Microsoft’s AI Edge: Why MSFT Stock Is Poised to Outperform Apple and Nvidia


  • Microsoft (MSFT) stock has ebbed and flowed, surging to top spot in the market capitalization rankings, and then giving up this position.
  • The company continues to battle Apple (AAPL) for top spot, with Nvidia (NVDA) coming up quickly on its heels.
  • Here are the key factors long-term investors will want to consider in regards to the company’s ability to hold this top spot. 
MSFT stock - Microsoft’s AI Edge: Why MSFT Stock Is Poised to Outperform Apple and Nvidia

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Microsoft (NASDAQ:MSFT) remains one of the Magnificent 7 stocks long-term growth investors should continue to hold. That’s been my view for a long time, and it’s still true.

However, after the company got dethroned by Apple (NASDAQ:AAPL), and as I’m writing this, Nvidia (NASDAQ:NVDA) as well, the question is whether this dominance will continue?

Now, it’s entirely possible all three could continue to race higher from here. In other words, whether you buy Microsoft, Apple or Nvidia, you could still win, even if one doesn’t keep pace with the rest.

But with that said, let’s dive into what may lead Microsoft to outperform relative to these peers moving forward.

Testing Sharing Files to Android

Microsoft recently enhanced integration between Windows PCs and smartphones, enabling users to handle texts, calls, and notifications on their computers. The Phone Link app syncs Android and iPhones with Windows, facilitating file sharing. In the latest Windows Insider Preview, Microsoft introduced a streamlined feature for quick content sharing from PC to Android. Now, users can select a file and share it directly to a paired Android phone via a quick share window.

Microsoft stated that users need to pair their smartphone with their Windows PC using the Link to Windows app on Android and Phone Link on their PC for the feature to work. Currently, only paired Android phones appear in the share window, with no information on iPhone compatibility. Right-clicking a file on Windows and selecting Share now shows options to email or use Nearby Share.

This feature, part of the Windows 11 Insider Preview Build 22635.3785, is rolling out in the Beta Channel and may take time to reach all users.

Microsoft Will Still Be an AI Winner

Most of the focus on the AI race is on Nvidia now, and for good reason. On this catalyst alone, it’s entirely possible Nvidia could break away from the pack. But I don’t think that means Microsoft will be a laggard, by any means.

Wedbush analysts predicted the AI boom for tech stocks is just starting, driving customer spending on Microsoft’s AI products. Analysts at Wedbush raised their price target on MSFT stock to $550, citing strong potential for monetizing its AI-powered Copilot tool and Azure cloud service based on recent customer checks.

Wedbush analysts observed accelerating deal conversions for enterprise AI deployments and maintained an outperform rating for Microsoft shares. They highlighted AI’s potential to transform Microsoft’s cloud growth, with over 70% of customers expected to adopt automated options. Rapid growth in AI usage is anticipated by 2025. 

Analysts noted the stock has not yet fully priced in the upcoming AI and cloud growth wave. Microsoft shares, boosted by OpenAI investments, have risen over 19% this year, reaching a $3.29 trillion market cap. Wedbush also mentioned Microsoft’s race with Nvidia and Apple to achieve a $4 trillion valuation.

Microsoft and Qualcomm

Microsoft and Qualcomm’s (NASDAQ:QCOM) limited-time collaboration on the Copilot+ PC has entered the pre-order phase, marking a significant step in AI-powered PCs. This initiative is the first major result of their partnership. 

At COMPUTEX 2024, Qualcomm representatives expressed optimism about the strong pre-order levels, which have exceeded Microsoft’s expectations. The momentum now depends on early adopter feedback. Qualcomm and other IC suppliers hope this trend continues through the year’s second half, establishing a solid foundation for AI PCs’ future.

Initially met with skepticism, Microsoft’s exclusive use of the Snapdragon X series for Copilot+ PC challenged the x86 norm in Windows PCs. Qualcomm’s past PC market struggles added to doubts. Despite this, Microsoft’s aggressive strategy and partnerships with major notebook manufacturers helped overcome initial concerns, leading to higher-than-expected pre-orders.

The success of Copilot+ PC in the long run hinges on these early sales. The initial high pricing suggests realistic pre-order targets, making surpassing them a manageable feat.

Yes, MSFT is a Buy

Microsoft’s Azure cloud division gains ground, challenging Amazon (NASDAQ:AMZN) Web Services amid widespread business digitization. Investments in AI (and OpenAI specifically) position the company for robust long-term growth. Recent quarterly results showcased diversified growth, with cloud revenue up 23% to $35.1 billion and operating income rising 23% to $27.6 billion. 

With the cloud market accelerating, MSFT stock stands out as a top tech investment to load up on right now.

On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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