Trump’s Tariff Plans Create Buy Opportunities in Microsoft Stock

On April 2, President Donald Trump unveiled plans to implement a series of tariffs on imported goods from the United States’ trading partners. This announcement have reignited concerns about a potential global trade war, resulting in a notable downturn in stocks as investors gravitate towards safe-haven assets like cash. As a result, the S&P 500 (SNPINDEX: ^GSPC) is down 14% from its record peak, while the tech-centric Nasdaq-100 has fallen by nearly 18%.

Historically, the U.S. stock market has shown resilience and always eventually climbs to new highs over the long term. Thus, recent declines can provide investors with attractive opportunities to acquire some of America’s best-quality stocks at discounted prices. One stock that stands out is Microsoft (NASDAQ: MSFT), known for its long-standing track record of success, especially in the rapidly evolving artificial intelligence (AI) sector, which could present significant growth potential.

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Currently, Microsoft shares are down 18% amidst the broader market sell-off. The company plans to release its financial results for the fiscal 2025 third quarter (ended March 31) on April 30, providing insights into its AI developments. This report could serve as a catalyst for a recovery in Microsoft stock—prompting questions about whether investors should capitalize on the dip ahead of this important announcement.

Anticipating Updates on Copilot

Since 2016, Microsoft has invested approximately $14 billion in OpenAI, the organization behind the ChatGPT chatbot. Microsoft has integrated OpenAI’s cutting-edge models into its AI virtual assistant, Copilot, which is included for free in some popular software products, such as the Windows operating system, Bing search engine, and Edge browser.

Moreover, Copilot is provided as a subscription add-on for users of the 365 productivity suite, which encompasses programs like Word, Excel, PowerPoint, and Outlook. Microsoft reports that over 400 million 365 licenses are purchased by businesses globally. Given that the Copilot add-on costs around $30 per license per month, it could evolve into a multibillion-dollar recurring revenue stream in the years ahead.

In the fiscal 2025 second quarter (ended December 31), usage of Copilot surged by 60% compared to the first quarter. Additionally, customers who adopted Copilot when it first launched 18 months ago have collectively increased their licenses tenfold.

Furthermore, Copilot Studio enables businesses to develop custom AI agents. These agents can perform various tasks, such as note-taking during meetings and responding to customer inquiries on company websites. In Q2, Microsoft reported that users created over 400,000 agents—double the number generated in the previous quarter.

Demand for Copilot is rapidly increasing across multiple platforms, making the April 30 update a key date for investors.

Image source: Getty Images.

The Role of Azure in AI Strategy

While Copilot represents a promising product for Microsoft, the Azure cloud platform is integral to the company’s AI strategy. Azure houses advanced centralized data centers equipped with chips from leading manufacturers like Nvidia, renting out computing capacity to aid businesses in their development and deployment of AI software.

Additionally, businesses can leverage a variety of pre-existing large language models (LLMs) on Azure—including those from OpenAI—which expedite their AI project advancements.

Azure remains one of the fastest-growing segments of Microsoft’s overall operations, with Azure AI contributing significantly to this growth. In Q2, Azure AI revenue soared by 157% year over year, representing 13 percentage points of Azure’s overall revenue growth, which was reported at 31% for the quarter. Consequently, Azure AI will be a focal point for Wall Street during Microsoft’s Q3 results release on April 30.

Investors will also scrutinize Microsoft’s capital expenditures closely. The company is on track to invest over $80 billion in AI data center infrastructure and equipment throughout fiscal 2025. However, trade-related disruptions and other economic factors could lead to a reduction in spending. A decrease in investment for AI infrastructure might hinder Azure AI’s growth, especially given that demand for computing capacity continues to outstrip the current data center supply.

Is It Time to Buy Microsoft Stock Before April 30?

The recent 18% decline in Microsoft stock has created an appealing buying opportunity for investors. It now trades at a price-to-earnings (P/E) ratio of 29.6, reflecting an 11% discount compared to its five-year average of 33.2.

MSFT PE Ratio data by YCharts

Therefore, Microsoft stock may represent an excellent buying opportunity now, irrespective of the impending earnings report on April 30. Given the company’s impressive history of performance, the results of one quarter are unlikely to impact its long-term trajectory. Investors might consider this stock dip as a solid entry point for a long-term investment.

According to PwC, AI could potentially contribute an estimated $15.7 trillion to the global economy by 2030. As a leading player in this sector, Microsoft positions itself favorably for long-term investor returns within the next five to six years.

Furthermore, Microsoft may navigate trade tensions more effectively than many peers due to its predominant focus on software and digital services. Tariffs typically affect physical imports, and most of Microsoft’s offerings have thus far avoided direct penalties. Although the company might experience indirect consequences from a slowing global economy—such as reduced demand for Copilot and Azure AI services—this trend is likely to be temporary, especially as countries pursue new trade agreements with the U.S.

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