Indeed, Morningstar’s view that Microsoft is undervalued rings true. Here are the factors that make the tech veteran a compelling growth stock<\/a> to buy now and hold for the long term.<\/p>\n Microsoft shares sank over 10% this year through April 21, and hit a 52-week low of $356.28 on March 30. Wall Street punished the tech giant for capital expenditures (capex) of $37.5 billion in its fiscal second quarter ended Dec. 31, which was a jaw-dropping 66% year-over-year increase.<\/p>\n Concerns over that enormous capex jump are understandable, especially since ChatGPT creator OpenAI accounts for 45% of Microsoft’s remaining performance obligations<\/a> (RPO). The dependence on one customer for such a significant amount of RPO is a valid worry, but as a leader in artificial intelligence, OpenAI is growing at an unprecedented pace. It was generating $1 billion per quarter at the end of 2024, and now that’s up to $2 billion per month.<\/p>\n The once-in-a-generation opportunity presented by AI justifies Microsoft’s capex. In the race to be an AI leader, the company is in an enviable position. To remain there, it needs to build up its infrastructure.<\/p>\n The company is the world’s second-largest cloud computing provider behind Amazon. However, its cloud infrastructure was assembled using tech that’s no longer sufficient for the advanced capabilities required of AI systems, necessitating the capex spending to perform required upgrades.<\/p>\n The infrastructure investment is already paying off. Microsoft’s fiscal Q2 revenue rose 17% year over year to $81.3 billion as its cloud division sales grew 29% to $32.9 billion. Its gross margin also increased 16% year over year, contributing to net income jumping 60% to $38.5 billion.<\/p>\n These results are excellent and likely to strengthen, since the AI sector is still in growth mode. Industry forecasts project the AI market will reach $335 billion this year, climbing to $1.3 trillion by 2032, providing Microsoft with a tailwind for years.<\/p>\n Given the company’s business performance, Wall Street’s reaction to its capex spending looks overblown, considering the tech titan’s share price valuation plunged to a multiyear low. This is evident in its price-to-earnings ratio.<\/p>\n As the chart shows, investors are starting to recognize Microsoft is undervalued, causing its earnings multiple to edge upward of late. However, it’s still below where it’s been for the past couple of years, so the opportunity to pick up shares at an attractive valuation remains.<\/p>\n Before you buy stock in Microsoft, consider this:<\/p>\n The Motley Fool Stock Advisor analyst team just identified what they believe are the\u00a010 best stocks<\/a> for investors to buy now\u2026 and Microsoft wasn\u2019t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.<\/p>\n Consider when Netflix made this list on December 17, 2004… if you invested $1,000 at the time of our recommendation,\u00a0you\u2019d have $498,522!* Or when Nvidia made this list on April 15, 2005… if you invested $1,000 at the time of our recommendation, you\u2019d have $1,276,807!*<\/p>\n Now, it\u2019s worth noting\u00a0Stock Advisor\u2019s total average return is 983% \u2014 a market-crushing outperformance compared to 200% for the S&P 500.\u00a0Don’t miss the latest top 10 list, available with\u00a0Stock Advisor, and join an investing community built by individual investors for individual investors.<\/p>\n See the 10 stocks \u00bb<\/a><\/p>\n *Stock Advisor returns as of April 25, 2026. <\/p>\n Robert Izquierdo<\/a> has positions in Amazon and Microsoft. The Motley Fool has positions in and recommends Amazon and Microsoft. The Motley Fool has a disclosure policy<\/a>.<\/p>\n![\"The](\"https:\/\/www.newsbeep.com\/nz\/wp-content\/uploads\/2026\/04\/f2514bc624a214ef85b016a7a1d9a171.jpeg\")
Image source: Getty Images. <\/p>\n<\/a> Data by <\/a>YCharts<\/a>. <\/p>\n