With $5,000 being a decent-sized chunk of change, some investors may be reluctant to bet it all on a single company. Yet, there's one company that's likely to continue growing and evolving over the next five years, and its stock moves fast (especially lately) but isn't excessively volatile.
I'm referring to Microsoft (MSFT -1.57%), a tech titan that's sufficiently established to appeal to cautious retirees, yet thoroughly modern, forward-looking, and disruptive. Besides, while Microsoft stock isn't a pure play on machine learning, it offers artificial intelligence (AI) market exposure so set-it-and-forget-it investors won't feel like they're missing out.
An appropriate holding for most investors
While Microsoft stock has been a fast mover (to the upside) in 2023 so far, it's not particularly volatile. So it should be appropriate for a $5,000 portfolio allocation, depending on your account size. Indeed, Microsoft stock's five-year monthly beta of 0.93 indicates that it has historically been slightly slower-moving than the S&P 500, which has a benchmark beta of 1.
Microsoft is also a tech company that pays a dividend (0.81% annually), so that's another reason to consider a five-year investment in the stock. So, there's something here for low-volatility and dividend investors -- but in today's market environment, many tech investors want assurance that they're not missing the bus, as generative AI is clearly more than a passing fad.
When I say "generative AI," there's a pretty good chance that you immediately think of OpenAI, the developer of ultra-popular chatbot ChatGPT. However, even if you're willing to wager $5,000 on OpenAI, you likely won't have the opportunity to do so directly; OpenAI CEO Sam Altman recently stated that he's "not that interested" in taking the company public.
A backdoor investment in OpenAI
Fortunately, you don't have to invest directly in OpenAI since Microsoft has invested $13 billion in the AI software start-up. Moreover, Microsoft has aggressively integrated OpenAI's technology into its product offerings, including Bing, Azure, Office 365, cybersecurity product Microsoft Security Copilot, and all-in-one business software suite Dynamics 365. So, even if Microsoft's top and bottom lines might get dented by PC market softness, the company can hopefully make up for that and then some through sales of AI-enhanced software products for smartphones, the cloud, and other environments.
Among those environments is the cyber-workspace of the U.S. government, which might be the best client a business could possibly ask for. Reportedly, Microsoft is embedding OpenAI's GPT-3 and GPT-4 large-language models into Microsoft's Azure Government cloud computing product. The Defense Department, and more precisely its Defense Technical Information Center, will apparently be among the earliest federal entities to experiment with Azure Government's large-language model functionalities.
It's not difficult to imagine that, five years down the road, governments and businesses of all sizes and sectors will have already adopted generative AI.
Microsoft laid down the gauntlet with its sizable stake in OpenAI and integration of machine-learning features into its product lines. For the rest of the 2020s, other tech large-caps will have to play catch-up -- and you can ride the coattails of an AI frontrunner and collect dividend payments along the way with a $5,000 share position in Microsoft.
