1 artificial intelligence (AI) stock you don’t need to think about, buy now and hold forever

The adoption of artificial intelligence (AI) is growing across many industries, which is not surprising, as this technology has the potential to increase productivity and significantly contribute to the global economy in the long term.

McKinsey estimates that generative AI could increase labor productivity by 0.1% to 0.6% per year by 2040. PwC, on the other hand, expects AI to contribute $15.7 trillion to the global economy by 2030, of which $6.6 trillion. Consider increasing productivity. Therefore, investors are encouraged to invest in companies that utilize AI to improve productivity.

microsoft (MSFT 0.20%) Since it is one of the companies that uses AI to increase productivity, it may be a good idea to buy it now and hold it for a long time. Let’s take a closer look at why.

Microsoft’s AI-powered productivity tools are witnessing robust demand.

Microsoft has been taking full advantage of its partnership with OpenAI to improve workplace collaboration tools to increase productivity. Last year, Microsoft launched Microsoft 365 Copilot, a solution based on Large Language Models (LLMs) embedded in popular applications such as Word, Excel, PowerPoint, Outlook, and Teams.

From helping users create presentations in PowerPoint through text prompts to analyzing data in Excel sheets to drafting in Word, Copilot can help you be more productive in a variety of ways. For example, Microsoft claims that developers using Copilot on GitHub have seen an 88% increase in productivity. The good news for Microsoft investors is that the company is already starting to monetize Copilot.

Users can purchase a Copilot subscription for Microsoft 365 for $30 per month. More importantly, users are willing to pay for this product, according to Microsoft executives on the company’s recent earnings conference call. For example, Microsoft has 1.8 million paying developers on GitHub Copilot. We’re adding paid developers to our platform at an impressive rate. GitHub Copilot user count grew 35% in Q3 FY 2024.

Microsoft notes that adoption is growing among companies across all industries, including: itau, Lufthansa System, nokia, Pinterestand volvo Even better, he says existing customers have increased their use of GitHub Copilot “after seeing improvements in productivity and code quality.” CEO Satya Nadella said during a recent earnings call:

This quarter, we made Copilot available to organizations of all types and sizes, from enterprises to small and medium-sized businesses. Nearly 60% of Fortune 500 companies are now using Copilot, and we’re seeing adoption accelerate across industries and geographies, including: Amgen, BP, recognizecoke Industries, Moody’s, novo nordisk, nvidiaTech Mahindra purchases over 10,000 seats.

As a result, Microsoft is seeing healthy growth in productivity and business processes, with revenue up 12% year-on-year to $19.6 billion in the previous quarter. Office 365 commercial revenue increased 15%, driven by an 8% increase in paid users.

Microsoft is also targeting the lucrative customer relationship management (CRM) and enterprise resource planning (ERP) markets with Dynamics 365 Copilot. Microsoft claims that this solution allows businesses to reduce the time employees spend performing office tasks such as responding to emails and writing meeting summaries.

Dynamics 365 Copilot can also be deployed across a variety of applications, from supply chain to e-commerce, digital marketing, and customer service. Demand for this product is clearly growing, evident from the 23% growth Microsoft recorded in Dynamics 365 revenue last quarter.

So Microsoft is taking the right steps to help increase productivity using AI tools, which could open up tremendous long-term growth opportunities for the company.

More reasons to buy stocks

AI-powered productivity tools are just one way Microsoft is leveraging this technology to drive growth. Thanks to AI, the company’s cloud business is also growing significantly. Microsoft’s Azure revenue rose 31% in the previous quarter, which was higher than the company had expected. Microsoft noted that AI drove 7 percentage points worth of growth in its cloud business in the second quarter of fiscal 2024, compared to the 6 percentage points of growth added by AI.

For comparison, Microsoft’s Azure cloud revenue grew 27% over the same period last year. This clearly indicates that the demand for AI-based cloud services is indeed giving a good boost to the company. Again, this is another market that has tremendous growth potential that Microsoft can use to fuel growth in the long term.

Overall, Microsoft is leveraging AI adoption in a variety of ways and is seeing tangible benefits, as evidenced by its financials. Investors looking to buy AI stocks should consider buying Microsoft immediately. Microsoft’s future earnings multiple is 30. Nasdaq-100earnings multiple (using the index as a proxy for technology stocks).