The million-dollar mark has long been a benchmark for financial success in many people's eyes. Achieving this milestone isn't a walk in the park by any means, but it can be more accomplishable than many realize, thanks to the power of investing and compound interest.
A $10,000 investment in Microsoft 30 years ago, at the start of January 1994, would be worth nearly $2.4 million today with dividends reinvested. There's no doubt Microsoft has made many millionaires (and even billionaires) during its rise to the $2.7 trillion tech giant it is today, but does the company have enough growth ahead of it to create many more? Well, I believe so.
I wouldn't expect Microsoft's total returns to be almost 24,000% in the next 30 years, as they were over the past 30 years, but consistent investments in the company could lead to substantial growth.
Microsoft Azure has been picking up steam
One of Microsoft's fastest-growing segments is its Intelligent Cloud division, which includes its cloud platform, Azure. Although Azure trails Amazon Web Service (AWS) in market share -- 19% of cloud spending in the third quarter of 2023, compared with AWS's 31% -- it has made considerable progress in the past few years. In 2016, Azure's market share was around 11%.
As of the end of 2023, the global cloud computing market is estimated to be around $626 billion. By 2028, it's expected to be over $1.26 trillion, a compound annual growth rate of around 15%. As the overall cloud pie gets larger, Microsoft has a chance to continue gaining market share, as it's growing faster than the current leader, AWS.
Microsoft should see a boost to its profits as Azure grows because it's a much higher-margin business than other segments involving physical products such as PCs or Surfaces.
MSFT Net Income (Quarterly) data by YCharts.
A partnership that could prove to be one of Microsoft's best
Microsoft's partnership with ChatGPT's creator, OpenAI, could prove to be a game-changer for the company. The partnership first started in 2017, when Microsoft invested $1 billion in OpenAI, giving it capital to fuel its research and development.
Since then, Microsoft has introduced two additional phases to its long-term partnership with OpenAI. The deals essentially combine the AI expertise of OpenAI with the vast resources and cloud computing power of Microsoft. That's a match made in AI heaven.
For Microsoft, being able to leverage OpenAI's language models like GPT-4 and integrate it into its products and services will allow them to become even more efficient and competitive against other options. Current examples include using Copilot in GitHub to suggest code improvements and making developers more productive, as well as using GPT-4 in Azure.
Built for sustained success in the long term
Short of generational returns or a large lump-sum to invest at once, the only way a stock could be a millionaire-maker is if it has continued success over a long period. Given the robustness of Microsoft's product and service ecosystem, there may not be another big tech stock built for this sustained success quite like Microsoft.
Microsoft operates in productivity (Office), professional networking (LinkedIn), gaming (Xbox), the cloud (Azure), operating systems (Windows), and a handful of other markets. Having this diversification is key to weathering economic storms because it reduces reliance and encourages long-term stability.
If the iPhone struggles, Apple struggles. And if Google advertising struggles, Alphabet struggles. In addition, if e-commerce struggles, Amazon struggles. And so, by no means is Microsoft exempt from struggles, but there isn't a single product, service, or segment that Microsoft leans on too much.
Making consistent investments in Microsoft is the most effective way to let it lead you to millionaire land.
