The Smartest Growth Stock to Buy With $1,000 Right Now

Artificial intelligence (AI) is one of the most significant opportunities to come along in decades, and many companies are already successfully tapping into it. One tech juggernaut that's accelerating its growth thanks, in part, to AI's rise is Microsoft (NASDAQ: MSFT).

Microsoft sprinted ahead of some of its AI rivals because of its early investments in ChatGPT creator OpenAI, and the company's fast-growing cloud-computing services business will likely continue to benefit for years as AI expands.

Here's why Microsoft is a smart place in which to invest $1,000 right now.

How Microsoft is tapping into AI's growth

Microsoft has invested nearly $14 billion to date in OpenAI, giving the company access to some of the most advanced AI available. The tech giant was quick to integrate versions of ChatGPT into everything from its Office 365 software used by millions of users worldwide to its Azure cloud computing services.

And it's already paying off. Microsoft said on its first-quarter earnings call that 70% of Fortune 500 companies now use its Microsoft 365 Copilot AI and, more importantly, that its AI businesses are on track to have an annual revenue run rate of $10 billion.

Companies of all sizes are using Microsoft's Azure Open AI tools to build their own Copilots and AI chatbots, and management said recently that usage of these features has more than doubled over the past six months.

Additionally, revenue from the company's Azure cloud services rose 33% in fiscal 2025's Q1 (which ended Sept. 30). This matters for Microsoft's long-term prospects because the company is the second-largest cloud computing company in the world, with 20% of the market.

Cloud computing investments are expected to soar over the next few years as companies spend heavily on building AI-powered cloud systems, the results of which will generate an estimated $2 trillion in revenue for cloud companies by 2030, according to Goldman Sachs.

Microsoft has an AI opportunity its competitors don't have

It's worth mentioning that the AI space will get increasingly competitive in the coming years. Amazon has integrated AI into its cloud computing services, and Apple and Alphabet offer similar consumer-facing AI features in their software.

But Microsoft's large investment in OpenAI means it will continue to have access to some of the best AI features available. And, just as importantly, The Wall Street Journal recently noted that after OpenAI pays about $194 million of its profits to its first investors, Microsoft will then receive 75% of OpenAI's profits until its initial investment is repaid.

And even after that, Microsoft will receive 49% of OpenAI's profits until a predetermined amount is reached. That amount hasn't been disclosed.

The point is that Microsoft has already benefited from OpenAI's tech, and it's about to financially reap the rewards from its early bet on AI as well.

Why Microsoft stock is a buy right now

Microsoft's shares have a price-to-earnings (P/E) ratio of just 34 right now, far below the tech sector's average of about 50. Even cloud computing rival Amazon has a P/E ratio of 43.

So, even with Microsoft's strong position in the AI market and the company making early moves to integrate top-shelf AI services into its products, the tech stock is still relatively inexpensive.

Putting $1,000 toward a single stock is a financial commitment, but if you're looking for a relatively inexpensive growth stock that's tapping into AI -- and has a very strong position in the cloud computing space -- Microsoft stock looks like a great place to put that $1,000 right now.

Don’t miss this second chance at a potentially lucrative opportunity

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See 3 “Double Down” stocks »

*Stock Advisor returns as of November 18, 2024

John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Chris Neiger has positions in Apple. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Goldman Sachs Group, and Microsoft. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy.