AI Stock Is the Ultimate Set-It-and-Forget-It Buy for Long-Term Investors
Microsoft is a key AI player with its OpenAI investment and growing cloud AI business, which achieved an annual revenue run rate of over $37 billion. Despite a recent 12% decline, the stock is a strong long-term buy due to deep integration with corporate customers and AI integration opportunities. At 25x forward earnings, it offers an attractive entry point.
Article intelligence
Key points
- Microsoft's AI cloud business annual revenue run rate exceeded $37 billion, up 123%.
- AI is not a threat but an opportunity to enhance Microsoft's software.
- The stock's forward P/E has dropped from 35x to 25x, presenting a buying opportunity.
Why it matters
This matters because microsoft's AI cloud business annual revenue run rate exceeded $37 billion, up 123%.
Technical impact
May affect model selection, inference cost, product capability, and evaluation benchmarks.
One of the world's biggest companies
The player I'm referring to is involved in many areas of technology and is among the world's biggest companies. At the same time, it got in early on AI and has emerged as one of the major players in the field. This stock to buy and hold for the long term is Microsoft (MSFT 0.06%).
Most of us are familiar with Microsoft because it's the owner of something we use every day: Microsoft 365, which includes famous products like Word and Excel. Microsoft sells these packages to individuals and businesses -- but the company's offerings go well beyond this software and apps suite.
Microsoft also generates revenue from ownership of professional networking platform LinkedIn, gaming brand Xbox, its cloud business, and more. All of this has helped the company's earnings grow over time. This track record offers Microsoft investors a certain sense of security as they can count on revenue and growth from the tech giant.
MSFT Revenue (Annual) data by YCharts
Meanwhile, the company has also become a key player in the AI boom. Microsoft has invested about $13 billion in OpenAI over time -- and through the partnership, it gained access to the AI research lab's models and became its main cloud provider.
On top of this, Microsoft's cloud business is delivering tremendous growth due to its offerings of AI products and services to its customers. In the recent quarter, for example, the AI business' annual revenue run rate topped $37 billion -- that's up 123%. And the entire cloud business delivered quarterly revenue of $54 billion for a 29% increase. Microsoft, as well as other cloud providers and chip companies such as leader Nvidia, have all delivered the same message in recent times: Compute demand for AI workloads continues to soar.
NASDAQ: MSFT
Microsoft
Today's Change
(-0.06%) $-0.24
Current Price
$418.85
Key Data Points
Market Cap
$3.1T
Day's Range
$416.35 - $424.40
52wk Range
$356.28 - $555.45
Volume
1.3M
Avg Vol
34.1M
Gross Margin
68.31%
Dividend Yield
0.85%
What's weighed on the stock recently
Some investors have shied away from Microsoft in recent months, though, fearing that AI will replace its software in the years to come. This has weighed on the stock, driving it to a 12% decline this year. I don't see AI as a threat since corporate customers have deeply integrated Microsoft's software into their systems -- it's unlikely they would unwind these systems in favor of an AI tool. Instead, the growth in AI may be an opportunity for Microsoft, as the company is integrating AI tools into its software to make this software more and more powerful.
And now that the AI boom is shifting into the era of AI agents, or the software that solves problems and completes tasks, Microsoft could emerge as a big winner. The tech titan is building out cloud infrastructure to support this technology and building agentic systems, too.
Meanwhile, Microsoft stock today trades for 25x forward earnings estimates right now, down from more than 35x about a year ago. This is a fantastic buying opportunity for a company that offers well-established growth drivers as well as leadership in the hot area of AI. And that's why it's the ultimate set-it-and-forget-it AI stock to buy now.
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About the Author
Adria Cimino is a contributing Motley Fool stock market analyst covering healthcare, technology, and consumer goods sectors. Prior to The Motley Fool, Adria covered the European stock market and U.S. stocks pre-market trading for Bloomberg News, Bloomberg TV, and Bloomberg Radio for more than a decade. Earlier in her career, she wrote about biotech, medtech, and technology companies in Boston for Mass High Tech, an American City Business Journals publication. She holds a bachelor’s degree in mass communications from the University of South Florida.
TMFAdriaCimino
@adria_in_paris
Microsoft
NASDAQ: MSFT
$418.85
(-0.06%)-$0.24
Nvidia
NASDAQ: NVDA
$215.42
(-1.86%)-$4.09
*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.