Is Microsoft Poised to Pop on its AI Investments? 3 Things to Consider Before Investing in MSFT

Much of the conversation surrounding the AI revolution focuses on names like Nvidia, AMD, Palantir, and other stocks that have captured the limelight by capitalizing on this emerging technology. 

However, there is reason to believe Microsoft (MSFT) could prove to be the real winner of the “AI arms race” in the long run. No, it’s not a pure-play AI company. But the investments it has made in generative technology have it poised to pop. 

That includes a $10 billion stake in OpenAI, the company behind ChatGPT. Microsoft is doubling down with the intention of building out vast data centers to be used with its prosperity AI supercomputer “Stargate”, which could end up costing $100 billion. This technology should be ready to roll out by 2028.

To put that into context, the company has only reported $104 billion in total capital expenditures over the past 4 years. That’s not all though. Just a little over a month ago Microsoft announced another $5.6 billion for European AI investing specifically.

Part of what makes this company so compelling over the other household names is its ability to actually monetize the technology it’s investing in. Microsoft Copilot – a chatbot similar to ChatGPT or Claude – is priced at a premium of $30/month. 

Are people willing to pay that much, though? Some analysts, like Dan Ives at Wedbush, believe so. In fact, it’s been said that this single product could contribute up to $30 billion in revenue by next year.

Another reason to place your AI bets on Microsoft? It’s diversified well beyond AI. This is part of why it flies under the radar in the AI conversation, as the company is built of so many different moving parts. 

This includes the Xbox unit, which is ramping up in its own right after the recent $69 billion acquisition of video game maker Activision Blizzard. When many people think of Microsoft, though, they think of the Azure cloud-computing segment of its business. This segment itself grew 30% in Q4.

MSFT is up 13% through 2024 thus far, and analysts have put price targets as high as $500, implying there is much more room for growth. So, should you add this stock to your portfolio? We’ve taken a deeper dive into this opportunity through the VectorVest stocks software and found 3 things to help you make your next move.

MSFT Has Good Upside Potential, Excellent Safety, and Fair Timing

VectorVest is a proprietary stock rating system that gives you actionable insights in just 3 simple ratings: relative value (RV), relative safety (RS), and relative timing (RT). Each sits on a scale of 0.00-2.00 with 1.00 being the average, making interpretation quick and easy.

Better yet, you’re presented with a clear buy, sell, or hold recommendation for any given stock at any given time based on its overall VST rating. No more guesswork or emotion getting in the way of profits. As for MSFT, here’s what you need to see:

• Good Upside Potential: The RV rating compares a stock’s long-term price appreciation potential (forecasted 3 years out), AAA corporate bond rates, and risk. This offers far better insights than the standard comparison of price to value alone. MSFT has a good RV rating of 1.23.
• Excellent Safety: The RS rating is a risk indicator. It’s calculated through a deep analysis of the company’s financial consistency & predictability, debt-to-equity ratio, business longevity, sales volume, price volatility, and other factors. MSFT has an excellent RS rating of 1.45.
• Fair Timing: The RT rating is based on the direction, dynamics, and magnitude of the stock’s price movement. It’s calculated day over day, week over week, quarter over quarter, and year over year to paint the full picture. MSFT has a fair RT rating just below the average at 0.99.

The overall VST rating of 1.23 is good for MSFT, but it’s not quite time to buy this stock yet. VectorVest rates it a HOLD for the time being. 

Stay up to date and watch for a more meaningful price trend to find your entry. You’re not going to want to miss this opportunity, so get a free stock analysis at VectorVest and make your next move with confidence! 

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VectorVest advocates buying safe, undervalued stocks, rising in price. Investing in MSFT is a unique, compelling opportunity for those interested in the AI arms race. While it may not be the first stock you think of, its massive investments are poised to pay an ROI sooner rather than later. The stock itself has good upside potential, excellent safety, and fair timing.

Before you invest, check VectorVest! Click here to ANALYZE ANY STOCK FREE and see our system in action!