For many, the primary goal of investing is to build wealth in retirement. Whether it’s 10 or 40 years, this ultimate goal should always be kept in mind – it’s a long game. In the meantime there may be macroeconomic fluctuations, tariff volatility, and a recession period, but smart investors know that it’s about buying high quality businesses with their heads bowed over the long term.
If you need to retire $1 million, you should sit patiently for 10 years with an evenly spread of $200,000 across these three stocks. In the end, it should be worth more than $1 million.
1. AI advantage in the alphabet
The first is one of the largest and best businesses in the world. (Goog 1.73%)) (googl 1.68%)). The tech giant, owns Google, Google Cloud, YouTube and other startups, has pushed its valuation to a $1.8 trillion market capitalization. Alphabet stocks need to generate five times the total return over the next 10 years to meet my estimate of this basket turning $200,000 into $1 million. It’s easy to do.
The company’s revenues rose 15% year-on-year in a certain currency in 2024 to $350 billion. Google Cloud is growing particularly rapidly for AI (AI), with revenue growth rates of 30% in the last quarter. The profit margin is expanding, with the operating profit margin going from 27% in 2023 to 32% in 2024. This increased margin is the main reason why operating profit has grown rapidly in the alphabet.
In addition to this, the alphabet returns a large amount of capital to shareholders in the form of buybacks and dividends. Its dividends currently generate 0.5%, with stocks down 10.8% over the past decade. Combining it all, this is why the alphabet earnings per share (EPS) has increased by 670% over the past decade. His current price and return rate (P/E) is 19 years old, which is well below the 10-year average, so alphabet stock looks cheap at these levels. As with the past decade, if we can grow EPS with significant clips over the next 10 years, we think the stock price will rise about five times over the next 10 years, including dividends.
2. World travel acquisition rate
Airbnb (abnb 0.25%)) Over a decade ago, a short-term rental platform revolutionized modern travel. Today, it is a company that has been open to the public in the past few years, and is one of the largest initial public offerings (IPOs) in the past few years, a global giant in travel. Last year, customers spent $81.8 billion on Airbnb. Revenues rose 12% year-on-year to $11.1 billion, giving them a long runway to grow as they try to catch the majority of the trillions of dollars spent on travel each year.
Up to five times in the next decade, Airbnb needs to increase durable revenue and revenue growth. I think it’s set to do just that. The majority of the company’s bookings come from several markets, including North America and Western Europe, particularly France and the UK. Currently working to increase the supply of accommodation in Germany, East Asia and Latin America. These are all large travel markets.
To add more fuel to the fire, Airbnb Management is looking to expand its Airbnb services beyond core services. These include adjacent services such as house cleaning, flights and even tours and experiences for local travelers. This should expand the entire addressable market for Airbnb and continue to grow revenue at double-digit rates over the remaining 10 years.
There is plenty of room for profit margins, so revenue should be even faster. Airbnb’s operating profit margin was 23% in the last 12 months, but is actively pushing to promote it in international markets and working hard on these new product lines. Over the next decade, we expect Airbnb’s profit margins to expand as scale increases. Adding to the durable revenue growth, it seems plausible that Airbnb’s stock will be five times higher in the next decade.
GO PE ratio data from YCHARTS
3. Semiconductor manufacturers around the world
The last stock on the list is Taiwan Semiconductor Manufacturing (TSM) -0.88%)). This is the bedrock of the semiconductor industry and an important input into the fast-growing AI sector. For example, if Alphabet needs more computing power in its data center, TSMC will turn to TSMC for short (TSMC) or third party working with TSMC to build its own computer chip.
This enviable position as one of the only companies capable of producing cutting-edge computer chips on a large scale has allowed TSMC to generate massive growth in its business. In 2024, the company’s high-performance computing (HPC) revenues, including AI customers, increased 51% year-on-year, and is now a major part of TSMC’s business. These large customers are the main reasons why TSMC’s EPS has reached nearly 300% over the past decade.
Industry analysts expect spending on AI to rise from $184 billion in 2024 to $826 billion in 2030. If this happens, much of this growth will go to TSMC. This should make the company’s EPS growth even faster over the next 10 years, so I think the stock price will be five times higher in that period.
The combined alphabet, Airbnb and TSMC are three great long-term holds in the portfolio, allowing you to turn $200,000 into $1 million in 10 years.
Suzanne Frey, an executive at Alphabet, is a member of the board of directors of Motley Fool. Brett Schafer has a job in the alphabet. Motley Fool has locations for semiconductor manufacturing in Airbnb, Alphabet and Taiwan, and is recommended. Motley Fools have a disclosure policy.
