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microsoft (NASDAQ: MSFT)is one of the world’s largest technology companies and a major player in the artificial intelligence (AI) market. The company owns 27% of OpenAI, the developer of ChatGPT, and is blending the startup’s generative AI tools with other models across cloud-based services. We also integrate our proprietary Copilot AI assistant into most of our products and services.
But Microsoft’s stock has only risen about 6% over the past 12 months, even as many other AI stocks have posted double-digit gains. Let’s take a look at why this is so, and why Microsoft is one of the safest AI stocks to own into 2026 and beyond.
Microsoft has a balanced strategy in the AI market
Over the past decade, Microsoft has aggressively expanded its cloud and mobile ecosystem to reduce dependence on locally installed desktop software. We’ve turned Azure into the world’s second-largest cloud infrastructure platform after Amazon. (NASDAQ:AMZN) It adopted Web Services (AWS) and transformed its productivity software into cloud-based services and mobile apps.
This transformation established a solid foundation for the deployment of additional AI services and expansion of first-party cybersecurity services and developer tools. We also continued to launch new first-party hardware devices and expanded our Xbox gaming business to attract more customers. With this scale and diversification, Microsoft has established a balanced path to benefiting from growth in the cloud, AI, consumer electronics, and gaming markets.
How fast will Microsoft grow in the next few years?
Analysts expect Microsoft’s revenue and EPS to grow at a CAGR of 16% and 18%, respectively, from fiscal year 2025 (ending last June) to fiscal year 2028. This growth should be driven by increased use of Copilot across services, deployment of more advanced AI agents to replace human workers, and monetization of those advanced AI capabilities.
Microsoft plans to spend tens of billions of dollars annually to upgrade its AI infrastructure (new data centers, GPUs, and custom AI chips) to support these new features for the foreseeable future. This increased spending has spooked some investors, but Microsoft can easily offset the pressure with steady growth in its high-margin software and cloud businesses.
Microsoft’s stock price is $405, but at 21 times next year’s earnings, it still looks like a good value. May not garner as much attention as high-growth AI efforts like Nvidia (NASDAQ:NVDA)But it’s one of the safest ways to increase your exposure to the expanding AI market.
Leo Sun has a position at Amazon. The Motley Fool has positions in and recommends Amazon, Microsoft, and Nvidia. The Motley Fool has a disclosure policy.
The Motley Fool is a USA TODAY content partner providing financial news, analysis and commentary designed to help people take control of their financial lives. Its content is produced independently of USA TODAY.
