Microsoft: More Than Just AI And Cloud, But Still Not Cheap

Summary:

• I remain cautious about Microsoft’s stock despite its strong quarterly results, citing high valuation multiples and potential overvaluation.
• Microsoft’s AI and cloud investments drive growth but impact short-term margins, with AI business set to surpass $10 billion in annual revenue.
• Microsoft’s diverse revenue streams, including LinkedIn and gaming, contribute to growth, but high capital expenditures currently limit free cash flow.
• Despite growth potential, I recommend waiting for lower entry prices, as current valuation requires unsustainable high growth rates to justify.

It is not wrong to say that I have been rather cautious about many of the major technology companies in the last few quarters – those companies that were not only driving the S&P 500 (SPY) higher

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