Generating AI software sales could grow 18,647% by 2032. 1 Unstoppable Artificial Intelligence (AI) Stocks to Buy Before They Do (Hint: Not Nvidia)

Artificial intelligence (AI) has been creating a lot of buzz since the beginning of last year, and rightfully so. Generative AI, which represents the edge of these next-generation algorithms, can create original content, including text, video and images, with just a few simple instructions. Perhaps most importantly, these systems can be used to simplify many time-consuming tasks, thereby increasing productivity. The ability to save time and money has many businesses eager to integrate AI into their operations.

Among the biggest winners of the AI ​​revolution so far is Nvidia. The company's graphics processing units (GPUs) are the gold standard when it comes to AI. However, with Nvidia generating more than 800% gains since the start of last year, investors are working to discover the next wave of stocks that benefit from the rapid adoption of AI. Many believe that the next frontier will be software. Generating AI software sales could grow as much as 18,647% to $280 billion by 2032, according to Bloomberg Intelligence.

Nvidia will likely continue to reap the benefits of the seeds it planted more than a decade ago, but there's another company that's positioned itself to benefit as the trend toward AI-enabled software gains steam.

Microsoft: Re-imagined for the 21st century

Microsoft (NASDAQ: MSFT) made a name for itself on the back of the Windows personal computer (PC) operating system and the Explorer web browser. The company cemented its place in tech history with the release of its Office workplace productivity software suite.

However, over the past decade, Microsoft has transformed and expanded into a number of new markets with the creation of its workplace collaboration software Teams, acquisitions that included Minecraft and Activision Blizzard, and the debut of its cloud infrastructure platform. Big Three". Azure cloud.

Microsoft was also among the first to recognize the transformative opportunity represented by generative AI. Its investment and partnership with OpenAI, which began in 2019, gave Microsoft a keen insight into the future potential of AI, working on these algorithms in relative obscurity until early last year.

The fruit of this early foray into AI is Microsoft Copilot, the tech giant's suite of digital assistants. What started as a single tool to help developers write code has grown into the foundation of the company's AI strategy.

The flagship version is Copilot for Microsoft 365, which is deeply embedded in Microsoft Office, the company's collection of software-as-a-service (SaaS) offerings. Beyond that, Microsoft has developed a number of additional Copilots designed for specific professions, including sales, service and finance.

The story continues

Copilot could be a digital gold mine for Microsoft. Most companies pay $30 per user per month for Copilot. For context, the company offers subscription plans ranging from $12.50 to $57 per user per month for Microsoft 365, so adding Copilot could roughly double the cost of many subscriptions.

Microsoft has so far been mum on the details, but some analysts have speculated, suggesting that Copilot could generate additional revenue of more than $100 billion a year by 2027.

The company is also seeing a boost in its cloud infrastructure services thanks to AI. In the first calendar quarter, Microsoft's Azure Cloud grew 31% year-over-year, outpacing both Amazon Web Services (AWS) and AlphabetGoogle Cloud, which grew 17% and 28% respectively. Management also revealed that AI services "contributed seven points" to Azure's growth.

In total, Microsoft captured 25% of global cloud infrastructure spending during the quarter, compared to Google Cloud at 10% and AWS at 31%. If the current trend continues, Microsoft could eventually become the leading provider of cloud services, dethroning AWS.

The proof is in the pudding

Microsoft continues to generate outstanding results, especially for a company of its size. For the fiscal third quarter (ended March 31), revenue rose 17% year over year to $61.9 billion, while diluted earnings per share rose 20% to $2.94.

Despite the massive forward opportunity and Microsoft's first-mover advantage, the stock is priced at 37 times forward earnings, which is surprisingly reasonable compared to the massive opportunity.

We're barely a year into the AI ​​revolution, yet the excitement about AI is palpable. Microsoft has developed a brilliant strategy to capitalize on the early stages of AI adoption, which is benefiting shareholders down the road. This is why the stock is a buy.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Danny Vena has positions in Alphabet, Amazon, Microsoft and Nvidia. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft and Nvidia. The Motley Fool recommends the following options: long January 2026 $395 Microsoft calls and short January 2026 $405 Microsoft calls. The Motley Fool has a disclosure policy.

Sales of AI-generating software could grow 18,647% by 2032. 1 Unstoppable Artificial Intelligence (AI) Stocks to Buy Before They Do (Hindi: Not Nvidia) was originally published by The Motley Fool