Microsoft Has A Headstart In The AI Boom

Summary:

  • The AI boom has legs to go.
  • Microsoft is well-positioned to be an AI winner.
  • Broad-based share gains are likely to continue.
  • Microsoft is trading at a 29.9x 1-yr fwd PE, which is at a modest 5.4% premium to its average multiple since 2018; an acceptable price given the rosy prospects ahead.
  • I intend to phase in the buys over a period of weeks to potentially capture a discount buying opportunity enabled by market whipsaws.

Entrance of Microsoft headquarters building in Issy les Moulineaux near Paris, France

Jean-Luc Ichard

Thesis

I think Microsoft (NASDAQ:MSFT) has a strong headstart in the current AI boom. I am fundamentally bullish on the stock for 3 key reasons:

  1. The AI boom has legs to go
  2. Microsoft is well-positioned to be an
Global AI Market Size

Global AI Market Size (Next Move Strategy Consulting, Author’s Analysis)

AI for Enterprise Applications Market Size

AI for Enterprise Applications Market Size (Precedence Research, Author’s Analysis)

Cloud Market Shares

Cloud Market Shares (Canalys, Author’s Analysis)

Q3 FY23 Product Revenues Split

Q3 FY23 Product Revenues Split (Company Filings, Author’s Analysis)

Microsoft 1-yr forward PE

Microsoft 1-yr forward PE (Capital IQ, Author’s Analysis)


Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in MSFT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha’s Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.


Leave a Reply

Your email address will not be published. Required fields are marked *