Like it or not, the world is barreling toward a new reality — one in which artificial intelligence (AI) will play a crucial role in our daily lives, perhaps reshaping the fabric of society in the process.
How should investors position themselves for this technological inflection point? While Nvidia has been the poster child for AI investing, Microsoft (NASDAQ: MSFT) and Taiwan Semiconductor Manufacturing (NYSE: TSM) also offer a direct line to this transformative trend.
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1. Microsoft: A top AI infrastructure play
Microsoft’s strategic partnership with OpenAI has positioned the tech behemoth at the epicenter of AI innovation. This collaboration has already yielded significant results, with AI integration enhancing Microsoft’s product suite across the board.
Despite an impressive 21% year-to-date increase in share price, Microsoft’s stock still appears to have considerable runway ahead. That said, the tech giant’s stock currently trades at 34 times forward earnings, a premium valuation that might give some investors pause.
However, this premium seems well justified in light of Microsoft’s noteworthy top-line growth forecast for 2025. With revenue estimated to rise by 14.3% in 2025, Microsoft is defying the typical slowdown expected of mature tech companies.
In fact, this double-digit revenue growth rate is nothing short of spectacular for a company with a $3.4 trillion market cap. It’s a clear indicator that Microsoft’s AI-driven strategy is paying dividends, quite literally.
Speaking of dividends, income-focused investors shouldn’t overlook Microsoft’s potential in this area. At first glance, the current yield of 0.66% might seem modest. However, it’s the growth rate of this dividend that truly sets Microsoft apart.
Over the past five years, the company has increased its dividend at a compound annual growth rate of 10.6%. To put this in perspective, this growth rate outpaces the average 6% growth rate of the world’s top 60 dividend growth stocks (author’s own data).
This combination of AI-driven growth and generous dividend increases makes…
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