepsake, analysts are positive on the stock and have a strong buy rating with an average price target of 178.84, a 34% upside from the current level. I do not think Deepsake is a threat to Nvidia and its quarterly results will boost the stock higher. 

The verdict 

Undoubtedly, Microsoft and Nvidia are both strong tech companies with a unique presence in the AI industry. The future is AI and choosing between one of them will set you up for growth. Microsoft is a stable company ideal for low-risk investors, however, its stock price is higher than Nvidia. On the other hand, Nvidia offers higher AI exposure, has a higher upside possibility, and has enjoyed a strong rally. For safer investors, Microsoft could be a good choice but if you really want to make money and take risks, I’d recommend Nvidia. I have always been bullish on the stock and believe in its ability to keep growing despite rising competition. Nvidia can be an ideal addition to your portfolio. 

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