There's no denying the advent of artificial intelligence is changing the world in big ways. From the instant creation of digital images to conversational interactions to autonomous robots to fraud detection -- and more -- the things being done with artificial intelligence (AI) now were unthinkable just a few years back. The rise of AI has also thrust companies like Nvidia, Palantir, and Symbotic into the spotlight, as they all helped usher in the new era of supercomputing.
There's another artificial intelligence stock worth a look, however, hiding in plain sight. That company is software giant Microsoft (MSFT 0.60%). It could easily help make you a millionaire.
Microsoft is already (and quietly) knee-deep in the business
You of course know the company. Not only is Microsoft currently the world's single-biggest company (as measured by market cap), but its Windows operating system is installed on more than two-thirds of the world's computers. This deep reach within the PC market makes Microsoft a key player in the personal productivity software market as well. The company is also an important cloud computing technology name, while its Xbox video game console is a well-regarded brand name in the gaming business.
But artificial intelligence? Actually, yes.
Microsoft's multibillion-dollar investment in AI outfit -- and ChatGPT parent -- OpenAI back in 2023 is a major hint of its commitment to whatever the future may hold for the AI industry. In the meantime, Microsoft has further integrated ChatGPT into its Bing search engine platform, and since then, this tech has evolved into a full-blown AI assistant Microsoft calls Copilot. For users willing to pay a monthly premium, Copilot can integrate with Microsoft's Office productivity software suite, making its programs like Word and Excel even more powerful.
The company's foray into artificial intelligence doesn't end there, however.
Take its cloud-management platform Azure as an example. Although Azure is capable of handling all sorts of cloud computing duties, one version of the software is purpose-built for AI applications. This particular tool can be used to create enterprise-specific AI chat applications or the development of a client-specific Copilot. Paying customers of these solutions include beer company Heineken, printer maker Lexmark, and telecom giant AT&T, just to name a few.
The technology giant is still investing in new AI-driven growth projects though. It earmarked $2.9 billion just this week to expand its hyperscale cloud computing and AI presence in Japan. A big chunk of this money will be spent on training as many as 3 million people to build and use AI solutions.
The AI market's growth outlook
It's still not completely clear what the future holds for the AI industry. It's also not entirely clear what sorts of things Microsoft will be doing within the AI arena in the future.
It is clear, however, that Microsoft will be ready for almost anything the future holds.
And that future is compelling, to be sure. Market research outfit Precedence Research believes the AI software market alone will grow at an annualized pace of 23% through 2032, at which time it will be worth more than $1 trillion per year.
NASDAQ: MSFT
Key Data Points
This outlook, however, may actually understate Microsoft's ultimate potential on the AI front. Precedence further suggests the worldwide virtual assistant market is set to grow at a compounded yearly rate of 26% during the same time frame. Already the centerpiece of most of the world's computers, Microsoft is almost unfairly positioned to win more than its fair share of this business's growth. As Wedbush Securities analyst Daniel Ives says of the recent launch of its Copilot platform, "We strongly view this as Microsoft's 'iPhone Moment' with AI set to change the cloud growth trajectory in Redmond the next few years."
It's an exciting comparison. The debut of the iPhone in 2007 is the chief reason Apple shares have performed so well since then; the popular smartphone now accounts for about half of the company's revenue.
A well-balanced, lower-risk way to invest in AI
No, it's not an AI "pure play." Productivity and business software still account for roughly one-third of Microsoft's current revenue, while cloud computing makes up a little more. Personal computing solutions like Windows, video gaming, and Bing are almost as big as those other arms (when combined with one another). Although some of these other ventures have AI elements to them, some of them don't.
Connect the dots -- it could take a little while for AI to move the proverbial needle for the software giant's top and bottom lines.
Nevertheless, it's not inconceivable that AI will ultimately be driving the majority of the company's revenue within a few years. That includes revenue generated by businesses that aren't necessarily marketed as being AI-related but are AI-powered all the same. The diversity of all of its other, already-proven profit centers just makes Microsoft stock a much easier name to own while you're waiting. That's something that can't be said for most other popular AI stock picks.
More important to interested investors, AI could accelerate this software behemoth's growth, which is otherwise being held back by Microsoft's sheer size. This mostly unexpected growth is the key reason it's a millionaire-making stock prospect.
