Is Microsoft (NASDAQ:MSFT) stock overvalued, or is it a must-own in 2023?
That’s the billion-dollar question today, but one thing’s indisputable: An investment in Microsoft provides direct exposure to the artificial intelligence market, which continues to gain traction whether or not the critics like it.
Imagine being able to turn back the clock and invest in the internet in 1995. Holding a handful of Microsoft shares for the long term would have yielded outstanding results.
You can’t turn back the clock, but you can consider what the future might look like. Chances are, AI will be even more pervasive than it is today. One simple way to capitalize on this multi-year opportunity would be to hold MSFT stock in your portfolio.
CEO Compares AI to an Unstoppable ‘Tidal Wave’
Earlier this year, Microsoft made an aggressive move into the machine learning space when the company invested in OpenAI’s generative AI technology. Microsoft promptly incorporated this technology into many of its products/services.
Microsoft was also an early adopter of internet technology in the 1990s, and obviously that turned out quite well for the company and its shareholders. In 1995, Microsoft co-founder Bill Gates called the internet phenomenon a “tidal wave” in a memo. Could AI be the tidal wave of the 2020s?
Current Microsoft CEO Satya Nadella seems to believe so. Referring to today’s AI trend, Nadella recently declared that “The Bill memo in 1995, it does feel like that to me,” and, “I think it’s as big.”
The Microsoft chief feels that AI today will be as impactful as the internet was in the 1990s and 2000s. That’s a bold statement to make, but is it credible? And, is holding MSFT stock the best way to ride this perceived “tidal wave”?
Considering the MSFT Stock Valuation Debate
There’s no denying that Microsoft is still pushing the boundaries of what’s possible with AI technology. Currently, the company is deploying AI functionalities to assist a range of frontline workers, including healthcare workers.
A recent poll found that many of today’s workers are already availing themselves of OpenAI’s ChatGPT chatbot program. In fact, around “28% of respondents to the online poll on artificial intelligence between July 11 and 17 said they regularly use ChatGPT at work.”
If you expect that percentage to increase, then you might consider buying and holding MSFT stock.
On the other hand, it might bother you that Microsoft’s GAAP trailing 12-month price-to-earnings (P/E) ratio of 32.74x exceeds the sector median P/E ratio of 24.9x.
So, you can pick a strategy. If you’d rather not invest in Microsoft due to valuation concerns, then you can wait for a share-price dip. Just bear in mind that sometimes, when you wait for a stock to dip, it never happens.
MSFT Stock Is Appropriate for Many Portfolios
Microsoft remains a tech-industry bellwether, just like it was in the 1990s. Clearly, Microsoft is willing and able to ride the “tidal wave” of generative AI technology in the 2020s.
Granted, some people might take issue with Microsoft’s current valuation. Nevertheless, Microsoft is a renowned leader amid the unstoppable AI phenomenon. Hence, MSFT stock gets a confident “B” grade and should be appropriate for many investors’ portfolios.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
