Is it appropriate to invest in Microsoft?

Microsoft is on track to become the second-largest corporation in the world to be valued at £4 trillion

Is it wise to invest in Microsoft at this time?

Following the release of its Q4 FY 2025 results after markets closed on July 30, Microsoft's stock shot up, putting the company on track to surpass the £4 trillion market cap threshold.

The demand for Microsoft (NASDAQ:MSFT) investments has driven the company's stock price to all-time highs. Following its earnings release, Microsoft's stock jumped more than 7%, and the gain persisted during the company's earnings call.

Track every market on TradingView "Microsoft bulls were ecstatic this quarter as it surpassed Wall Street's expectations, with significantly accelerated Azure growth," Wedbush Securities' global head of technology research, Dan Ives, said.

Despite not being among the most popular stocks among individual investors, Microsoft is a well-established market titan that appears poised to join Nvidia in reaching the £4 trillion mark.

Being established in 1975, one year ahead of Apple, Microsoft is the oldest of the Magnificent Seven stocks that currently control the SandP 500 and, with it, a large portion of the global stock market.

Microsoft has experienced a number of highs and lows over that time. During the late 1990s .com boom, Microsoft's stock rose more than 460 percent in three years, but it then fell more than 50 percent over the following three years as the bubble burst.

However, Microsoft has led a number of computing revolutions. In the global economy and stock market, it has consistently risen to the top thanks to PCs, the enterprise suite via Microsoft Office, and more recently, cloud computing and artificial intelligence (AI).

What is Azure for Microsoft?

Microsoft's cloud computing platform is called Azure. It directly competes with Amazon's AWS (Amazon Web Services) and Google's GCP (Google Cloud Platform).

With a combined market share of 63%, these three businesses control the majority of the cloud hosting industry. The biggest incumbent is AWS, but even if Azure only keeps its 22% market share, there is room for significant growth as AI spending fuels an increase in demand for cloud hosting services.

However, the evidence points to Azure possibly doing more than this and displacing AWS in the market.

In the year ending June 2025, Azure revenue climbed by 39%, which contributed to Microsoft's stock skyrocketing to £4 trillion following the release of its earnings.

The demand for AI is fueling a spike in cloud revenue growth as new AI model developers use cloud computing resources, or "compute" as they are known in the industry, to train and develop their models.

What amount does Microsoft spend on data centers?

Potential Microsoft investors should monitor the company's capital expenditure as one indicator.

According to Microsoft, the construction of AI data centers alone will cost £30 billion in Q3 2025. A year or two ago, the market would have been concerned by those figures. Even with this level of investment, Microsoft has shown that it can produce significant returns in the current environment.

Ives declared that Microsoft was "doubling down on the AI monetization strategy within cloud." Put differently, the market might not care how much Microsoft spends on data center construction as long as it can continue to profit from the demand for AI cloud services.

Do Microsoft own OpenAI?

Microsoft does not own ChatGPT, but it is a significant investor in OpenAI, the company that created it.

Though OpenAI is reportedly looking into the possibility of ending its exclusive use of Azure in favor of other partners, it still has rights to OpenAI's intellectual property and benefits from OpenAI's demand for access to Azure.

In addition to having access to OpenAI's intellectual property, which includes ChatGPT, Microsoft also has Copilot, its own AI assistant. The Copilots app family now has over 100 million monthly users, according to Microsoft CEO Satya Nadella's announcement during the Q4 2025 earnings call.

Do Microsoft's stock shares offer good value?

Even though Microsoft is the second most valuable company in the world, its stock isn't extremely expensiveat least not when compared to other large tech stocks.

Microsoft's stock price was 37.6% higher than trailing earnings and 33.6% higher than projected earnings as of the end of regular trading on July 30. Because of this, Microsoft stock was less expensive than shares of Nvidia or Amazon, even though these numbers came before the post-hours spike that followed Microsoft's earnings announcement.

According to Matt Britzman, senior equity analyst at Hargreaves Lansdown, "investors don't need to look much further for an AI name to buy and hold" because of Microsoft's combination of AI exposure, revenue visibility, impressive margins, and healthy cash flows.

According to Lale Akoner, global market analyst at eToro, Microsoft remains one of the best options available if you're searching for a reliable, long-term strategy to ride the AI wave.

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