Microsoft Investing $5 Billion in AI — Is It Time To Load Up on the Stock?
Written by
David Nadelle
Edited by
Travis Woods
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The American economy has remained defiantly strong over the past few years amid a global pandemic, recession warnings, interest rate hikes, a politically-motivated debt default crisis, a series of bank failures and other economic uncertainties.
One of the reasons is the continued surge in the tech industry. According to Insider Monkey, the last three years has seen earnings for companies competing within the Information Technology sector increase by 5.7% annually, while revenues have grown at a rate of 3.1% per year.
Although many are calling for a potential artificial intelligence (AI) bubble burst this year, tech companies continue to rule the markets. As the world’s most valuable publicly traded company, few are in a more strategically enviable position to expand their ongoing dominance than Microsoft.
Microsoft to Invest Nearly $3.5 Billion in Germany and $1.2 Billion in Spain
The software giant announced it will invest 3.3 billion euros (approx. $3.47 billion USD) in Germany, primarily in artificial intelligence, over the next two years. The move will boost a lagging German economy, will provide partnership and recruitment opportunities in the region and will place Microsoft as a world leader in AI.
“We are doing this because of the enormous confidence we have in Germany,” said President Brad Smith. Microsoft believes Germany to be at the forefront of technological change and notes that Germany came second in Europe for the creation of AI based applications and that AI was increasingly being adopted by German companies, per Reuters.
Additionally, Microsoft will be investing $2.1 billion in Spain, and in the process, will grow its AI and cloud technology foundation.
“Our investment is beyond just building data centers, it’s a testament to our 37-year commitment to Spain, its security, and development and digital transformation of its government, businesses and people,” Smith said.
Heavy investment abroad will impact the company’s strong market performance back home in the U.S. But is now the right time for you, the average American investor, to load up on Microsoft stock?
Should You Buy Microsoft Stock Now?
Microsoft continues to deliver on high expectations for demand driven by artificial intelligence and its aggressive European commitments show that it means business in our AI-guided future.
There’s now doubt Microsoft Corp (stock symbol: MSFT) is a strong buy right now. Most experts — Tipranks, Nasdaq, MarketBeat, InvestorPlace — are bullish on the company’s upside, dividend strength and projected earnings growth. The company has an outstanding track record with flawless balance sheet.
The combination of future trends and current applications is uniquely suited to a company like Microsoft and is likely to result in tremendous value for its customers. In addition, it is likely that Microsoft will gain market share in the cloud and search markets as a result of its ongoing AI developments.
The company has already begun enhancing its software suite by integrating AI across its operations, including the newest Microsoft 365 Copilot addition which improves efficiency in applications including Word, Excel, PowerPoint, Outlook and Teams. Additionally, while its Bing search engine ranks way behind Google, Microsoft has added a Deep Search generative AI feature already and will continue to develop Bing’s functions using AI.
With a seemingly unlimited future, buying MSFT at whatever price (today it sits around $405) would seemingly be a bargain. But bargains are relative. And its stock price is huge. Buying one share of Microsoft is out of the typical investor’s comfort spending zone.
However, just because a company is gigantic, it doesn’t mean it isn’t mispriced. If you’ve been sitting on the sidelines with money to invest and aren’t sure whether to jump in now in hopes of additional gains or ignore the stock because of its somewhat pricey valuation, then the decision should probably lean toward “buy.”
If you do choose to bet on Microsoft’s infinite growth potential, you’ll be holding stock in a company that will be even stronger than it is today in five years time. As InvestorPlace noted, “Why wager your hard-earned money on second-rate tech companies? Microsoft is the gold standard on a global scale, especially in the field of AI.”
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