Microsoft stock leads 3 AI software to watch

Artificial intelligence is moving from a buzzword to real-world infrastructure, and investors are looking for clear ways to gain exposure as bond yields, inflation patterns, and energy costs continue to shift across regions. Our AI stock screener focuses on companies directly associated with ChatGPT, with a focus on building AI in semiconductors, software, large language models, cloud, and broader digital transformation. Instead of trying to track every macro headline, you can use this theme to focus on the business at the heart of this technology shift. In this article, we introduce three rising stocks filtered by this AI-focused tool.

Microsoft (MSFT)

overview: Microsoft is a global technology company that sells software, cloud computing, AI tools, and hardware, and its flagship products, including Windows, Microsoft 365, Azure, LinkedIn, and Xbox, are used by consumers, businesses, and governments around the world.

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 the AI ​​buildout, with Azure and Copilot converting significant data center spending into AI services, and while large customers are already paying for it, profitability and margins remain strong. The company’s stock trades at a lower P/E than many of its software peers, despite the high quality of its earnings and strong free cash flow. At the same time, large capital expenditures, regulatory scrutiny surrounding cloud and licensing practices, and recent insider sales are creating risks for investors to consider potential AI-focused strategies.

Microsoft’s AI engine is already generating real revenue, but the key story is how its cash flow, capital expenditures, and regulatory risk are combined into Microsoft’s analytical reporting.

Tenable Holdings (TENB)

overview: Tenable Holdings is a cybersecurity company that helps organizations understand and reduce their entire attack surface, from traditional IT networks and cloud environments to web apps, identity, operational technology, and AI-related risks. Its platform uses analysis and threat research to highlight the most critical vulnerabilities, allowing security teams to prioritize which ones to fix first.

operation: Tenable generates approximately US$1 billion in revenue from security software and services, of which approximately US$539.2 million comes from the United States, with the remainder spread across Europe, the Middle East, Africa, Asia Pacific, and the rest of the Americas.

Market capitalization: $4.6 billion

As enterprises and governments seek integrated tools to manage cloud, identity, OT, and AI risks in one place, Tenable Holdings provides exposure to AI-driven cybersecurity. The company is on track to improve its profitability, with recent guidance showing annual revenue of more than $1 billion and a return from past losses to a decent net profit, while stock buybacks will reduce its share count. At the same time, reliance on federal contracts, heavy debt financing and competition from large platforms are raising questions about how sustainable profit margins and growth will be. Balancing these strengths and risks is an important consideration for investors focused on AI infrastructure and security.

Tenable’s commitment to US$1 billion in sales, modest fluctuations in net income and share buybacks suggest an underappreciated quality shift. However, the real story appears in Tenable Holdings’ analytical report.

ServiceNow (Now)

overview: ServiceNow is a cloud software company that helps large organizations run their daily workflows, from IT support and security to human resources, customer service, and AI governance. So routine requests and complex processes are handled through one unified platform instead of disparate tools and emails.

operation: ServiceNow generates approximately US$14 billion in revenue from Internet software and services, including approximately US$8.3 billion from the United States, US$3.6 billion from Europe, the Middle East, and Africa, US$1.6 billion from Asia Pacific and other regions, and US$500 million from the rest of North America.

Market capitalization: $112.2 billion

ServiceNow is gaining interest because it looks less like optional software and more like core infrastructure for large enterprises to run workflows and manage AI in a controlled way. Revenues have grown significantly over the past five years and are expected to continue growing. However, the stock has underperformed the software sector recently, trading well below some fair value estimates. This creates a tension between premium P/E and potential upside. At the same time, investors must weigh margin pressures, reliance on external borrowing, insider sales, and very high executive compensation. Meanwhile, new AI partnerships with groups such as IBM, Accenture, and Hitachi and strong subscription metrics indicate that the platform’s AI monetization story is still developing.

ServiceNow’s AI partnership and subscription engine suggest this story may be separate from the recent stock slump. It will be interesting to see how analysts match up their expectations for ServiceNow with margin pressure, debt, and management incentives.

These three AI stocks are just a starting point. Our complete Artificial Intelligence/AI Stock Screener reveals an additional 659 companies related to semiconductors, software, LLM, ChatGPT, cloud, and broader transformation, each with their own potential catalysts and risks. To identify and analyze the highest-conviction ideas on your watchlist, you can use our Artificial Intelligence/AI Stock Screener to filter for the exact narratives, cash flow profiles, and AI exposures that matter most to you.

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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 new alternatives beyond AI?

New themes are gaining momentum, but so far they are still under the radar. Consider positioning early before the next breakout phase passes and the price moves.

• Before the crowd starts focusing on yield, we identify income powerhouses that aim to continue paying even when sentiment dips by reviewing our nine dividend fortresses.
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• With 76 carefully selected resilient stocks with low risk scores, we focus on stability and downside protection, ensuring you don’t get caught in a temporary dip if you’re not ready.

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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