Tech giant and "Magnificent Seven" member Microsoft (MSFT 4.01%) needs no introduction. Many people interact with its products and services on a regular basis, whether that involves using its suite of business productivity programs to get work done, playing video games on its Xbox console, or making connections and networking on social media platform LinkedIn.
Investors who bought Microsoft around the time the company went public in 1986 have done remarkably well. In fact, if you'd invested just $300 in the company back then and held on firmly in the decades that followed, you'd have a position worth over $1.4 million now.
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Today, however, its $3.65 trillion market cap makes it one of the five largest companies in the world. One version of the financial world's "law of large numbers" explains that the larger a business grows, the more difficult it gets to sustain the percentage growth rates it was able to achieve when it was smaller. So from its current massive size, is it possible for Microsoft to be a multimillionaire-maker investment again?
Still a big opportunity ahead
The good news for Microsoft investors is that the company still has many large opportunities ahead. Its Azure cloud unit allows other businesses to essentially rent server space, data storage, and networking services on systems that Microsoft owns and operates. That way, its clients don't have to build their own infrastructure.
Azure is one of the three largest cloud infrastructure players in the world, and the traditional cloud space still has a lot of runway ahead because many businesses have yet to complete their digital transformations. However, the emergence of artificial intelligence (AI) presents a whole new massive opportunity for Microsoft, and the company is investing heavily to capitalize on it.
In Microsoft's most recent fiscal quarter, its Intelligent Cloud unit, which includes Azure, saw revenue grow 28% year over year. During the earnings call, management said that Azure is now capacity-constrained, meaning that it lacks sufficient data center capacity to meet the demand of clients, which will result in it missing out on some revenue.
As more companies look to develop and run AI applications, Microsoft is expected to be a large beneficiary. Furthermore, there could also be a massive opportunity to monetize AI tools through the Copilot AI Assistant.
Now, of course, it's possible that this massive AI infrastructure buildout may not yield the returns investors are hoping for. It's also possible that it will take significantly longer than expected for AI to have the impacts its proponents promise. The good news is that Microsoft has many other tremendous businesses. This is not a company that will live and die by the success of AI, although the progress of that particular trend could certainly result in volatility for the stock.
So, could Microsoft be a multimillionaire maker from here? It depends on how much one invests. The stock is extremely unlikely to compound over then next four decades like it has over the past four, but it still will likely be a great long-term investment.
