Nvidia CEO Jensen Huang Just Announced Fantastic News to Microsoft Stock Investors

Microsoft (MSFT 1.43%) has not performed well over the past year. One issue the company has encountered is the perception that some of its products and services will be replaced by artificial intelligence (AI). That makes it hard for Microsoft to justify its heavy capex spending, since, if it is unable to keep up with AI, revenue growth will eventually drop even as expenses rise, leading to shrinking margins and profits. However, what if the tech leader is in a much better position than many investors think? Recent comments from Nvidia's (NVDA 2.16%) CEO, Jensen Huang, suggest that this is the case. Let's look into what Huang said and what it could mean for Microsoft and its shareholders. Image source: The Motley Fool. Evolving with AI Huang has been bullish on the next stage in the AI revolution: Agentic AI, or autonomous systems that can organize, plan, and execute tasks. AI agents go beyond the question-response model we see with chatbots. They could significantly transform practically every sector and industry. Agentic AI, though, poses a significant threat to software companies, or so the sentiment goes. Huang disagrees. Speaking at a recent international information technology show in Taiwan, Computex, the founder of Nvidia said: A lot of people have said, 'Jensen, AI is coming. Agentic AI is coming. Therefore, all of the software companies are going to go out of business.' I said it's exactly the opposite. Huang also said that it is an "incredible" time to be a software company, suggesting that not only will AI not replace the products and services of top players in the industry like Microsoft, but that it could actually improve them. It's worth noting that we have already seen this movie play out. One of the first companies whose business many thought would be destroyed by AI was Alphabet (GOOG +1.19%) (GOOGL +1.10%). Many believed that its search engine would become obsolete in the age of AI, leading to decreased traction and significantly lower advertising sales. Exactly the opposite happened. Alphabet incorporated AI into its search engine through AI mode and AI overviews. This helped the company increase engagement and, if anything, AI was a boost to its business, leading to higher revenue. Could we see something similar with Microsoft? The company has already incorporated AI into its services. For instance, Microsoft 365 Copilot integration embeds various AI tools across the company's famous productivity suite and helps users perform many tasks much more efficiently, including things like analyzing data and summarizing documents. In all likelihood, Microsoft will continue evolving with AI. The company's impressive track record of innovation and significant free cash flow strongly suggests it can stay ahead of technological revolutions like the one we are currently experiencing. Today's Change(-1.43%) $-5.72Current Price$394.04 Is Microsoft stock a buy? It's worth noting that despite its shares dropping by about 17% over the past 12 months, Microsoft's financial results have generally been strong. In the third quarter of its fiscal year 2026, ending on March 31, the company's revenue increased by 18% year over year to $82.9 billion. Microsoft's Azure and other cloud services revenue climbed 40% compared to the year-ago period. And on the bottom line, the tech leader's adjusted earnings per share came in at $4.27, 21% higher than the year-ago period. Further, the company's cloud backlog was $627 billion at the end of the period, up 99% year over year. This gives the company significant near-term visibility and suggests that cloud revenue will continue to move in the right direction for the foreseeable future. And importantly, Microsoft's AI business surpassed a $37 billion annual run rate and increased by 123% year over year. This isn't what a struggling company looks like. In fact, Microsoft seems to be doing just fine, if not better. The company still has significant opportunities in AI and cloud computing, two industries where it is a leader. Further, Microsoft benefits from a strong competitive advantage thanks to its brand name, its long-standing partnerships with millions of businesses, and high switching costs. Meanwhile, the stock is trading at reasonable levels. Microsoft's forward price-to-earnings ratio is currently 20.6, versus an average of 22.3 for information technology stocks. Lastly, Microsoft has a strong dividend program, despite its fairly low forward yield of 0.9%. Given all these factors, Microsoft looks like a steal at current levels. Those who invest in the company today and hold onto their shares for a long time could see outstanding returns.