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Magnificent AI Stock: Microsoft
Unlocking the Potential: Microsoft’s Exponential Growth in AI

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Artificial intelligence (AI), a buzzword that has dominated headlines, is not merely a futuristic concept but a tangible force reshaping our present. While AI is not new, recent strides in the field have opened up a realm of possibilities, promising monumental advancements. Companies at the forefront of this technology stand to reap immeasurable benefits, and one such frontrunner is Microsoft (NASDAQ: MSFT).

Pioneering the Wave

The recent surge in AI innovation traces back to the groundbreaking launch of ChatGPT by OpenAI, a company backed by Microsoft, in November 2022. ChatGPT swiftly soared to unprecedented heights, acquiring over 100 million users in a mere five days – a testament to its colossal impact. Microsoft’s prescient support for OpenAI paid off handsomely, prompting the tech giant to double down on its investment. In January 2023, Microsoft inked a substantial multiyear, multimillion-dollar pact with OpenAI, solidifying its commitment to AI leadership.

The landscape of generative AI is evolving at breakneck speed, with rivals emerging from every corner. Forecasts predict a staggering compound annual growth rate of approximately 42% for this burgeoning market by 2032. Microsoft’s proactive stance in bolstering its partner’s prominence positions both entities for a remarkable payoff in the foreseeable future.

The Confluence of Cloud Computing and AI

While incorporating ChatGPT into its search engine, Bing, to challenge Google’s supremacy yielded limited success, Microsoft diversified its AI strategy. Leveraging its cloud computing platform, Azure, the tech behemoth is carving a niche in AI services. Microsoft ranks second only to Amazon in the cloud market – a critical factor primed for sustained growth.

In the second quarter of fiscal 2024 (ended December 31, 2023), Microsoft reported a total revenue of $62 billion, marking an 18% year-over-year uptick. Notably, Azure revenue surged by 30%, outpacing the overall growth rate. With 53,000 customers onboard Azure, and a third being recent converts, Microsoft’s AI offerings are attracting a fresh wave of clientele, hinting at the platform’s expanding appeal.

Though AI currently represents a modest share of Microsoft’s revenue stream, the rapid ascent of AI attitudes and Microsoft’s unwaveringly inventive spirit signal a transformative trajectory in the making.

Charting a Path Beyond AI

Beyond its AI prowess, Microsoft’s core business is robust. A vanguard in operating systems, the company boasts an array of productivity software like Excel and Teams, indispensable to myriad businesses worldwide. This foothold engenders customer loyalty, a potent competitive edge complemented by Microsoft’s globally renowned brand name. Additionally, Microsoft holds a dominant position in the gaming realm.

What renders Microsoft an evergreen investment? Its rich legacy of innovation, supremacy across diverse sectors brimming with growth potential, and a consistent track record of generating robust earnings and cash flow. The company’s stellar performance over decades speaks volumes about its prowess and resilience.

MSFT Revenue (Quarterly) Chart

MSFT Revenue (Quarterly) data by YCharts

An added allure of investing in Microsoft lies in its stature as a stellar dividend stock. Despite a modest forward yield of 0.71%, Microsoft raised its dividends by a staggering 168% over the past decade. With a cash payout ratio of 30.75%, the potential for further dividend escalation remains ample.

Whether seeking growth or passive income, Microsoft is primed to deliver what investors desire for the long haul. It stands out as an exceptional stock for enduring value and unwavering success.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, sits on The Motley Fool’s board of directors. Prosper Junior Bakiny has holdings in Amazon. The Motley Fool holds positions in and endorses Amazon and Microsoft. The Motley Fool advocates for the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool upholds a disclosure policy.

The views and opinions articulated here are personal reflections of the author and may not mirror those endorsed by Nasdaq, Inc.

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