As the second-most valuable company in the world, with its market cap of $2.3 trillion not far behind Apple, many investors have considered buying Microsoft's (MSFT 0.46%) stock at one time or another. The company is home to potent brands like Windows, Office, Xbox, and LinkedIn, which have granted it leading market shares in multiple high-profit industries. Its dominance across tech has led to consistent stock growth, with its shares rising over 800% in the last decade.
Microsoft has increased its position as a compelling investment after becoming one of the biggest names in artificial intelligence (AI), with the market projected to surge in the coming years. Meanwhile, its bid to acquire the game-development company Activision Blizzard is increasingly likely to go through after gaining approval from European regulators. The purchase is projected to make Microsoft the world's third-largest video game company.
Here's why Microsoft's stock is a screaming buy right now.
Microsoft is a leading name in artificial intelligence
Last November, the launch of OpenAI's ChatGPT kicked off an AI race where countless tech companies have pivoted their businesses to developing the burgeoning market. Consequently, Microsoft's $1 billion investment in OpenAI back in 2019 now appears to be the foresight of the century and put the company ahead of many of its competitors, which are now scrambling to join the industry. Microsoft's further investment of $10 billion in the start-up this year has only strengthened its outlook.
The partnership has reinforced Microsoft's potential to become the go-to in AI services by allowing it to integrate OpenAI's technologies across its different platforms. For instance, the company's Office productivity suite, cloud-service Azure, and search engine Bing, have all received AI upgrades since the release of ChatGPT.
Moreover, Microsoft's recent collaboration with Advanced Micro Devices further proves its dedication to AI development. According to a Bloomberg report, the Windows company is supporting AMD's AI chip expansion by providing financial and engineering resources. Microsoft's guidance could see AMD use chips specifically tailored to its needs in the future, allowing it to get the most out of its software and produce the most effective AI offerings.
According to data from Grand View Research, the AI market is projected to expand at a compound annual growth rate (CAGR) of 37% through 2030, with Microsoft well positioned to profit significantly from the sector's development.
Growing dominance in gaming
Microsoft entered the video games market in 2001 with the release of its first Xbox console. The company stumbled in the industry for years as it had to contend with steep competition from more established companies in the industry like Sony and Nintendo. However, Microsoft hit its stride in gaming with the release of its game-subscription service Xbox Game Pass in 2017.
The platform gave members access to a large library of games for a low monthly fee, making the Xbox console a bargain next to its competitors by doing away with the need to buy games individually. From 2020 to 2022, Game Pass subscribers soared 150% from 10 million to 25 million. The platform's success has motivated Microsoft to acquire several high-profile game studios over the years as it seeks popular titles to attract new Game Pass members.
As a result, Microsoft announced intentions to buy Activision-Blizzard in January 2022 for a historic $69 billion, or $95 per share. The purchase has been held up by regulatory approval as the game developer is home to one of the world's most profitable game franchises: Call of Duty. Regulators worldwide have questioned whether Microsoft's ownership of the brand could grant it too much control of the industry.
NASDAQ: MSFT
Key Data Points
However, the transaction is increasingly likely to go through after the European Commission approved the deal this month. The EU's consent increases the likelihood that dozens of other countries will follow suit, with the next major decision to come from the U.S.
Adding Call of Duty to Xbox Game Pass will give consumers a massive incentive to subscribe, bolstering Microsoft's position in the games market for years.
Microsoft's stock has offered investors consistent gains over the years, making it one of the most reliable investments. With exciting developments in different areas of its potent business over the next year, the company's stock has only grown more attractive. So if you're wondering if you should buy, hold, or sell Microsoft stock, the answer is in its history of past growth and vast potential in AI and gaming.
