Microsoft: The Ultimate Long-Term AI Investment
Written by Emily J. Thompson, Senior Investment Analyst
Updated: 53 minutes ago
0mins
Should l Buy MSFT?
Source: Fool
- AI-Driven Growth: Microsoft has invested approximately $13 billion in AI, gaining access to models through its partnership with OpenAI, which has propelled its cloud business to an annual revenue run rate of $37 billion, reflecting a remarkable 123% growth and indicating strong market demand and profit potential.
- Strong Cloud Performance: In the most recent quarter, Microsoft's cloud business generated $54 billion in revenue, marking a 29% year-over-year increase, which not only solidifies its leadership in the cloud computing market but also provides robust support for future AI products and services.
- Integration of Software and AI: While some investors fear that AI may replace Microsoft's software, the company is integrating AI tools into its existing software, enhancing functionality and providing greater value to customers, thereby ensuring customer loyalty.
- Attractive Valuation: Microsoft’s stock currently trades at 25 times forward earnings estimates, down from over 35 times a year ago, presenting a highly attractive buying opportunity for long-term investors, especially given its leadership position in AI and ongoing growth prospects.
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Analyst Views on MSFT
Wall Street analysts forecast MSFT stock price to rise
34 Analyst Rating
32 Buy
2 Hold
0 Sell
Strong Buy
Current: 423.540
Low
500.00
Averages
631.36
High
678.00
Current: 423.540
Low
500.00
Averages
631.36
High
678.00
About MSFT
Microsoft Corporation is a technology company. The Company develops and supports software, services, devices, and solutions. The Company’s segments include Productivity and Business Processes, Intelligent Cloud, and More Personal Computing. The Productivity and Business Processes segment consists of products and services in its portfolio of productivity, communication, and information services. This segment primarily comprises: Office Commercial, Office Consumer, LinkedIn, and Dynamics business solutions. The Intelligent Cloud segment consists of server products and cloud services, including Azure and other cloud services, SQL Server, Windows Server, Visual Studio, System Center, and related Client Access Licenses (CALs), and Nuance and GitHub; and Enterprise Services, including enterprise support services, industry solutions and Nuance professional services. The More Personal Computing segment primarily comprises Windows, Devices, Gaming, and search and news advertising.
About the author
Emily J. Thompson
Emily J. Thompson, a Chartered Financial Analyst (CFA) with 12 years in investment research, graduated with honors from the Wharton School. Specializing in industrial and technology stocks, she provides in-depth analysis for Intellectia’s earnings and market brief reports.
Microsoft: The Ultimate Long-Term AI Investment
- AI-Driven Growth: Microsoft has invested approximately $13 billion in AI, gaining access to models through its partnership with OpenAI, which has propelled its cloud business to an annual revenue run rate of $37 billion, reflecting a remarkable 123% growth and indicating strong market demand and profit potential.
- Strong Cloud Performance: In the most recent quarter, Microsoft's cloud business generated $54 billion in revenue, marking a 29% year-over-year increase, which not only solidifies its leadership in the cloud computing market but also provides robust support for future AI products and services.
- Integration of Software and AI: While some investors fear that AI may replace Microsoft's software, the company is integrating AI tools into its existing software, enhancing functionality and providing greater value to customers, thereby ensuring customer loyalty.
- Attractive Valuation: Microsoft’s stock currently trades at 25 times forward earnings estimates, down from over 35 times a year ago, presenting a highly attractive buying opportunity for long-term investors, especially given its leadership position in AI and ongoing growth prospects.
See More
Microsoft's Long-Term Investment Edge in AI
- Significant Revenue Growth: Microsoft's cloud business achieved $54 billion in quarterly revenue, a 29% year-over-year increase, with its AI segment's annual revenue run rate surpassing $37 billion, reflecting the company's robust growth potential in the AI sector.
- Strategic Investment in OpenAI: Microsoft's cumulative investment in OpenAI has reached $13 billion, positioning it as the main cloud provider, which not only enhances its competitive edge in AI technology but also supports innovation in its software products.
- Stable Market Position: Despite concerns that AI might replace its software, Microsoft's products are deeply integrated into corporate systems, making it unlikely for clients to switch, thus providing stability for the company while also creating opportunities for AI integration.
- Attractive Valuation: Microsoft shares currently trade at 25 times forward earnings estimates, down from over 35 times a year ago, presenting a compelling buying opportunity for long-term investors, especially given its leadership in AI and ongoing growth drivers.
See More
Amazon: The Hidden Winner in AI Infrastructure
- Strategic AWS Advantage: Amazon is positioning AWS as a backbone for the AI era, leveraging its robust computing and storage capabilities to meet the enormous resource demands of AI models, thereby gaining a competitive edge in the market.
- AI Chip Development: The introduction of Trainium and Inferentia AI chips aims to reduce costs associated with AI training and inference, enhancing Amazon's technological prowess and competitiveness in the AI sector, facilitating efficient AI deployment for businesses.
- Ecosystem Integration: By embedding AI across its e-commerce, advertising, and logistics sectors, Amazon creates a powerful flywheel effect that optimizes product recommendations and advertising effectiveness, improving user experience and sales, thus solidifying its market position.
- Investment and Risks: While Amazon's investment in AI infrastructure is projected to reach $200 billion by 2026, this could pressure its margins and free cash flow, necessitating cautious evaluation of its long-term performance in a highly competitive landscape.
See More
Rigetti Quantum Computers Face High Error Rates and Valuation Challenges
- Significant Revenue Growth: Rigetti's total revenue reached $4.4 million in Q1 2026, marking a staggering 198% year-over-year increase; however, the company's revenue remains volatile, lacking a sustained upward trend, which could undermine investor confidence.
- Technological Advances and Challenges: The Cepheus-1-108Q system, with its 108 qubits, is the industry's largest multichip quantum computer, achieving a single-qubit gate fidelity of 99.9%, yet its two-qubit fidelity of only 99.1% presents substantial challenges for practical applications.
- Orders and Market Expansion: Rigetti plans to deliver an $8.4 million order for the Cepheus-1-108Q to India's Center for Development of Advanced Computing, which will significantly boost annual revenue, and as the system's fidelity improves, future order flow is expected to become more consistent.
- Significant Financial Risks: Despite holding $569 million in cash reserves, Rigetti reported operating expenses of $27.3 million in Q1, leading to a net loss of $20.5 million; if profitability is not achieved in the coming years, the company may need to raise additional funds, diluting existing shareholders' equity.
See More
Rigetti Quantum Computers Face Significant Challenges
- Quantum Computing Innovation: Rigetti Computing's Cepheus-1-108Q system is the industry's largest multichip quantum computer with 108 qubits and a single-qubit gate fidelity of 99.9%, yet it still faces high error rates that limit its practical applications in real-world problems.
- Revenue Growth and Volatility: Although Rigetti generated $4.4 million in revenue during the first quarter, representing a 198% year-over-year increase, the revenue remains volatile due to the timing of system deliveries and government-funded projects, lacking a sustained upward trend.
- Escalating Financial Risks: Rigetti incurred $27.3 million in operating expenses in the first quarter, resulting in a net loss of $20.5 million; despite having $569 million in cash reserves, the company may need to raise additional funds if it fails to achieve profitability in the coming years, risking shareholder dilution.
- Stock Price Decline and Valuation Pressure: With Rigetti's stock down 61% from last year's peak and a price-to-sales ratio of 574, significantly higher than Alphabet's 11, the stock could potentially fall below $10 in the next year, and even below $5 if the company's progress does not meet investor expectations.
See More
Seeking Stable Dividend Growth Amid Market Turbulence
- Dividend Growth Strategy: Trivariate Research emphasizes that in turbulent markets, investors should focus on companies with consistent dividend growth over the past five years for downside protection, especially as traditional defensive stocks now represent just over 10% of the S&P 500's market cap.
- Rollins Performance: Pest control company Rollins recently raised its dividend by over 10% to 18 cents per share, and despite a roughly 10% decline in its stock in 2026, analysts remain optimistic about its ability to deliver compounding growth, with Goldman Sachs reiterating a buy rating.
- Cheniere Energy Growth: Liquefied natural gas company Cheniere Energy increased its quarterly dividend by over 10% last October, currently yielding 0.9%, and its stock has risen 26% this year, benefiting from reduced LNG production in the Middle East.
- Analyst Support: Cheniere Energy's first-quarter results exceeded expectations, raising its adjusted EBITDA guidance to between $7.25 billion and $7.75 billion, with analysts bullish on its strong volume outlook and project execution, as 23 out of 24 analysts rate it a buy.
See More
Microsoft: The Ultimate Long-Term AI Investment
- AI-Driven Growth: Microsoft has invested approximately $13 billion in AI, gaining access to models through its partnership with OpenAI, which has propelled its cloud business to an annual revenue run rate of $37 billion, reflecting a remarkable 123% growth and indicating strong market demand and profit potential.
- Strong Cloud Performance: In the most recent quarter, Microsoft's cloud business generated $54 billion in revenue, marking a 29% year-over-year increase, which not only solidifies its leadership in the cloud computing market but also provides robust support for future AI products and services.
- Integration of Software and AI: While some investors fear that AI may replace Microsoft's software, the company is integrating AI tools into its existing software, enhancing functionality and providing greater value to customers, thereby ensuring customer loyalty.
- Attractive Valuation: Microsoft’s stock currently trades at 25 times forward earnings estimates, down from over 35 times a year ago, presenting a highly attractive buying opportunity for long-term investors, especially given its leadership position in AI and ongoing growth prospects.
See More
Microsoft's Long-Term Investment Edge in AI
- Significant Revenue Growth: Microsoft's cloud business achieved $54 billion in quarterly revenue, a 29% year-over-year increase, with its AI segment's annual revenue run rate surpassing $37 billion, reflecting the company's robust growth potential in the AI sector.
- Strategic Investment in OpenAI: Microsoft's cumulative investment in OpenAI has reached $13 billion, positioning it as the main cloud provider, which not only enhances its competitive edge in AI technology but also supports innovation in its software products.
- Stable Market Position: Despite concerns that AI might replace its software, Microsoft's products are deeply integrated into corporate systems, making it unlikely for clients to switch, thus providing stability for the company while also creating opportunities for AI integration.
- Attractive Valuation: Microsoft shares currently trade at 25 times forward earnings estimates, down from over 35 times a year ago, presenting a compelling buying opportunity for long-term investors, especially given its leadership in AI and ongoing growth drivers.
See More
Amazon: The Hidden Winner in AI Infrastructure
- Strategic AWS Advantage: Amazon is positioning AWS as a backbone for the AI era, leveraging its robust computing and storage capabilities to meet the enormous resource demands of AI models, thereby gaining a competitive edge in the market.
- AI Chip Development: The introduction of Trainium and Inferentia AI chips aims to reduce costs associated with AI training and inference, enhancing Amazon's technological prowess and competitiveness in the AI sector, facilitating efficient AI deployment for businesses.
- Ecosystem Integration: By embedding AI across its e-commerce, advertising, and logistics sectors, Amazon creates a powerful flywheel effect that optimizes product recommendations and advertising effectiveness, improving user experience and sales, thus solidifying its market position.
- Investment and Risks: While Amazon's investment in AI infrastructure is projected to reach $200 billion by 2026, this could pressure its margins and free cash flow, necessitating cautious evaluation of its long-term performance in a highly competitive landscape.
See More
Rigetti Quantum Computers Face High Error Rates and Valuation Challenges
- Significant Revenue Growth: Rigetti's total revenue reached $4.4 million in Q1 2026, marking a staggering 198% year-over-year increase; however, the company's revenue remains volatile, lacking a sustained upward trend, which could undermine investor confidence.
- Technological Advances and Challenges: The Cepheus-1-108Q system, with its 108 qubits, is the industry's largest multichip quantum computer, achieving a single-qubit gate fidelity of 99.9%, yet its two-qubit fidelity of only 99.1% presents substantial challenges for practical applications.
- Orders and Market Expansion: Rigetti plans to deliver an $8.4 million order for the Cepheus-1-108Q to India's Center for Development of Advanced Computing, which will significantly boost annual revenue, and as the system's fidelity improves, future order flow is expected to become more consistent.
- Significant Financial Risks: Despite holding $569 million in cash reserves, Rigetti reported operating expenses of $27.3 million in Q1, leading to a net loss of $20.5 million; if profitability is not achieved in the coming years, the company may need to raise additional funds, diluting existing shareholders' equity.
See More
Rigetti Quantum Computers Face Significant Challenges
- Quantum Computing Innovation: Rigetti Computing's Cepheus-1-108Q system is the industry's largest multichip quantum computer with 108 qubits and a single-qubit gate fidelity of 99.9%, yet it still faces high error rates that limit its practical applications in real-world problems.
- Revenue Growth and Volatility: Although Rigetti generated $4.4 million in revenue during the first quarter, representing a 198% year-over-year increase, the revenue remains volatile due to the timing of system deliveries and government-funded projects, lacking a sustained upward trend.
- Escalating Financial Risks: Rigetti incurred $27.3 million in operating expenses in the first quarter, resulting in a net loss of $20.5 million; despite having $569 million in cash reserves, the company may need to raise additional funds if it fails to achieve profitability in the coming years, risking shareholder dilution.
- Stock Price Decline and Valuation Pressure: With Rigetti's stock down 61% from last year's peak and a price-to-sales ratio of 574, significantly higher than Alphabet's 11, the stock could potentially fall below $10 in the next year, and even below $5 if the company's progress does not meet investor expectations.
See More
Seeking Stable Dividend Growth Amid Market Turbulence
- Dividend Growth Strategy: Trivariate Research emphasizes that in turbulent markets, investors should focus on companies with consistent dividend growth over the past five years for downside protection, especially as traditional defensive stocks now represent just over 10% of the S&P 500's market cap.
- Rollins Performance: Pest control company Rollins recently raised its dividend by over 10% to 18 cents per share, and despite a roughly 10% decline in its stock in 2026, analysts remain optimistic about its ability to deliver compounding growth, with Goldman Sachs reiterating a buy rating.
- Cheniere Energy Growth: Liquefied natural gas company Cheniere Energy increased its quarterly dividend by over 10% last October, currently yielding 0.9%, and its stock has risen 26% this year, benefiting from reduced LNG production in the Middle East.
- Analyst Support: Cheniere Energy's first-quarter results exceeded expectations, raising its adjusted EBITDA guidance to between $7.25 billion and $7.75 billion, with analysts bullish on its strong volume outlook and project execution, as 23 out of 24 analysts rate it a buy.
See More
