MSFT Stock Buy Alert: Microsoft AI Moves Should Create Stock Value Microsoft’s AI-Powered Growth

of Microsoft (NASDAQ:MSFT) recent performance in the context of Big Tech’s struggle to prove the profitability of AI positions it solidly in the market. Despite concerns about the broader tech sector’s ability to translate massive artificial intelligence (you) investments in tangible returns, Microsoft has shown progress. This is especially true of its Azure cloud platform.

In fiscal Q4 2024, Microsoft’s annual value exceeded $245 billion, marking a robust 15% year-over-year (YOY) growth. Crucially, Microsoft Cloud revenue topped $135 billion, reflecting 23% year-over-year revenue growth. This growth indicates Microsoft’s sharp execution of its cloud strategy, which is significantly driven by advances in integrating AI into its services.

Microsoft’s flagship cloud computing service Azure has seen accelerated share growth driven by AI advances. The company has expanded its global data center footprint, enhancing capabilities critical to long-term growth. Moreover, advancements like Azure Maia incorporate new AI accelerators from Advanced microdevices (NASDAQ:AMD) and Nvidia (NASDAQ:NVDA). These advances mark Microsoft’s focus on cutting-edge infrastructure to support AI-powered applications across industries. Therefore, Microsoft stock is a buy during the great tech weakness.

Microsoft CapEx Focuses on New AI Data Centers

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Like cloud infrastructure, the AI ​​transition requires intensive investment in capital and knowledge. Microsoft Cloud’s gross margin fell 70% year over year due to the expansion of its AI infrastructure. In the second half of fiscal 2025, Azure growth will accelerate as heavy investments increase available AI capacity to capture growing AI demand.

Beyond infrastructure expansion, Microsoft’s Azure AI services have seen high adoption. With more than 60,000 Azure AI customers, up nearly 60% from last year, and an increasing average spend per customer, Microsoft is effectively monetizing its AI investments. The introduction of Models as a Service and enhancements to the Azure Intelligent Data Platform further strengthen its leadership position in AI-based solutions.

Moreover, Microsoft’s success extends beyond Azure. GitHub Copilot, an AI-powered development tool, has seen significant industry adoption, driving revenue growth for GitHub and increasing developer productivity. Similarly, the integration of AI into Dynamics 365 and Microsoft Teams highlights its focus on transforming business operations through AI-based automation and productivity tools. Microsoft’s stock value is supported by strong performance and strategic AI investments against broader industry challenges.

The rise of Microsoft artificial intelligence: promise vs. profitability

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Despite Microsoft’s strong performance, the challenges and potential counterarguments are worth considering. The broader tech sector’s struggles to demonstrate immediate returns on AI investments raise valid concerns about Microsoft’s long-term profitability in these ventures.

While Microsoft has spurred growth in Azure and AI services, the resilience of that growth in countering competitive pressures remains to be seen. His peers like him Amazon (NASDAQ:AMZN), AWS and Google (NASDAQ:Google) Cloud is also investing heavily in AI infrastructure. Therefore, Microsoft needs to match CapEx and continuously differentiate itself to maintain its market leadership.

Moreover, concerns about the scalability of AI solutions and their profitability persist. AI adoption across all industries is still in its early stages. So the timeline for widespread profitability remains ambiguous. However, Microsoft’s proactive approach to expanding its AI capabilities and capitalizing on its extensive customer base counteracts some of these near-term risks. The company’s diversified top line, solid financials and strategic acquisitions strengthen its moat against industry headwinds.

AI growth is a long-term game

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Looking ahead, Microsoft’s strategic focus on AI integration and cloud expansion positions it favorably for sustained growth and market leadership. Despite pressure from competitors and industry-wide obstacles, Microsoft’s performance in Q4 Fiscal 2024 highlights its innovation and product development capabilities in the AI ​​era.

Microsoft offers stability and growth potential in a volatile technology market with its strong financial fundamentals, which include double-digit sales growth and growing cloud revenue. The company’s investments in Dynamics 365, GitHub Copilot and Azure AI demonstrate a visionary approach to harnessing AI-driven change across industries.

Overall, Microsoft stock is a buy. For FY2025, the company will continue to drive investments in cloud and AI. Therefore, in order to capture the long-term extreme demand for AI based on the advantages of first movers such as NVIDIA, Microsoft and other big tech companies, they have to sacrifice the bottom line to some extent (obviously), so they wouldn’t should panic about short-term performance. of big tech giants like Microsoft.

At the time of writing, Yiannis Zourmpanos held long positions in AMD and NVDA. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.