It pays to follow the money when it comes to technology investments. It’s just as vital to spot industry trends as it is to pick stocks. Microsoft is a wonderful opportunity to obtain exposure in the cloud computing business, which is expected to earn $947 billion yearly by 2026. 90% of the world’s data was created in the previous two years, and businesses are flocking to Snowflake for assistance in handling it. Upstart has revolutionized the lending industry by utilizing artificial intelligence, and the company’s growth is skyrocketing.
Investors have had it tough in the last two years, and 2022 will be no different. Investors haven’t had it easy or predictable in the last two years, and 2022 will be no different.
However, long-term tactics tend to drown out the noise that lasts a short time, and given the recent drop in several technology companies, 2022 could be an excellent moment to invest in the long run. Focusing on broadened trends in highly-grown industries when picking companies could be a good idea.
Upstart Holdings (NASDAQ: UPST), Snowflake (NYSE: SNOW), and Microsoft (NASDAQ: MSFT) were chosen by three Motley Fool contributors because they all operate in businesses that will generate dollars in trillions in economic growth over the next decade.
Microsoft’s Cloud Computing
Anthony Di Pizio (Microsoft): In its most basic form, cloud computing is the practice of accessing programs and data through the internet instead of getting them installed locally on devices or computers. In a world of remote working with dozens of corporations operating in various nations, the cloud makes day-to-day operations much easier since it efficiently connects enterprises inside — no matter where they are located.
The stats demonstrate the technology’s popularity. The market of cloud computing is expected to be more than double in size by 2026, reaching 947 billion dollars in annual spending. Microsoft is one of the few tech behemoths that dominate the cloud services industry all-around. Why shouldn’t the average customer connect the corporation with its Office 365 or its Windows operating system? These products benefit billions of individuals all around the world.
Cloud computing, however, is the largest of Microsoft’s three primary business sectors, accounting for almost 37% of the overall revenue in the most current fiscal first quarter of the year 2022. Cloud revenue is also increasing at a far higher rate than Microsoft’s entire revenue.
- Total revenue for Fiscal Q1 of 2021 is 37.1 billion dollars and Fiscal Q1 of 2022 is 45.3 billion dollars with 22% Growth.
- Cloud Metric revenue for Fiscal Q1 of 2021 is 12.9 billion dollars and Fiscal Q1 of 2022 is 16.9 billion dollars with 31% Growth.
This trend had been evident at Microsoft for a certain time. Cloud revenue climbed at a compound 24% annual rate from fiscal 2019 to fiscal 2021, compared with 15% of all-round sales.
The cloud business of Microsoft is powered by its platform of Azure, which offers over 200 services and products, few of which depend on cutting-edge technology such as machine learning and artificial intelligence. These could be utilized for analyzing images and speech, and also produce data-driven predictions. Azure, on the other hand, caters to all-around Snowflake server’s high-demanding services such as IoT, security, and application development.
Microsoft is, in my opinion, one of the greatest stocks to invest in if you want to gain exposure to a cloud. It’s not just since the market is booming, but also due to investors snapping up a slew of other excellent businesses. Apart from the application, Microsoft owns Surface and Xbox, both of which are multibillion-dollar hardware businesses.
Microsoft could be the best bet in the uncertain year 2022 and beyond because of its diversity.
Snowflake Data Analytics
Jamie Louko (Snowflake): Over the last few years, businesses have been generating a growing data amount. In just two years, 90% of the world’s data was created, and the data amount created today is anticipated to increase in the next two years. Companies will require greater capabilities for evaluating and processing their enormous data amounts as a consequence of this rapid expansion in data, which Snowflake provides. Take this online Snowflake Training course offered by industry experts which assists you in discovering how to work with Snowflake and makes you understand more about the concepts underlying the products.
Businesses could bring and retain their data on Snowflake servers for free, and they only purchase it when they wish for querying and accessing it. Snowflake is an obvious choice for firms that get rising data amounts each day because it does not cost to preserve the data. Snowflake’s customer count in the third quarter increased 52% year after year to 5,416.
Customers are drawn to this aspect of Snowflake’s business, but it is in the analytics that the company will grow. Companies would have to evaluate their data more frequently as they collect more data, resulting in greater contact with Snowflake. This business model has already been shown to be successful for the organization. In Q3, the no. of customers that spent more than 1 million dollars with Snowflake climbed by 128% year after year to 148. Furthermore, clients who spent 100 dollars a year ago are now paying an average of 173 dollars.
The corporation sees a $90 billion addressable market ahead of it today, which is why it is investing money extensively in the company. Snowflake spent more than $306 million on marketing, sales and also research and development, resulting in a huge loss in Q3. The corporation lost $155 million in the third quarter, accounting for nearly 46% of revenue. While the current net loss is concerning, as Snowflake’s expenses pay off in the form of increased market share and new product development, the firm will be able to reduce its expenses as growth continues.
The basic conclusion is that Snowflake’s business model turns it simple for customers for joining the platform, and the rapidly rising market for data analytics would surely continue to grow until 2022. Snowflake is positioned well to thrive in the year 2022 and further, with these two tailwinds pushing it ahead.
Upstart Holdings’ Artificial Intelligence
Trevor Jennewine (Upstart): AI is expected to be among the most revolutionary technologies ever devised by humanity. It tends to boost efficiency and production in practically every organization, and it would almost certainly lead to massive wealth creation. According to McKinsey and Company, artificial intelligence will boost global economic production by $13 trillion by the year 2030.
On that topic, Upstart is an excellent instance of a startup that uses AI for solving real-world challenges. Its platform, in particular, intends for making loans much accessible to customers while reducing risk for lenders. Upstart records over 1,600 data points per borrower and compares them to payback events, whereas standard credit models analyze among eight and thirty variables for determining who qualifies for the credit. As a result, each time a payment is made or missed, Upstart’s AI models become smarter.
More crucially, Upstart’s decisioning tech takes into account more data, allowing it to measure risk more accurately in theory. Internal experiments have demonstrated that Upstart’s AI models may cut a bank’s 75% of default rate while maintaining the same approval rate. Its platform, on the other hand, can increase the 173% approval rate while keeping the rate of loss constant.
Banking partners have shown a great interest in Upstart, which is not surprising. Its customer base has tripled in the last year, and the industry has achieved substantial progress in the industry of auto lending. As a consequence, third-quarter transaction volume increased by 244% to 3.1 billion dollars, while revenue increased by 250% to 228 million dollars. Even more remarkable, Upstart is lucrative as per typically accepted accounting methods, despite being a fledgling fintech company (GAAP).
I believe Upstart will be able to continue its momentum in the future. Its technology backed 8.9 billion dollars in loans in the last year. However, Upstart’s entire addressable market is estimated to be 753 billion dollars, and this figure might grow even larger if the company extends into new firms — for example, the organization of mortgage loans annually reaches 4.5 trillion dollars.
Upstart’s AI models, moreover, look to give companies a major advantage. If that trend continues, I believe stockholders will see a 10x return over the following decade.
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We hope this article has provided valuable information covering the trends of Microsoft cloud computing, snowflake data analytics, and upstart holding of Artificial Intelligence.