RBC Capital Sees Microsoft (MSFT) Leading Amid Long-Term Software Transformation

Microsoft Corp. (NASDAQ:MSFT) is one of the most profitable tech stocks to invest in now. On August 25, RBC Capital’s analysts argued that concerns about the “death of software” in a post-AI world are overstated. Rishi Jaluria, an analyst at RBC, suggested that while AI will reshape the sector, traditional software providers retain valuable distribution and data advantages that could help them adapt and monetize AI over time.

The analysts outlined three possibilities: incumbents benefiting selectively, new AI firms scaling rapidly, and M&A activity accelerating as incumbents acquire AI-focused players. They cautioned, however, that monetization could take longer than investors expect, with broad adoption unlikely before 2028.

RBC warned about the risk of disintermediation, where AI-focused startups initially plug into existing platforms but later compete directly, potentially reducing user activity for established big players. Even so, the analysts see Microsoft Corp. (NASDAQ:MSFT) as one of the best-positioned companies to handle this shift, benefiting from both its distribution scale and AI integration.

Before publishing this report, Jaluria had reaffirmed a Buy rating on Microsoft Corp. (NASDAQ:MSFT) on July 31 and raised the price target to $640 from $525.

Microsoft Corporation (NASDAQ:MSFT) develops and sells a wide range of software, cloud services, devices, and business solutions, serving both individual users and enterprise customers worldwide.

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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Disclosure: None. This article is originally published at Insider Monkey.