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Two Inflation-Proof Growth Stocks That Could Outperform in a Rising-Rate World

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  //business-finance.news-articles.net/content/202 .. hat-could-outperform-in-a-rising-rate-world.html
  Published in Business and Finance on Thursday, November 20th 2025 at 10:17 GMT by The Motley Fool

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Two Inflation‑Proof Growth Stocks That Could Outperform in a Rising‑Rate World

In an era of higher interest rates, persistent price pressure, and an uncertain macro backdrop, investors are increasingly looking for shares that can weather inflation while still delivering solid upside. A recent The Motley Fool article (November 20, 2025) zero‑es in on two companies that fit the bill perfectly: Apple Inc. and Microsoft Corp. The piece argues that these tech giants combine the best of both worlds—robust, recurring revenue streams that provide a cushion against cost‑push inflation and strong growth prospects that keep the stock attractive long‑term.

Why “Inflation‑Proof” Is a Good Lens

The article opens by defining what “inflation‑proof” means in a practical sense. It isn’t simply a defensive play; it’s a blend of:

With the Fed tightening, many cyclical names will feel the pinch. Inflation‑proof growth stocks, by contrast, can convert higher commodity costs into higher selling prices—think premium products, software licenses, and cloud services that customers treat as essential.

Apple: The “Premium” Playbook

Why Apple?

1. Brand Loyalty & Ecosystem
   The article highlights that Apple’s ecosystem—iPhones, Macs, iPads, Apple Watch, and services—creates a “sticky” customer base. Users are willing to pay a premium for seamless integration.

2. Recurring Services Revenue
   Apple’s services segment (Apple Music, iCloud, App Store, Apple TV+) grew to over $70 billion in 2025, representing ~15% of total revenue. This shift to subscriptions is a major win in the article’s eyes, because subscription income is more resistant to inflation-driven price sensitivity.

3. Pricing Power in a Hot Market
   Even as commodity costs climb, Apple can raise product prices because of its perceived quality and brand strength. The article notes that the iPhone 15 lineup was able to increase its launch price by 3% without a measurable drop in unit sales.

4. Financial Resilience
   With $200 billion of free cash flow in 2024 and a $120 billion cash reserve, Apple can weather a downturn, continue to invest in R&D, or return capital via dividends and buybacks.

Projected Growth & Risks

The analysis projects a 6.8% YoY revenue growth for Apple in 2026, driven largely by services and a 2% bump in iPhone average selling price. EPS is forecast to rise 8.3% thanks to margin expansion. Key risks flagged include the ongoing semiconductor shortage, rising labor costs in China, and potential regulatory pressure on the App Store.

Microsoft: The Cloud Powerhouse

Why Microsoft?

1. Dominance in Cloud & Productivity
   Azure’s revenue climbed 22% YoY in 2024, making it the largest contributor to Microsoft’s operating income. Azure’s ability to charge high rates for compute and storage—essential even during inflation—makes it a natural inflation‑proof asset.

2. Enterprise Software with High Switching Costs
   Office 365, Dynamics 365, and other cloud‑based productivity suites have high switching costs, creating a loyal customer base that can absorb price increases.

3. Strong Balance Sheet & Cash Flow
   Microsoft’s operating cash flow hit $120 billion in 2024, with an operating margin of 35%. The company has a debt‑to‑equity ratio of less than 0.3, giving it ample room to invest in new cloud services or make strategic acquisitions.

4. Robust Valuation
   The article points out that Microsoft trades at a forward P/E of 27x—still attractive relative to the sector average of 32x, especially given its consistent dividend and buyback program.

Projected Growth & Risks

Microsoft’s revenue growth is projected at 10.5% in 2026, largely due to Azure and Office 365. The article cites a forecasted 13% increase in Azure’s average price per GB, reflecting pricing power. Risks include competition from Amazon Web Services and Google Cloud, geopolitical tensions affecting supply chains, and potential antitrust scrutiny.

Comparative Takeaway

Both companies score high on the “inflation‑proof” criteria, but their paths differ:

The article notes that investors looking for a blend of defensive positioning and upside potential should consider allocating 15–20% of a balanced portfolio to each of these names.

How to Add Them to Your Portfolio

1. Assess Your Current Exposure
   If you’re already heavily invested in consumer staples or utilities, adding these tech names can diversify your risk profile.

2. Set a Clear Target
   The article recommends buying Apple at $170–$180 and Microsoft at $350–$360, based on a 12‑month target price that reflects expected margin expansion.

3. Monitor Key Indicators
   Keep an eye on quarterly earnings for price‑to‑earnings ratios, subscription growth, and any signs of regulatory pressure.

4. Rebalance Regularly
   As inflation and rates change, revisit your allocation to ensure you’re still in line with your risk tolerance.

Bottom Line

Apple and Microsoft represent the archetype of “inflation‑proof growth stocks.” Their strong pricing power, high recurring revenues, and solid balance sheets give them a buffer against rising costs, while their continued innovation keeps upside potential alive. According to the Motley Fool article, adding these names could provide a hedge against the volatility that inflation and tightening monetary policy often bring, while still positioning you for growth in a tech‑driven economy.

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