Microsoft stock is down, but AI spending still signals long-term upside potential

Artificial intelligence is moving from buzzword to real-world infrastructure, and investors are looking for clear ways to gain exposure as inflation trends, central bank signals, and energy geopolitics keep markets on edge. Our AI stock screen focuses on companies directly related to ChatGPT and building AI, including semiconductors, software, LLM, cloud, and broader digital transformation. This targeted world helps you focus on the core business of your AI spending, rather than guessing at the entire market. In this article, we highlight three of the most attractive stocks from this screener that are worthy of further investigation.

Microsoft (MSFT)

overview: Microsoft is a global technology company that provides cloud infrastructure through Azure, productivity software such as Microsoft 365 and Teams, business applications such as Dynamics 365 and LinkedIn, and consumer products such as Windows, Xbox, and Surface devices.

operation: Microsoft generates approximately US$135.3 billion from Productivity and Business Processes, US$128.4 billion from Intelligent Cloud, and US$54.6 billion from More Personal Computing, with revenue split broadly between the United States (US$162.8 billion) and the rest of the world (US$155.4 billion).

Market capitalization: 2.9 trillion USD

Microsoft is at the center of AI and cloud spending, with Azure, Copilot, and its enterprise software stack tightly aligned and supported by high margins and strong free cash flow. The stock price has fallen significantly, even though revenue and net profit margins remain strong. Simply Wall Street’s fair value estimate is significantly higher than the current price, and some investors see this as an opportunity. At the same time, the story is fraught with risk due to large capital investments in AI data centers, large-scale insider sales, and active antitrust and cloud regulatory scrutiny. For investors who want to consider these tradeoffs, the full story of Microsoft is much more detailed than the headline AI enthusiasm and short-term volatility might suggest.

Microsoft’s highly profitable AI and cloud engine, combined with Simply Wall Street’s fair value estimate above the current stock price, suggests there may be something important missing from the consensus story. To explore this further, start with 5 key rewards and 1 important warning sign.

Tenable Holdings (TENB)

overview: Tenable Holdings is a cybersecurity company that helps organizations discover and remediate weaknesses across IT, cloud, identity, AI, and operational technology systems. This allows organizations to see their entire attack surface in one place, rather than using separate tools. The company’s platforms, including Tenable One, Tenable AI Exposure, and cloud and identity products, are used by enterprises and government agencies around the world to assess vulnerabilities, prioritize risk, and support compliance.

operation: Tenable generates approximately US$1 billion in revenue from security software and services, including approximately US$539.2 million from the United States, US$283.8 million from Europe, the Middle East, and Africa, US$118.6 million from Asia Pacific, and US$80.7 million from other Americas markets.

Market capitalization: $4.4 billion

Tenable Holdings has first-hand knowledge of the growing need for AI-aware cyber exposure management as businesses and governments grapple with expanding attack surfaces, stricter regulations, and new AI-driven threats. The business is on track to improve profitability, with earnings and return on equity expected to improve from recurring losses. Large-scale platforms such as Tenable One and Hexa AI, along with the recent partnership between OpenAI and Claude, are intended to support larger, longer-term contracts and deeper customer relationships. At the same time, reliance on public sector budgets, high-risk external funding, and intense competition from large platform providers means enforcement must be tight. To see how these strengths and risks are balanced, investors will want to understand the detailed assumptions and scenario mechanics behind analyst expectations for Tenable’s growth, margins, and valuation.

Momentum is building for AI exposure management around Tenable Holdings, but the real question is how its potential matches up with Tenable Holdings’ analyst forecasts for growth, margin, and valuation.

Allegro Microsystems (ALGM)

overview: Allegro MicroSystems designs and manufactures sensors and power integrated circuits that help control operation, manage power, and improve energy efficiency in systems such as electric vehicles, industrial automation equipment, AI data centers, robotics, and energy infrastructure.

operation: Allegro MicroSystems generates approximately US$890.1 million in revenue from the design, development, production and sales of integrated circuits, with sales in Greater China (US$249.4 million), Rest of Asia (US$158 million), Japan (US$150.9 million), Europe (US$120.6 million), South Korea (US$78 million), and the United States. (US$91.4 million), and the rest of the Americas. (US$41.8 million).

Market capitalization: 10.2 billion USD

Allegro MicroSystems focuses on building blocks for EV and AI infrastructure. There, its sensors and power ICs are used for vehicle electrification, ADAS functions, data center cooling, robotics, and automation content. Analyst comments now highlight expectations for rapid revenue and revenue growth, supported by improving gross margins, a rich mix of high-value products, and signs of easing inventory adjustments. At the same time, the stock also has obvious pressure points, including a high valuation multiple, recurring losses, dependence on outside funding, significant auto exposure, and meaningful insider sales. A key question for investors is whether Allegro’s competitiveness in the automotive and AI-centric markets is enough to offset these risks and expectations already reflected in market prices.

Allegro MicroSystems’ accelerating role in EV and AI infrastructure may mean current expectations are only part of the story, but the real tension lies in what Allegro MicroSystems analysts predict

These three stocks are just a starting point. A further 201 companies with equally compelling stories related to chips, software, LLM, ChatGPT, and cloud infrastructure are displayed through our complete artificial intelligence/AI stock screener. With Simply Wall St, you can identify, analyze, and filter the specific catalysts and narratives that matter to you to focus on the AI ​​stocks that best align with your highest-conviction views.

Take control of your investment journey

If you’re interested in Tenable Holdings or any of these companies, sign up for free on Simply Wall St and add the companies to your watchlist to monitor stock prices relative to fair value and follow any new developments. Once migrated, manage your holdings with a portfolio command center that filters out the noise and delivers only the most important and actionable updates. Our community allows you to filter the best ideas from thousands of investor perspectives throughout your journey. Discover hidden catalysts and risks early to accelerate decision-making and stay ahead of the market.

Looking for alternatives before anyone else?

By the time a fresh idea makes its first move and the crowd catches on, the ideal entry point may have disappeared. Take a look at these focused stock lists and consider your options while it still matters.

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This article by Simply Wall St is general in nature. We provide commentary using only unbiased methodologies, based on historical data and analyst forecasts, and articles are not intended to be financial advice. This is not a recommendation to buy or sell any stock, and does not take into account your objectives or financial situation. We aim to provide long-term, focused analysis based on fundamental data. Note that our analysis may not factor in the latest announcements or qualitative material from price-sensitive companies. Simply Wall St has no position in any stocks mentioned.

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