Microsoft: Pace Of AI Monetization Is Faster Than Expected

  • Microsoft is increasing its spending on AI capabilities and has experienced a strong rebound in top-line growth due to its early success in AI monetization.
  • The company’s AI product, Copilot, has attracted 1.3 million customers and is driving growth across the broader GitHub platform.
  • The management mentioned a continued increase in capex on AI infrastructure in FY2025 while managing to maintain margins.
  • The stock is currently trading at a premium valuation, reflecting its strong growth rebound in cloud and other AI initiatives compared to its software peers.
  • MSFT is highly correlated with broader indexes, which diminishes diversification benefits and exposes investors to higher systematic risk.

Investment Thesis

Microsoft (NASDAQ:MSFT) is undoubtedly experiencing many tremendous growth tailwinds under the current GenAI boom. The company has significantly increased its capex by more than 50% YoY over the past three quarters in FY2024. In my previous articles, I