The U.S. equity market has been grappling with high volatility in 2025, as investors fear a potential recession amid escalating trade wars. However, this period of market uncertainty can also help long-term investors compound their wealth, especially if they can ignore the short-term noise and instead pick stakes in companies that are riding secular tailwinds, have durable moats, and are expanding their profitability.
If you check the daily headlines, you will see that companies like Meta Platforms (NASDAQ: META), Microsoft (NASDAQ: MSFT), and Palantir Technologies(NASDAQ: PLTR) seem primed for an exceptional long-term growth trajectory. Here's why these stocks are smart picks now.
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Meta Platforms
With CEO Mark Zuckerberg strategically focusing on artificial intelligence (AI)-driven innovation and effective cost management, Meta has strengthened its position as a leading player in the digital advertising space. The company's recent quarterly results were impressive, with revenue and earnings surpassing consensus estimates.
Meta's 3.4 billion-strong user base remains a significant strength, as it provides the company with access to a vast amount of personalized first-party data. The data helps train AI models, which are then used to improve user connections and experiences on the company's social media platforms. In the past six months, AI-powered recommendations helped boost time spent on Facebook by 7%, on Instagram by 6%, and on Threads by 35%.
A more engaged user base also translates into better conversion rates for the platform's advertisers. The Generative Ads Recommendation Model enhances ad targeting and boosts conversion rates. This flywheel effect has helped Meta create a durable moat that competitors are struggling to replicate.
Despite these advantages, Meta trades at 21.5 times forward earnings -- reasonable for a company with expanding profit margins, $70.2 billion in cash, and $28.8 billion in debt. All these factors make the stock a worthwhile buy-and-hold forever opportunity now.
Microsoft
Microsoft's diversified business model and consistent execution have made it an exceptional buy-and-hold stock for the long-term investor.
Recent earnings performance has highlighted Microsoft's resilience even in a challenging economic environment. The company surpassed consensus analyst estimates for both revenue and earnings. Microsoft's commercial remaining performance obligations (RPO, a metric to gauge future revenue and earnings potential) also rose 34% year over year to $315 billion.
The company's AI strategy, which involves integrating advanced AI technologies into its core offerings, has also proven very successful. The Azure cloud computing platform experienced 33% year-over-year growth, with AI services accounting for 16 percentage points of that growth. This performance has helped alleviate some of the concerns about a potential slowdown in the cloud business. Furthermore, management expects Azure revenue to grow 34%-35% in constant currency terms in the fourth quarter.
Accounting for a 22% share of the global cloud infrastructure services market (second only to Amazon's AWS at 29%), Azure is experiencing rapid expansion in data center capacity and enhanced model capabilities. These moves can further help Azure capture share in the expanding global cloud computing market.
Microsoft 365 Copilot, an AI-powered virtual assistant, is also experiencing a 3x year-over-year increase in customer adoption. The company's Copilot Studio is enabling more than 230,000 organizations, including Fortune 500 companies, to build custom AI agents. All of these AI initiatives are strengthening Microsoft's competitive moat.
Shares of the tech giant trades at 26.2 times forward earnings, significantly lower than their five-year average of 33. Hence, with healthy top-line growth, expanding operating margins, $79.6 billion in cash, and AI-powered growth, Microsoft is a worthwhile investment, especially at current reasonable valuation levels.
Palantir Technologies
In the past few years, Palantir Technologies has evolved from a data analytics contractor working mainly with government and defense agencies to a major ontology and AI-powered operating system for modern enterprises. The company helps its clients integrate and analyze vast amounts of organizational data across silos to derive actionable insights.
Palantir's impressive earnings performance for its fiscal 2025's first quarter has underscored the strong demand for its AI-powered solutions from both government and commercial clients. Revenue was up 39% year over year to $884 million. The company's U.S. revenue increased 55%, accounting for 71% of its total revenue. U.S. commercial revenue soared dramatically by 71% and has now crossed the $1 billion annual revenue run rate milestone.
Palantir's Artificial Intelligence Platform (AIP) is seeing unprecedented demand. What differentiates AIP from its competitors is its focus on deploying AI solutions in a real-time environment in a secure and observable manner, rather than advanced model development.
The company's proprietary ontology system -- a digital framework that helps relate an organization's digital and real-world assets -- is a significant competitive moat, as it facilitates understanding the dynamic relationships among the clients' operations, even when the underlying data assets are messy and fragmented. With this robust ontology layer, regular business users can now build, test, evaluate, and deploy AI-powered agents using the AIP platform.
Palantir is also evolving from being a pure-play software company into one that offers integrated software and hardware solutions. The company has already delivered some TITAN (Tactical Intelligence Targeting Access Node) systems -- AI- and machine learning-powered systems that connect soldiers on the battlefield with data from various sensors to the U.S. Army. Consequently, Palantir is well-positioned to capture a significant share of the $1 trillion defense budget for 2026.
Palantir is trading at 208 times forward earnings, which is significantly higher than its five-year average of 145. Although the valuation is very expensive, it can be justified considering that growth companies with exceptional long-term growth prospects have been known to enjoy rich valuations for several years. Investors should consider buying a small stake in Palantir, even at elevated valuation levels.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Manali Pradhan has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Meta Platforms, Microsoft, and Palantir Technologies. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.
