Sky-high Growth Predicted for Generative AI Software Sales by 2032. One Unyielding Artificial Intelligence (AI) Investment Opportunity Suggested Before Its Surge (Hint: It's Not Nvidia)

Sky-high Growth Predicted for Generative AI Software Sales by 2032. One Unyielding Artificial Intelligence (AI) Investment Opportunity Suggested Before Its Surge (Hint: It's Not Nvidia)

Artificial Intelligence (AI) has been expanding rapidly since the previous year, and its advantages are undeniable. These advanced AI generative algorithms take AI to another level, generating unique text, images, and videos from basic inputs. This allows users to simplify routine tasks and boost efficiency. Consequently, businesses are keen to incorporate these advanced AI systems due to the saying, "Time is money."

Nvidia (NVDA -2.33%) has been the primary benefactor of this transformation, being the primary supplier of the processors and other hardware required for AI operations. This led to four consecutive quarters of over 100% revenue and profit growth, a dividend hike, and an impending 10-for-1 stock split.

However, the market is forward-thinking, and investors are now preparing for the escalation of AI software adoption. Generative AI software sales are predicted to surge by 6,260% to $318 billion by 2032, according to Bloomberg Intelligence.

While Nvidia will continue to benefit from its superior AI processors, another company is poised to exploit the AI software boom.

Microsoft - Beyond the Operating System Giant

Microsoft (MSFT -0.78%) gained recognition through its Windows operating system and Office suite of productivity software. The company continues to make an impact with its Teams collaboration platform and Azure Cloud. However, the most significant opportunity may come from AI.

Microsoft was one of the first to recognize the potential of generative AI and invested in OpenAI, the creator of ChatGPT, back in 2019, increasing its stake to $13 billion last year. This strategic move gave Microsoft the edge to incorporate these advanced algorithms into its flagship products and services.

The most noteworthy development has been the creation of Microsoft Copilot, Microsoft's expanding roster of AI-powered digital assistants, which form the backbone of Microsoft's AI strategy. The most prominent is Copilot for Microsoft 365, deeply integrated into its Office products. Microsoft also developed other Copilots for specific roles, such as sales, service, and finance, charging customers $30 per user per month, with strong uptake reported. Although Microsoft hasn't provided detailed figures on adoption, some analysts suggest that Copilot could generate up to $100 billion in additional annual revenue. Additionally, Microsoft launched a line of Copilot+ PCs, with the company's AI-powered digital assistant built in.

As the second-largest cloud infrastructure provider, Microsoft is well-equipped to provide AI services to its clients. This, in turn, is drawing new users to its cloud offerings, helping Microsoft outperform its cloud competitors. In the fiscal 2024 third quarter (March 31), Azure Cloud grew 31% year over year, surpassing AWS and Alphabet's Google Cloud, which increased 17% and 28%, respectively. Microsoft's management attributed 7 points of Azure's growth to AI.

In fact, during the first calendar quarter, Microsoft accounted for 25% of worldwide cloud infrastructure spending, trailing AWS with 31% and Google Cloud with 10%. If Microsoft continues to progress, it could soon challenge AWS for the lead position among cloud providers.

The Evidence Speaks Loudly

A brief overview shows that Microsoft continues to post robust results. Third-quarter revenue surged 17% year over year to $61.9 billion, while diluted earnings per share climbed 20% to $2.94. Despite being the world's largest company by market cap, at approximately $3.19 trillion (as of this writing), Microsoft stock is selling at 36 times forward earnings, a reasonable price given the potential opportunity.

Generative AI is already transforming the business world, but its adoption is still in its early stages. Microsoft's strategy of creating a variety of AI-powered Copilots is a testament to its forward-thinking strategy, ensuring the company will profit from the ongoing adoption of AI. That's why Microsoft is a worthy investment.

Investors are actively looking for companies to benefit from the expected surge in generative AI software sales, with predictions of a 6,260% increase to $318 billion by 2032. Given Microsoft's early investment in generative AI, specifically with OpenAI and ChatGPT, the company is well-positioned to capitalize on this trend.

Microsoft's strategic move to incorporate advanced AI algorithms into its flagship products and services, such as Microsoft Copilot, has the potential to generate up to $100 billion in additional annual revenue. With Microsoft offering Copilot for various roles like sales, service, and finance, and the strong uptake reported, the company is positioning itself as a key player in the AI software market.

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