This Artificial Intelligence (AI) Stock Is a "Magnificent Seven" Leader. But Is It a Buy?

There aren't many technology companies that can claim they've been a leader in artificial intelligence (AI), but Microsoft (NASDAQ: MSFT) can do so easily. The tech giant made early investments in OpenAI, giving it early access to ChatGPT, and has been quick to implement AI into its products and services.

But even with Microsoft's moves, the company's share price has tumbled about 9% over the past six months. A general sense of concern for the economy may be fueling the drop, but rising competition in the AI space from smaller AI companies, including DeepSeek, may be fueling pessimism that large tech companies will remain on top of the AI hill.

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So what should investors think of Microsoft right now? I think there are a couple of compelling reasons why Microsoft stock is a buy.

Image source: Getty Images.

Microsoft has successfully integrated AI into its cloud business

Microsoft's early move to integrate AI into its cloud offerings is already paying off. In the first quarter (which ended Jan. 29), Microsoft's Intelligent Cloud revenue jumped 20% to $24.1 billion, driven in part by a 33% jump in Azure cloud sales.

This is notable because Microsoft is the second-largest cloud infrastructure company, behind Amazon. Microsoft has been gaining on Amazon for years and now has 21% of the market, compared to Amazon's 30%.The cloud was important before artificial intelligence came along, but AI has vastly expanded its value. Goldman Sachs estimates global AI cloud revenue could reach $2 trillion just five years from now.

Microsoft CFO Amy Hood said on the earnings call that Azure's AI service jumped an impressive 157% from the year-ago quarter, saying the growth "was ahead of expectations even as demand continued to be higher than our available capacity."

All this should give potential investors an idea of just how successful Microsoft has been in integrating AI into its cloud services and how it's positioning itself to benefit from this segment for years to come.

Microsoft has a massive opportunity in the AI agentic era

In addition to Microsoft's current benefits from AI cloud computing, the company is tapping into the fast-growing AI agent space. AI agents can perform tasks with relative autonomy, like making reservations or fielding customer service calls, and Microsoft is already seeing the benefits.

More than 160,000 organizations have already used Microsoft's Copilot Studio to help build 400,000 AI agents in the first quarter alone, up more than 2X from the year-ago quarter.

That's helped Microsoft's 365 service grow, with Microsoft CEO Satya Nadella saying on the recent earnings call, "We are seeing accelerated customer adoption across all deal sizes as we win new Microsoft 365 Copilot customers and see the majority of existing enterprise customers come back to purchase more seats."

While we're still in the early innings of agentic AI, Nvidia CEO Jensen Huang believes it could be a "multitrillion-dollar opportunity." Microsoft considers its 365 Copilot platform the "UI for AI," meaning the user interface for how people interact with AI, and users' rapid adoption of Microsoft's platform for building AI agents shows just how well the company is tapping into this fast-growing, potentially lucrative space.

OK, but is Microsoft stock a buy based on all of this?

As a leading cloud computing company that's rapidly expanding its AI offerings and a dominant services company that's successfully growing its AI agent tools, I think Microsoft is a compelling AI stock to buy right now.

The stock looks even more attractive considering it's down about 9% over the past six months. This is giving investors an opportunity to pick up Microsoft shares at a relative discount. The company's stock now has a forward price-to-earnings multiple of about 26.3, down from 33.6 at the beginning of the year.

Therefore, investors looking for a clear AI leader that's taking a breather in the market right now should consider starting a position in Microsoft before some of these AI tailwinds kick in.

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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Chris Neiger has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Amazon, Goldman Sachs Group, Microsoft, and Nvidia. 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.