Historically, the stock market has helped create massive amounts of generational wealth. However, not all stock investments are the same.

Investors seeking to build lasting, intergenerational wealth should choose stocks of companies with strong fundamentals, robust finances and sustainable growth strategies.

Apple, Amazon, NVIDIA, Microsoft (MSFT 0.30%), alphabet (GOOG 1.17%) (GOOGL 1.11%), TeslaAnd Meta-platformscollectively known as the “Magnificent Seven,” are the seven technology stocks that have delivered impressive performance over the past year. Of these, Microsoft and Alphabet are well positioned to continue delivering robust returns in the years to come – wealth that can be passed down through generations.

Here’s why.

Microsoft

Microsoft stock is nearly 10% below its 52-week high of $468.35 in early July 2024. The stock failed to take off after the release of its fourth-quarter fiscal 2024 results (ended June 30), despite beating revenue and earnings estimates, mainly due to slower-than-expected growth in its Azure cloud business.

Yet the long-term growth story of this prominent player in the $5.06 trillion global IT market is intact, thanks to its well-diversified business model and large customer base spread across different industries and geographies. Azure remains the cornerstone of the company’s long-term growth strategy. In the second quarter (ending June 30, 2024), it had a 20% share of the global cloud infrastructure services market, up 3 percentage points from two years ago.

AI workloads were a key growth catalyst for Azure, accounting for nearly 8 percentage points of the cloud computing business’s year-over-year revenue growth in the fourth quarter. Microsoft also reported a 60% year-over-year increase in the number of Azure AI customers to 60,000, as well as an increase in average spend per customer at the end of the fourth quarter. In addition, the number of Azure AI customers using the company’s data and analytics tools increased 50% year-over-year in the fourth quarter.

Microsoft is also seeing increasing use of its AI-powered CoPilot assistants in its core offerings. CoPilot customer numbers are up 60% sequentially and usage among existing enterprise customers increased significantly in the fourth quarter. The company’s partnership with ChatGPT developer OpenAI has proven transformative for the company, and increasing monetization of its AI services will be a major tailwind in the coming years.

Microsoft generated net income of $88.1 billion on revenue of $245.1 billion in fiscal 2024. Microsoft’s cash flow from operations reached $119 billion in fiscal 2024, meaning the company has significant funds to continue its investments in AI in the coming years.

Taking these factors into account, Microsoft can be an impressive choice for long-term investors due to its strong economic moat, resilient and diversified business model, numerous tailwinds from AI, and solid financial position.

alphabet

Alphabet, the digital advertising giant and parent company of Google, YouTube and the Android operating system Alphabet, announced its second-quarter results on July 23. Shares fell despite strong revenue and beaten earnings. Management’s comments about increasing pressure on operating margins in the third quarter appear to have unsettled many investors. Share prices have continued to fall after a recent Bloomberg report claimed that the U.S. Department of Justice may be considering breaking up the company because it monopolizes the internet search market through exclusive deals with smartphone makers such as Apple and Samsung.

While the looming uncertainty is concerning, the long-term impact on the stock will be minimal. Google accounts for 91% of the global internet search market. Therefore, even without exclusive deals with mobile phone manufacturers, Google will retain a dominant position in the internet search market and the US digital advertising market for at least the next few years. According to Statista’s research division, Google’s share of US digital advertising revenue is expected to decline from 26.8% in 2023 to 23.9% in 2026. Google is expected to be the largest digital ad publisher in the US by 2026.

To face increasing competition from search engines like Microsoft Bing and AI-powered search engines like Perplexity.ai and OpenAI’s new search engine SearchGPT, Alphabet is integrating advanced AI and machine learning capabilities into its Google search engine to deliver more contextual and relevant results. The company is leveraging its large user base and vast data pool to effectively train its own family of Gemini models based on generative artificial intelligence. At the end of the second quarter, more than 1.5 million developers were using Gemini.

Alphabet’s Google Cloud business is also gaining momentum, crossing the $10 billion revenue mark for the first time in the second quarter. The company’s diversified product portfolio has ensured that it is not overly dependent on any single product or service.

Alphabet is also cash-rich, having $101 billion in cash and marketable securities at the end of the second quarter, giving the company the financial flexibility to invest in AI initiatives. Yet the company trades at just 6.2 times trailing-12-month revenue, well below many other AI tech giants. Given its outstanding qualities and reasonable valuation, Alphabet appears to be a clear long-term choice for the smart investor.