We live in a world of extremism, and the debate around artificial intelligence has become unsurprisingly polarized. One camp fears total job destruction, while the other dismisses the technology as pure hype. The truth lies squarely in the middle, and it presents a highly actionable opportunity for investors right now.
AI in its current state is not a takeover agent; it is a powerful work assistant that accelerates human output, making every employee faster. The prospect of achieving more with the same staff is intoxicating for managers. This enables for profit companies to justify capital expenditures to stay competitive, while non-profits can stress efficiency.
The Ontario Public Service is a prime example. This unionized government agency just rolled out Microsoft Copilot to over 15,000 civil servants, who will use the AI assistant for drafting communications and summarizing documents. Following a pilot program, the OPS found Copilot saved nearly three hours per employee each week.
This massive, institutional deployment is crucial evidence that AI is being mandated as an essential tool for baseline efficiency. Premium software licenses are being justified by highly cautious government and enterprise leaders. AI is moving from experimental use to essential, institutional deployment across the board.
Investors are largely missing this critical trend.
Organizations are not using AI to destroy jobs, nor is the technology being dismissed as hype. The truth is that AI is being deployed in the real world, at scale, as an able assistant that makes work fundamentally more productive.
Microsoft’s position as both the primary Cloud Service Provider through its Azure subsidiary, and a major Enterprise Software Vendor via Copilot, provides the clearest proof of this spending supercycle. Many investors see the soaring capital expenditures at Azure are wasteful; however, this spending is necessary to power the growth of Copilot, which customers are clamoring for.
The numbers don’t lie. Sales at Azure grew to $26.8 billion in the third quarter, up 33% year-over-year. Clearly, enterprises are paying up for the underlying infrastructure. Meanwhile, Copilot’s adoption rates validate the willingness to pay for the efficiency gains layered on top. This vertical integration creates a powerful, self-reinforcing capital expenditure and revenue loop.
Microsoft is capturing revenue from both ends of the spending cycle. Investors don’t understand the durability of this revenue. They are mispricing the essential, annuity-like stream created by the AI assistant layer.
The shift from experimental to essential AI deployment fundamentally changes enterprise software. We believe the market is severely underestimating the annuity-like revenue stream of Copilot, justifying a significant re-rating of Microsoft’s enterprise multiple. Buy the core infrastructure and application leader while its revenue durability is still viewed as cyclical.