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Over the past two decades, some leading tech companies, such as Amazon (NASDAQ: AMZN), Microsoft (NASDAQ: MSFT), and Netflix (NASDAQ: NFLX), have produced life-changing returns. Many investors missed the boat, but the good news is that these three industry leaders still have plenty of growth fuel. Here's why Amazon, Microsoft, and Netflix are still worth investing in right now and holding onto for the next 20 years.
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Amazon is the leader in U.S. e-commerce and global cloud computing. The company generates consistent revenue and earnings and benefits from a wide moat from several sources, including its brand name and network effects in e-commerce, as well as switching costs in cloud computing. Amazon's competitive edge should allow it to maintain its position in its core markets, which will expand over the next two decades.
E-commerce still accounts for only 16.6% of total retail sales in the U.S. The shift to online commerce will fuel Amazon's core segment and also boost its advertising business. Further, Amazon is actively looking to increase margins, notably by shrinking its workforce and relying more on artificial intelligence (AI) and humanoid robots. Amazon has taken investors on a great ride over the past 20 years, but it is still tapping into massive long-term opportunities. That's why it's a great pick.
Microsoft is another longtime tech leader with outstanding prospects. It holds a dominant position in the market for computer operating systems (OS), while its famous suite of productivity tools is part of the day-to-day activities of millions of people and businesses, creating high switching costs for these services. These deep relationships with enterprises have enabled Microsoft to become one of the leaders in cloud computing, ranking second only to Amazon.
However, Microsoft's Azure has been growing its sales faster than Amazon's cloud business in recent quarters. Microsoft's partnership with OpenAI, which allows it to offer some of the leading artificial intelligence models to its clients in the cloud, is another strength. Microsoft's future continues to look bright; even with a market cap of almost $3 trillion, there is plenty of upside left.
Netflix revolutionized the entertainment industry and delivered an (almost) mortal blow to cable with its streaming model, which lets people watch shows on demand and on any platform. The company is now dealing with more competition than ever. But Netflix maintains a strong competitive advantage from its brand name and its deep ecosystem of paid users, which provides it with plenty of data on viewer habits that helps it decide which content to license or produce.
