The Bull Market Is Coming: 1 Artificial Intelligence (AI) Unstoppable Growth Stocks to Buy and Hold Forever | colorful fool

There are mixed signals on Wall Street these days that have market watchers debating the state of the current rally. However, historically, every bear market is followed by an even stronger bull market – and there is evidence to suggest that the market may have already started.

particle for direct object S&P 500 It has risen more than 20% since the bear market crash in October, a sign of an impending bull market. Once the index hits new highs — just 9% above where it is now — any lingering questions about whether we’re in a bull market will be put to rest.

Moreover, while some companies were stopped in their tracks by the worst recession in more than a decade, others proved their mettle by continuing to grow dramatically. One such stock was unstoppable Microsoft (MSFT -1.40%)And despite its 39% gain so far this year, the evidence suggests that the company’s best days are yet to come.

Image source: Getty Images.

A long-awaited return to the consumer PC market

Microsoft has historically generated nearly a third of its revenue from its more personal computing division, but in recent years, the business has fallen on hard times. At the start of the pandemic, working from home became the rule rather than the exception, leading to an increase in demand for personal computers (PCs).

Market saturation and the subsequent recession have since affected growth. Last year, PC shipments fell to the lowest level since 2008, according to market intelligence provider IDC. But eventually there are green growth buds.

According to IDC, PC sales are expected to grow by approximately 4% in 2024. Additionally, the debut of more powerful processors, the end of Windows 10 support, and consumer adoption of generative AI are all expected to boost the industry over the next few years.

During Microsoft’s 2023 fiscal year (ended June 30), revenue in the more personal computing segment fell to $54.7 billion, down 9 percent, offsetting gains from the rest of the business. Once the recovery in the PC market begins in earnest, it will remove that headwind from Microsoft’s results, which should help the stock rise.

You can’t spell without AI

Microsoft quickly recognized the potential opportunity from advances in generative AI and invested $13 billion in ChatGPT creator OpenAI.

Since then, Microsoft has been at the forefront of this movement, building AI capabilities into a wide range of its paid products and services. While the extent of these moves is not yet known, the impact on its financial results could be significant.

Dan Loeb of hedge fund Third Point believes that Microsoft’s Office Copilot with the help of artificial intelligence can increase the company’s revenue by 25 billion dollars or more in software sales alone. A more enthusiastic estimate of goodwill is provided Evercore ISI analyst Kirk Mattern suggests Microsoft’s AI efforts could generate $100 billion in incremental revenue by 2027.

Microsoft is just beginning to scratch the surface of ways to profit from artificial intelligence, and the company’s Azure Cloud is at the center of this opportunity.

Sunshine on a cloudy day

Azure has long played second fiddle to the industry leader Amazon Web Services — which controls 30 percent of the cloud infrastructure services market, according to industry analyst Canalys. However, Microsoft is the #2 provider with 26% and continues to gain against its rival. If this trend continues, it will eventually guarantee the ball overtaking.

Microsoft plans to use its generative AI tools to encourage cloud users to switch and support the resulting productivity gains. The company recently introduced a set of tools based on artificial intelligence and announced the availability of Bing Chat Enterprise, its search system with artificial intelligence. The company expects big things from its foray into artificial intelligence. “The next generation AI business will be the fastest growing $10 billion in our history,” said CFO Amy Hood.

Much of it comes directly from the AI ​​tools available in the Azure Cloud.

Buy Microsoft Fist hand

Those who invest in Microsoft stock now have huge growth potential. The company offers a unique combination of recurring revenue from its software-as-a-service (SaaS) and cloud computing businesses, as well as strong exposure to artificial intelligence. The expected rebound in the PC industry provides another catalyst for a company full of opportunity.

Despite the potential, Microsoft stock is still reasonably priced, trading at 30 times forward earnings and 9 times next year’s sales. While this one little Given the future potential of the company, I would suggest that this is a relative bargain.

That’s why investors should buy Microsoft stock outright and hold it forever.

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Danny Vena has positions at Amazon.com and Microsoft. The Motley Fool has positions and recommends Amazon.com and Microsoft. The Motley Fool has a disclosure policy.

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