A $135 Billion Reason to Buy Microsoft Stock Now

Core Insights - The tech earnings season shows strong revenue trends, but heavy AI spending is impacting results, particularly for Microsoft, which faced a share price drop due to concerns over elevated AI-related capital expenditures and a recent Azure outage [1] - Microsoft has made a significant strategic move by acquiring a 27% stake in OpenAI, valued at approximately $135 billion, which secures exclusive cloud and IP rights along with multi-year Azure commitments and revenue sharing [2] - The partnership with OpenAI is seen as a potential catalyst for Microsoft stock, providing large-cap AI exposure with strong cash flow and analyst support [3] Company Overview - Microsoft, founded in 1975, is a diversified technology company offering products such as Windows OS, Office software, Azure cloud services, and consumer devices, organized into three main segments: Productivity & Business Processes, Intelligent Cloud, and More Personal Computing [4] - The company has a market capitalization of nearly $4 trillion and has expanded from software into cloud computing and AI, competing in both enterprise tech and consumer markets [4] Stock Performance - Microsoft shares have outperformed the market, rising approximately 23% year-to-date through late October 2025, compared to a 15% gain in the S&P 500, driven by AI-driven cloud growth and positive investor sentiment around Azure [5] - Despite the strong performance, Microsoft's valuation appears reasonable, with a trailing P/E ratio of about 37x, significantly lower than the software industry average of 81x, indicating a relative discount [6] - Morgan Stanley suggests that Microsoft trades under 26x forward EPS estimates for 2027, indicating it may be "underpriced" given its growth outlook [6]