Jim Cramer Says Microsoft’s (MSFT) AI Investment Is Finally Paying Off Syeda Seirut Javed Wed, October 7, 2026 at 5:07 AM EDT 5 min read MSFT +0.78% OPAI.PVT Trade MSFT on Coinbase Trading disclosure Trading disclosure The above button links to Coinbase. Yahoo Finance is not a broker-dealer or investment adviser and does not offer securities or cryptocurrencies for sale or facilitate trading. Coinbase pays us for certain activity generated through this link. Prices displayed are informational.
During the September 30 episode of Mad Money, Jim Cramer discussed how Microsoft Corporation's (NASDAQ:MSFT) massive artificial intelligence investment is entering a new phase as the company starts turning its data-center buildout into higher revenue. He said concerns over Azure growth, Copilot adoption, and Microsoft's relationship with OpenAI had proved misplaced.
This stealth run in Microsoft has been one for the ages. Remember back in June, the stock was at $349, and many people had given up on it? We thought Azure's web services business had slowed down. We were concerned that it was too tied up with OpenAI, causing confusion about what business belonged to whom and how Microsoft is really doing. Most important, we kept hearing that customers weren't willing to pay for Microsoft's Copilot... All of these worries turned out to be either wrong or false, which is why the stock now sits at $513 with a $3.8 trillion valuation.
Microsoft's accelerating AI monetization is also why it earned a place among our Top 10 AI Stocks That Will Skyrocket. But with billions still flowing into AI infrastructure, investors should also consider whether Microsoft can keep growing its dividend through the AI spending cycle.
Cramer mentioned that Microsoft Corporation (NASDAQ:MSFT) is moving from a period of heavy AI infrastructure spending toward one in which those investments can generate more revenue. He said:
Copilot has 30 million users and growing. They're paying as Azure's accelerating, not contracting. Microsoft seems to be separating from… gang at OpenAI... But the most important story, the biggest change, has come from something that hardly anyone talks about. Microsoft's beginning to recoup its monster data center investment. Those of us who were so troubled by the destruction of its balance sheet now realize that the data center spending might be even peaking, and profitability is beckoning. You know I'm a big believer in NVIDIA's Jensen Huang. He told me several years ago that there could be a gigantic payback on his semiconductors just a few years after they were purchased. I think Microsoft has now reached that payback period.
Recently, Cramer also praised the company for its deal with Chevron. You can read about it here. In its fiscal fourth quarter, Microsoft Cloud revenue increased 27% to $59.3 billion, while Azure and other cloud services revenue grew 43%. Microsoft said, "Customer demand continues to exceed available capacity." Commercial remaining performance obligations rose 84% to $678 billion, including a 25% increase excluding OpenAI. CFO Amy Hood said on September 9 that Microsoft had reduced "dock-to-live" times for infrastructure by more than 50% over the year. She said the company was focused on reducing the time between bringing infrastructure online and making it revenue-ready. Microsoft's infrastructure spending remains substantial, with capital expenditures reaching $41 billion in the June quarter. Cramer said:
There's been a ton of skepticism about how the tech titans were spending insane amounts of money to build these data centers, still are. But it turns out Microsoft had to build them because there are so many customers that are clamoring for them. We stuck with Microsoft for the Charitable Trust the whole way down. Why? Because the one thing I never lost faith in was quite simple: the belief that CEO Satya Nadella and CFO Amy Hood understood the data center opportunity.
Cramer called the stock's post-earnings surge a "nice surprise," and you can read about it here.
Microsoft Corporation (NASDAQ:MSFT) traded at 25.13x forward earnings as of September 22, according to Yahoo Finance, above Alphabet at 22.83x and Amazon at 23.64x, carrying a higher forward earnings multiple than those two large technology peers. It is worth noting that the U.S. software systems and applications industry had a 34.13x forward P/E in NYU Stern's January 2026 sector dataset covering 309 companies. Because that industry figure predates the September company and peer data, it is a broader valuation reference rather than a same-day comparison.
The clearest financial risk is that Microsoft Corporation's (NASDAQ:MSFT) AI infrastructure spending could remain ahead of the cash generation from those investments. Microsoft Cloud's gross margin fell to 65% in the June quarter from a year earlier, with the company citing the sales mix shift toward Azure, continued AI infrastructure investment, and increased product usage. It generated $19.6 billion of free cash flow while recording $35.8 billion of cash paid for property and equipment in the quarter. The company expects fiscal 2027 capital expenditures to increase year over year, with first-quarter spending expected to exceed $50 billion. The scale of that spending leaves it exposed if AI demand grows more slowly than expected or if new capacity takes longer to convert into revenue. Management has said spending is tied to demand and that faster deployment and infrastructure efficiencies can improve the economics of the buildout.
Insider Monkey, which tracks more than 1,000 hedge funds, showed 273 hedge funds holding Microsoft in the second quarter, down from 282 in the first quarter. Short interest was around 0.91% of the public float. Microsoft Corporation's (NASDAQ:MSFT) AI spending is still enormous, but the latest results seem to give Cramer a reason to believe the investment is starting to pay off. Azure growth, rising contracted revenue and faster infrastructure deployment support that view, while the continued rise in capital spending leaves margins and cash flow worth watching.
While we acknowledge the potential of MSFT as an investment, we believe certain AI stocks offer greater upside potential and carry less downside risk. If you're looking for an extremely undervalued AI stock that also stands to benefit significantly from Trump-era tariffs and the onshoring trend, see our free report on the best short-term AI stock.
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