Technologically heavy Nasdaq composite The index is currently in the correction territory. The stock market correction occurs when the market falls 10% or more than its all time.
Should investors buy DIP? There is a chance that the recent withdrawal will turn into something worse, like a long bear market. However, most 10% corrections are resolved relatively quickly, making them great times to pick up high quality company for a long way.
This means that for those who want to add their long -term portfolio, high quality supplies in the “Magnificent Seven” group, which withdrawn along with the market, today could be great pikaps. Of these seven All-Star companies, one ultra-safe name seems to be the best of the crowd at this appropriate moment.
Picture source: Getty Images.
In the past 10 years, Nasdaq has corrected six times, good at about 1,67 years. So the good news is that the correction is regular, perhaps even healthy, part of the market.
On the other hand, sometimes corrections are converted to a full -fledged bear market, which is a correction greater than 20% and usually lasts much longer than mere corrections.
It remains to be seen if the current withdrawal is an introduction to something worse. Investors are unlikely to know until April 2, when the reciprocal tariffs of Trump administration on Mexico and Canada should completely enter the full effect. Even if they do, it remains to be seen whether the bear market is completely.
Considering the very insecure influence of tariffs, the investors who should add their portfolio at this point at the moment, should be kept high quality, relatively “safe” stocks that are, no matter what, experienced withdrawal, but they could also bring a recession completely if it happened. That is why the next magnificent seven shares currently looks so attractive.
Microsoft(NASDAQ: MSFT) is the second largest company in the world today and is the main portfolio of many technological portfolio, but that does not mean that the company cannot surpass forward.
Microsoft is one of only a few companies dealing with the superiority of artificial intelligence (AI). Considering the huge investments needed to compete in the race for artificial general intelligence (AGI), it is not in line with the question that very largest companies could become even stronger in 10 years. After all, people wondered if the law of a large number would retrieve Mag-7 supplies. However, these incredibly innovative companies defied skeptics and managed to innovate their way to a great growth of profit in the last decade.
Furthermore, if the economy fell out of bed, Microsoft has $ 71.6 billion in cash in its balance sheet compared to only $ 45 billion in debt. Furthermore, in only the first half of its fiscal year (ended in December), Microsoft generated $ 26 billion in free cash flow, supported by a collection of high margins, mostly recession subscriber companies.
In fact, Microsoft is one of only two companies with AAA credit rating – a rating that exceeds even the US Government’s grade!
Microsoft has surpassed the market with a significant margin since Satya Nadella took the post of executive director in 2014, but in recent years his effect has actually lang behind some of his peers. In fact, stock is actually lowered 8.2% in last year-a single negative performer of all the names of Mag-7.
But this weaker effect seems to be because of nothing wrong with Microsoft’s job. In the last quarter, Microsoft increased revenue of a solid 12%, and operating profits increased by 17% as margins spread.
Thus, the recent effect can only be the result of irregular bursts of gains and consolidation periods with any stock. Microsoft Stock is now trapping 31.5 times by lagging in earnings, according to the lower end of its range in the last five years:
Given that resetting is lower, supplies could soon enter the new period.
Some wondered about financial payment than a recent AI Building. In this note, Microsoft’s revenues and earnings have appeared to increase this year due to the recent price increase – in fact big. In January, Microsoft announced a huge price increase of 43% for his Microsoft 365 consumer subscription, which will now cost $ 9.99 a month or $ 99.99 a year, which is more than $ 6.99 and $ 69.99 a year.
This price increase should be paid for all AI features of the Copilot that Microsoft has been included in its 365 software (previously called Office) in recent years. Although the price increase may seem exaggerated, it is actually the first price increase to 365 consumer products in 12 years.
Now investors should alleviate their enthusiasm for this increase, as 365 consumers made up only about 3% of Microsoft revenue. Thus, the bumps of income and profit can be somewhat gradual from this.
However, commercial products Microsoft 365 make up a much higher 31% of total revenue. While Microsoft has recently increased the prices of commercial product, the last price increase was only 10% to 20% in the commercial 365 product range as early as 2022.
Chatgpt did not come out until the last month of 2022, so Microsoft has not yet increased the commercial 365 product prices in AI ERI. Therefore, if a smaller test of price increase on the Consumer 365 product goes well, a higher price for commercial 365 subscriptions could be on the road. That It could make a big difference in Microsoft’s results.
Finally, starting this year, Microsoft can alleviate the key concern that investors have about AI escalation costs. To date, Microsoft has been a particularly large consumer on AI chips compared to his rivals. Last year, the Technology Consulting Company Omdia estimated that Microsoft bought 485,000 Nvidia(NASDAQ: NVDA) Hopper GPU 2024 – Far and the biggest purchase of any other Nvidia customer.
This is more than a double -largest buyer, Meta platformwho bought 224,000 tank chips and 2.5 times the GPU -A Amazon(NASDAQ: AMZN) – Although Amazon has an even larger computing company in a cloud than Microsoft.
Microsoft not only bought more GPUs but anyone else, but is also a large GPU renter than recent “neo -chore”, such as Coreweve, who will soon go out to a public public offer (IPO). According to Coreweave’s submission S-1, Microsoft made up 62% of Coreweave $ 1.92 billion in revenue last year.
The reason for Microsoft’s big consumption is that it has not yet increased its custom job AI Chip (XPU), while its large cloud rivals have invested in custom XPU programs for years. The Nvidia GPU sales for huge margins, as evidenced by a companion that increases the gross and operational margins since the AI revolution exceeded two years ago.
Thus, Amazon and others with robust programs of custom chips direct as many working loads as possible to adapted chips and far from Nvidia GPU. Because of this, Amazon’s shopping of Nvidia GPUs were so lower than Microsoft’s.
But that just means that Microsoft has so much more opportunities to save on AI infrastructure when it increases its own XPU business. And that should happen soon. Microsoft has just introduced his Maia AI chips in late 2023 and has still talked his first generation of Maia XPU so far. So, Microsoft’s internal chip program didn’t have much time to mature and so far large quantities to still compete with Amazon and others.
However, the CEO of Saty Nadella said in an interview at the end of 2024 that Microsoft would not be “chip limited” as last year until the middle of this year. This could mean that Microsoft will enhance their next generation program of the next generation sometime in mid-2025, allowing a potentially massive savings of costs and further margin increase.
Recent effects, a relatively lower estimate, the upcoming price and potential savings of AI costs should be combined to make Microsoft’s progress in 2025. Although a wide macroeconomic picture is uncertain today, Microsoft with AAA grade remains the latest name that will invest invested investors with long-term investment.
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John Mackey, former Whole Foods Market CEO, Amazon Branch, is a member of the Board of Directors Motley Fool. Randa Zuckerberg, former director of the development of the market and spokeswoman for Facebook and sister of Meta Platform Executive Director Mark Zuckerberg, is a member of the Board of Directors Motley Fool. Billy Durestein and/or his clients have positions in Amazon, Meta platforms and Microsoft. Motley Fool has positions and recommends Amazon, Meta platforms, Microsoft and Nvidia. Motley Fool recommends the following options: Long January 2026. $ 395 calls Microsoft and short January 2026. $ 405 calls to microsoft. Motley Fool has disclosure rules.
