Microsoft Just Hit a 1-Year Low. Here's Why You'll Regret Not Loading Up on Shares Right Now.
Key Points
Microsoft's AI business is rapidly growing.
Azure is delivering strong growth results.
The stock is cheaper than the S&P 500.
- 10 stocks we like better than Microsoft ›
Microsoft (NASDAQ: MSFT) has been a terrible investment in 2026. The stock has declined 21% year to date, and it has been a straight line down since 2026 began. To add injury to insult, Microsoft stock is now down around 30% from its all-time high set last October. It has been a nearly year-long run of Microsoft disappointment, but is now the time to buy the stock?
A few days ago, Microsoft hit a 52-week low, but it has rallied a bit since then. Still, it looks primed to deliver incredible upside, as it's a strong player in the artificial intelligence (AI) space and is taking a balanced approach to the major economic shift.
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Microsoft is a screaming deal
Microsoft is approaching AI from several different angles. First, it is developing Copilot, its AI tool to assist users of its other software products. This has been a strong addition to Microsoft's lineup, helping push its AI annual recurring revenue to $37 billion, up 123% year over year in its most recent quarter.
Another way Microsoft is thriving is from cloud revenue. Few companies have the computing resources available to build and run AI applications, so they rent them from cloud computing platforms like Microsoft Azure. Azure hosts countless generative AI models, so users can pick and choose which large language model (LLM) is right for them. Azure is growing rapidly, with 40% revenue growth during its last quarter.
While Azure is technically neutral about which AI model is used, Microsoft would prefer that its users deploy ChatGPT, the model from OpenAI. Microsoft is a major OpenAI investor and exchanged computing power for equity in OpenAI. This has led Microsoft to build up a massive 27% stake in OpenAI.With OpenAI projected to go public at a valuation of $1 trillion or more, this investment appears to be paying off for Microsoft.
All three of these are top reasons to invest in Microsoft, yet the stock is priced at dirt cheap levels.
Data by YCharts.
At less than 20 times forward earnings and well below its five-year average of 30.2, Microsoft looks like a screaming deal, especially with the S&P 500 trading for 21.7 times forward earnings. Microsoft is a fantastic stock pick that's on sale for no good reason. I won't be surprised to see Microsoft stock skyrocket sometime in July, especially with its earnings coming out later this month. That could be the catalyst it needs to kick-start its return, making now the perfect time to buy it.
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Keithen Drury has positions in Microsoft. The Motley Fool has positions in and recommends Microsoft. The Motley Fool has a disclosure policy.
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