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There are only three tech stocks I'd buy with $5,000 and never sell, and you've heard of all of them. Each company has a gargantuan customer base that would find switching to a competitor expensive, painful, or both.
Each also has a long record of investing in new technology and returning cash to shareholders when those bets pay off.
Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a "Double Down" signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same "Total Conviction" signal is flashing for a company 1/100th the size of Nvidia. Continue »
Apple (NASDAQ: AAPL) has a wide economic moat that starts with hardware people love and ends with subscription bills they keep paying indefinitely. As of January, its installed base had topped 2.5 billion active devices, and each one of those devices is an opportunity for the company to up-sell, cross-sell, and market new services.
Each device is a storefront for apps, subscriptions, and payments that generate recurring revenue without the company incurring large expenses at the same time. Because Apple takes a cut of App Store sales and retains its own subscription revenue, its services segment had a 76.2% gross margin in its fiscal 2026, which ended Sept. 26.
Upgrade cycles and accessory sales also enable Apple to grow by making incremental improvements to the products that it already knows how to sell on a recurring basis. With its fiscal 2026 net income of $132.2 billion, and a 10-year compound annual growth rate of 11.2% for those earnings, I have no problem holding Apple stock for a very long time.
While Apple rules consumer hardware, Microsoft (NASDAQ: MSFT) is a powerhouse in the enterprise software and cloud infrastructure realms. Its Azure cloud platform grew revenue 48% year over year in its fiscal 2027 first quarter, which ended Sept. 30.
Even more compelling is Microsoft's commercial remaining performance obligation, meaning contracted revenue not yet recognized, which jumped 73% to $677 billion. Few other cloud computing stocks can point to that much contracted demand waiting in the wings.
Microsoft's "agents and infrastructure" segment, which is home to both Azure and Microsoft 365, brought in $76.8 billion during the quarter, up 25%. A company running its email, documents, log-ins, and cloud computing on Microsoft would face a long and expensive migration if it wanted to leave its ecosystem. And while that stickiness could prove frustrating to a customer that's trying to switch providers, for investors, it's one more reason to expect the company will be able to retain its competitive position.
Nvidia (NASDAQ: NVDA) sells crucial hardware to the largest cloud infrastructure builders, including Microsoft.
Its data center sales were $89 billion in its fiscal 2027 second quarter, or 92.5% of its total revenue. Management also returned about $26 billion to shareholders via stock repurchases in the same quarter, which is hard to beat in terms of the absolute size of the buyback.
Aside from the huge scale of its chip manufacturing capabilities, another part of the business' economic moat is its software, with more than 7.5 million developers using its CUDA platform. In order to run CUDA-based AI code on a rival's chips, developers have to rewrite much of it, which means that in practice, developers and their employers are largely locked into Nvidia's hardware.
The main risks for the company are the high levels of concentration among both its suppliers and customers. Just five direct customers make up the majority of Nvidia's accounts receivable balance, and it relies on a mix of hardware suppliers and distributors. Still, I'd buy the stock with $5,000 today anyway, because that situation is not new for the company, and the other stakeholders involved -- both buyers and suppliers -- are all highly reliant on it for their own survival.
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Alex Carchidi has positions in Apple and Nvidia. The Motley Fool has positions in and recommends Apple, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
The Only 3 Tech Stocks I'd Buy With $5,000 and Never Sell was originally published by The Motley Fool
