A wave of high-profile companies are about to hit the stock market. And they could have serious implications for existing stocks. 

IPOs

SpaceX, OpenAI, and Anthropic are gearing up for initial public offerings (IPOs). And these could be some of the largest in history.

SpaceX is looking for a valuation of $1.75trn. OpenAI is looking for $1trn, and Anthropic is aiming for $500bn. Those are big numbers. And they come with correspondingly big implications for the stock market. 

Ordinarily, none of these stocks would be eligible to join an index straight away. But Nasdaq is changing its entry requirements. Under the new rules, the new stocks could join the Nasdaq 100 within 15 days. And that could have big implications.

Their inclusion would shake up the index in a big way. Importantly, it could cause some big names to fall sharply.

Index inclusion

SpaceX, OpenAI, and Anthropic are targeting $3.25trn in total market value. This will make them a big part of the Nasdaq 100.

As a result, funds that track the index are going to have to buy a lot of shares. That should be good for their share prices.

The new names joining, however, means existing ones will make up less of the overall index. So they’ll get sold as a result. A lot of these are also the biggest names in the S&P 500. And to balance their portfolios, funds will need to sell these.

That’s will create downward pressure on their share prices. But it won’t be because of anything going wrong with the businesses. It’s just the supply and demand dynamics of the stock market. For long-term investors, though, this could be a huge opportunity.

Microsoft

Microsoft (NASDAQ:MSFT) shares are down 22% this year. The firm is dealing with a threat on two fronts from artificial intelligence (AI).

The first is the threat of software disruption. The concern is that its enterprise software might be less valuable in a world of AI agents.

The second is the risk of overinvesting. The company has announced big spending plans for 2026 and those aren’t guaranteed to pay off. 

My own view is that the falling share price is an opportunity. And I’ve been buying the stock for my portfolio as a result. 

Microsoft shares are already at some unusually low multiples. But for those who aren’t convinced, a better opportunity might be on the way. The share price falling due to index rebalancing has nothing to do with disruption. And it’s going to be hard for investors to ignore.

Once-in-a-lifetime opportunity

Falling share prices can present buying opportunities. But there are usually associated business risks to think about. Sometimes, though, that isn’t the case. It’s extremely unusual, but this might be exactly what’s on the way later this year.

SpaceX, OpenAI, and Anthropic joining the stock market is a once-in-a-lifetime event. And it could result in a major Nasdaq reshuffle.

In that situation, investors will want to be ready. I’ll certaintly be paying close attention as the situation develops.

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Is now a good time to start buying shares though, considering the volatility in the markets? Let’s discuss.

Rare investment opportunities

While it may not seem like a good idea to invest when there’s so much uncertainty, history shows that periods like this are often actually a great time to buy shares. When uncertainty’s high – and investors are on edge – there are often attractive opportunities in the market that aren’t available when the market’s rising and investors are relaxed and optimistic about the future.

By buying at low levels during periods of market stress, investors can potentially do very well when market conditions normalise. History shows that those willing to buy during dips and be patient are usually rewarded in the long run.

It’s worth noting that the market has recovered from geopolitical flare-ups like the one we’re experiencing at the moment many times in the past. In recent years, for example, the market has bounced back from the Ukraine war and the Israel/Hamas conflict.

Of course, the current conflict does pose some risks to the economy in the near term – high oil prices could hurt the economy. Taking a five-year view however, the economy and the market are likely to recover.

Lots of stocks are down

In terms of investment opportunities, I’m personally seeing a ton of them right now. Plenty of stocks I follow are 20%, 30%, or more below their 52-week highs, despite the fact that the underlying companies are performing very well and have huge growth potential in the long run.

Check out this name

One stock I believe is worth a look today is Microsoft (NASDAQ: MSFT), one of the largest technology companies in the world. It’s currently trading near $370. Back in November, it was near $550.

From an investment perspective, there are a lot of things to like about Microsoft. For a start, its software is used by businesses across the world so it has reliable, recurring revenues.

Second, it’s one of the largest players in cloud computing. Looking ahead, this industry is forecast to grow by almost 20% a year over the next five years so there’s a lot of growth potential.

As for the valuation, it looks very reasonable. At present, the company’s price-to-earnings (PE) ratio is about 20.

I’ll point out that a lot of UK investors clearly see an opportunity at that valuation. Over the last week, the stock’s been one of the most bought names on AJ Bell.

Of course, there are risks. One issue some investors are concerned about is the company’s spending a lot of money on AI with no guarantee it will pay off.

Microsoft has navigated technology shifts in the past before however. So I think it’s worth giving it the benefit of the doubt and taking a closer look.

It’s worth noting that investors can reduce their risk by buying shares in a range of different companies. Drip feeding money into the market slowly is another smart risk management strategy to consider.

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When they’re not watching oil prices, investors are trying to figure out artificial intelligence (AI). And Meta is an interesting case study.

Horizon Worlds

One of Meta’s recent ventures is Horizon Worlds. For those that haven’t heard of it (lucky them) it’s a sort of metaverse game.

The company announced that it was shutting the project down, before changing its mind almost immediately. But that’s not important.

The point is that Meta has lost a lot of money a lot on the metaverse since 2021. The total is around $84bn in operating income. 

The thing is, though, the stock has done really well – handily outperforming the S&P 500 since 2021. And the reason is simple.

Source: Fiscal.ai

The metaverse project has been an almost total failure. But Meta’s social media platforms have been absolutely sensational.

Since 2021, they’ve generated enough high-margin revenue to take operating profits from $46bn to $83bn. That’s why the stock is up.

I think the lesson here is that a company with terrific core assets can withstand big mistakes. And that feels very relevant in today’s stock market.

Artificial intelligence

Investors are currently wary of companies spending big on AI. There’s a real risk these won’t work. 

Two good examples are Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT). The stock market has reacted badly to their plans to keep investing through 2026.

The question is how investors should assess that risk. And I think the example of Meta is an instructive one. 

Both Amazon and Microsoft plan to spend north of $100bn in 2026. But they also have quality businesses behind them.

Amazon has AWS – its cloud computing division – and a growing advertising business. Both of these generate high-margin revenues. 

Microsoft also has a cloud business – Azure – and a huge enterprise software unit. And those are extremely impressive operations.

None of this means AI investments are going to work out for either company. But I think it means the risk might be worth it for investors.

Risk taking

Amazon and Microsoft are used to taking risks that don’t ultimately work. Both companies have tried to launch smartphones – and neither succeeded.

There are plenty more examples of unsuccessful ventures. Despite this, both stocks have been terrific investments until recently.

The proposed AI spending is on another level. But Horizon Worlds shows that more money doesn’t guarantee success.

It’s really hard to know if the latest investments are going to work. So investors can’t afford to just ignore the inherent risks.

Fortunately, I don’t think they need to. In my view, there’s a good chance both stocks do well even if the AI investments don’t.

This is why I see both stocks as buying opportunities worth considering right now. In my own portfolio, I’ve been focusing on Microsoft.

The only reason for this is that Amazon is already a big part of my portfolio. So I’m looking to add to the company I own less of.

The bottom line

Can both stocks fall further from their current levels? Absolutely – that happened to Meta in 2022. 

Will their strong operations ultimately come to the fore the way Meta’s did? My view is that this is also likely.

The post £10,000 invested in Meta Platforms Stock 5 years ago is now worth… appeared first on The Motley Fool UK.

I have been buying shares in another S&P 500 company though. This stock is down about 27% from its highs and at current levels, I see it as a bit of a no brainer for my retirement portfolio.

A long-term winner

The company I’m referring to is Microsoft (NASDAQ: MSFT). One of the largest tech companies in the world, it’s a leader in business productivity solutions, cloud computing, artificial intelligence (it owns a large chunk of ChatGPT owner OpenAI), and video gaming.

Not so long ago, this stock was trading for $550 and analysts were targeting a share price of $600 or higher. Today however, it can be snapped up for around $400 (I actually managed to pick up some shares near $385).

At current levels, I see a lot of appeal. In terms of the valuation, the stock’s price-to-earnings (P/E) ratio using the earnings forecast for the financial year starting in July is only 22.

In my view, there’s a lot of value on offer at that earnings multiple. Because this company is a proven long-term winner.

An exceptional business

Despite being a very large company (market cap of around $3trn today), Microsoft is growing at a very impressive rate. Over the last five years, revenue has climbed from $143bn to $282bn (an annualised growth rate of about 15%).

Looking ahead, analysts expect revenue of $328bn (+16%) this financial year. The following year, they expect $379bn (also +16%).

Fuelling this growth is the company’s cloud computing division. Last quarter, this grew 26% year on year.

Note that this segment has plenty of growth potential from here. According to Grand View Research, the global cloud computing market is expected to grow by around 20% per year between 2025 and 2030.

Another thing to like is the company’s high level of profitability. Over the last five years, return on capital employed (ROCE) has averaged 29%, which is fantastic.

Additionally, it has a rock solid balance sheet, pays dividends (and has a great dividend growth track record), and is doing share buybacks. Overall, there’s a lot to like.

I should also point out that over the long term, this stock has really delivered for investors. Over the last 10 years, it has generated a share price return of around 22% per year (and that’s after the recent 27% fall).

An investment opportunity?

Of course, it’s not perfect. One issue to be aware of is that the company is spending a ton of money on AI infrastructure at the moment — around $120bn this year — in an effort to be a leader in this area of technology. The problem is that there’s no guarantee this investment will pay off.

Another issue is that as a software company, it’s being dragged into the ‘AI is going to kill software’ narrative. I’d be very surprised if AI did kill this business given how embedded its products are in the corporate world and its part ownership of OpenAI, but this could impact sentiment towards the stock for a while.

Overall though, I think the risk/reward proposition is compelling at current levels. I believe the shares are worthy of further research.

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As the rise of artificial intelligence (AI) creates doubt over the outlook for software companies and AI infrastructure firms, I think the stock market is a great place to invest. So here’s what I’m doing.

A dislocated market

The stock market has changed its mind several times about which businesses are going to be the AI winners. But one industry that has fared very well is semiconductors.

Companies like Micron that supply things that go into data centres – in this case, memory chips – have seen demand surge. And supply hasn’t been able to keep up.

As a result, prices have increased and this means revenue growth has been accompanied by margin expansion. So profits have surged and share prices have rocketed as well. 

The trouble is, that same dynamic – inelastic supply that can’t react to changes in real time – is going to prove a problem if (or when) demand ever falls. And that’s the big risk. 

It’s not just hypothetical. The stock market seems genuinely concerned about the risk of data centre overbuilding and it’s been expressing this in falling share prices for big tech companies. 

That, though, is where I think there’s an opportunity. The market is worried about one side of the AI infrastructure boom but not the other – and that’s where I’m looking for opportunities. 

Hyperscalers

Amazon (NASDAQ:AMZN) and Microsoft (NASDAQ:MSFT) saw their share prices fall in response to their latest earnings reports. And the general theme was very similar. 

Both companies announced significant plans to invest in AI data centres in 2026. In each case, the proposed spending is around five times the revenue of their cloud businesses in Q4 2025.

The market is concerned about the risk of oversupply, which is fair enough. But it isn’t expressing the same worry about the companies making the equipment that goes into these data centres.

Given this, I think Amazon and Microsoft both look like relatively attractive opportunities, which is why I’ve been buying both recently. And there’s something else to pay attention to on this front.

Both companies have significant investments in some of the leading AI labs. Microsoft owns 27% of OpenAI and Amazon owns around 20% of Anthropic.

I’m not convinced the market is fully reflecting the value of these investments in the share prices of the big tech companies. And that’s another reason for thinking there might be an opportunity.

AI bubble?

I think whether or not the stock market is in an AI bubble depends on which bit you look at. Shares in semiconductor companies are trading at levels that look ambitious to me right now.

Elsewhere, though, there are some stocks that look much more attractive to me at today’s prices. Rather than pricing in the growth of AI, they’re actively discounting it. 

That’s where I’m looking for opportunities at the moment. As part of a diversified portfolio, I’m seeing the chance to participate in the success of AI at some reasonable prices.

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Here, I’m going to highlight three software stocks that JP Morgan highlighted in its research note as Buys. Are they worth considering today?

Microsoft

Let’s start with mega-cap Microsoft (NASDAQ: MSFT). It has fallen to $400 after trading near $550 in late 2025.

I like this pick. To my mind, this company is one of the safer picks in software.

Why? Because it’s a really diversified business.

Not only is it a key player in business productivity software, but it’s also a global leader in cloud computing and video gaming.

Additionally, it’s a massive player in AI itself. Because it has a large stake in ChatGPT owner OpenAI.

Of course, there are risks. One big one is that a lot of its expected cloud growth is tied to OpenAI (customer concentration risk).

With the stock now trading on a forward-looking price-to-earnings (P/E) ratio of 21 (using next year’s earnings forecast) though, I’m bullish. I plan to buy more shares for my own portfolio soon and believe it’s worth a look.

ServiceNow

Next up is ServiceNow (NYSE: NOW). It has fallen from $200 to $100.

This is another good call, in my view. While this company isn’t very well known, it’s a really important player in the corporate world.

Today, it provides crucial operating software for a vast range of large companies (85% of the Fortune 500). From Apple to GSK, everyone is using its software.

In simple terms, it handles all the behind-the-scenes work. Think IT incidents, employee requests, and security cases.

Given how embedded its solutions are within large multinational companies, I doubt this company is going to be replaced by AI. Ultimately, I expect AI agents to work on top of its software.

A risk is pricing. Looking ahead, the group may have to adjust its pricing model as companies automate their operations and lay off staff.

I expect it to continue growing though. And with the P/E ratio now in the low 20s, I think it’s worth considering.

Zscaler

Finally, we have Zscaler (NASDAQ: ZS), a small, but fast-growing cybersecurity company. Its share price has fallen from $330 to $165 – a decline of about 50%.

Cybersecurity strikes me as an area of software that should be relatively immune to AI disruption. Because this is a really specialised field and I don’t think that companies will be able to simply ‘vibe code’ their own cybersecurity applications.

To my mind, it wouldn’t be worth the risk. Get it wrong and the company could potentially be out of business if hit by a major attack.

Of course, while this company has been able to generate prolific growth in recent years (five-year revenue growth of 520%), there are no guarantees that this will continue. This is a dynamic industry and threats are likely to evolve over time.

Any slowdown could hit the share price. Because the stock is priced for strong growth.

I’m bullish, however, and plan to buy more shares for my own portfolio in the weeks ahead. In my view, it’s worth a closer look.

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There’s a stock that I probably should have bought a long time ago, but didn’t. And I finally got – and took – the opportunity to put that right.

Background: overthinking

One of Warren Buffett’s great insights into investing is that there aren’t any points for difficulty. Whether a company is easy to understand or complicated, famous, or obscure, doesn’t matter. 

Ultimately, there are only two things that matter. The first is how much cash the business is going to produce over time and the second is how much an investor pays to own part of it.

Sometimes, the best stocks to buy are under-the-radar names that are hard to find. But this isn’t always the case and I’ve definitely overlooked some opportunities hiding in plain sight in the past. 

Fortunately for me, I saw a chance to go some way towards putting that right this week. And that’s why I’ve added a new name to my Stocks and Shares ISA. 

What I’ve bought

The stock is Microsoft (NASDAQ:MSFT). Pretty much everyone knows what the company is and what it does, but that hasn’t stopped it from being an outstanding investment in the past. 

As I write this, the stock is down 1.76% from where it was 12 months ago. But there have been plenty of opportunities to buy it below its current price in the last five years.

I think, though, that now is a rare chance. In the last five years, the stock hasn’t traded at a lower price-to-book (P/B) ratio and its price-to-earnings (P/E) ratio has been lower once – briefly – in 2022.

Investors who bought the stock back then are currently up 70% on their investment, compared to a 57% gain for the S&P 500. And I’m hoping for similar success from this point forward. 

Outlook

There’s a reason Microsoft shares are cheap right now. The stock market is worried about artificial intelligence (AI) and the firm is right in the middle of everything that’s concerning investors.

The company has committed to investing $150bn in AI infrastructure this year and there’s a risk this might not pay off. And AI could generate new competitors for its software products.

Microsoft, however, has its own AI product – Copilot. And with Office having a huge market share, creating a meaningful challenger that can convince customers to switch would be extremely hard.

The big investments are also designed to strengthen this position. Building out data centres that power its AI products gives the firm an integration advantage few competitors can match. 

Better late than never?

I probably should have bought Microsoft shares a long time ago. But I struggled to see how a stock that’s so well-covered by analysts could possibly be a bargain (outside a market crash). 

Fortunately, I’ve had a chance to put that right this week. And I’m pleased that I managed to be patient and wait for my opportunity, rather than forcing it at a P/E ratio of 38. 

I’m more mindful of Warren Buffett’s advice about not making things unnecessarily complicated than I once was. But with Microsoft, I think it’ll be a case of better late than never.

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Ten years ago, the stock was trading at an unusual discount because the company was in the early stages of a major technological transition. Sound familiar? 

Cloud

Back in 2016, Microsoft shares were trading at some unusually low valuation multiples. The stock reached a price-to-earnings (P/E) ratio of 18 and a price-to-book (P/B) ratio of 5. 

The reason is that the company was going through a major shift in the way it operated. It was shifting from selling physical copies of software (on discs) to cloud-based subscription services.

Moving from permanent licenses to monthly subscriptions resulted in a drop in sales. And building out the associated data centre infrastructure compressed margins in the short term.

On reflection, though, the chance to grab Microsoft shares at a once-in-a-decade valuation proved to be a huge opportunity. But this isn’t just a history lesson – it might well be relevant today.

AI

Fast forward to the present day and Microsoft’s stock has just fallen 16% in a month. The big reason is that the firm has announced plans for $150bn in artificial intelligence (AI) investments this year. 

That’s going to weigh on free cash flows for the foreseeable future. But while history doesn’t exactly repeat itself, I wonder whether investors might think there’s something familiar here. 

There’s a risk that Microsoft could be over-investing in AI at the moment. And a big part of this comes from the fact that 45% of the firm’s contracted future revenue is set to come from OpenAI.

It’s currently unclear exactly how Sam Altman’s firm plans to finance its obligations. So investing heavily on the basis of future order from ChatGPT’s owner makes investors nervous.

Risks

There isn’t much investors can do in these situations. The situation is in the hands of the company’s management – and Microsoft looks to me to have a very good CEO in Satya Nadella. 

I’ve been impressed by the way Nadella has conducted himself over the last 12 months or so. He wasn’t flustered by DeepSeek and he has a clear strategy for the firm. 

Most importantly, he doesn’t come across to me like someone running a start-up. His ambition isn’t growth at all costs – he seems to me to be a careful, diligent, and responsible operator.

I certainly don’t believe Microsoft is making a $150bn commitment without a lot of careful thought first. That’s not to say it can’t make a mistake, but I strongly doubt this is just data centre FOMO.

Opportunity

I think the recent pullback in Microsoft shares means it might be worth investors taking a closer look. The stock is down 2.7% over the last 12 months, but earnings per share have climbed 29%. 

There’s no guarantee the share price won’t fall further from this point. But chances to buy the stock at these kinds of valuation multiples don’t come around very often.

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So what’s behind the drop? Well, there are several interpretations. Slowing cloud growth’s one angle.

The “show me the money” era has arrived. While the top-line beat was solid, the staggering $37.5bn in quarterly capital expenditure — a 66% year-on-year surge — has sparked fears of an “AI tax” with a distant exit ramp.

Investors are no longer content with potential. They demand proof that these massive investments in GPUs and data centres will translate into margin expansion and improved earnings, not just increased overhead.

What’s more, with 45% of commercial obligations now tied directly to OpenAI, the risk concentration is starting to rattle even the most disciplined portfolios.

Short-term performance

Investing £10,000 into Microsoft a month ago wouldn’t have been a successful move. The 13% share price slide would have slashed your capital to £8,700, while a 2% depreciation in the dollar further eroded value when converted back to sterling.

Interestingly, the stock’s now down 2% over the year.

The broader exodus from software stocks explains part of this underperformance. Hedge funds have slashed software exposure to a record low of 4.5%, a staggering 12-point decline since the mid-2023 peak.

Investors are aggressively rotating into hardware, with semiconductor exposure surging to a record 8%. This pivot suggests the market’s currently prioritising the shovels (chips) over the gold (software). 

That’s certainly an interesting conclusion because for years investors have coveted software companies with their strong margins and potential for rapid growth given that software can typically be scaled almost infinitely with near-zero marginal cost. For a decade, the “capital-light” nature of SaaS was the gold standard for growth.

What happens next?

What happens next operationally is beyond my knowledge. However, I can look at the valuation and come to some conclusions as to where the stock might be going next.

It’s now trading around 24.3 times forward earnings. That’s pretty much in line with the information technology sector average. But this figure doesn’t tell us a lot on its own.

Another factor is growth. So with earnings expected to grow by around 14% annually over the medium term, we actually come to a price-to-earnings-to-growth (PEG) ratio around 1.75. This is just a little above the sector average.

And then it’s got a near-perfect balance sheet with around $20bn in net debt — that’s tiny for the size of the company.

So what does all of this tell me? Well, it’s not bad value compared to the sector average. But Microsoft isn’t any average company — it’s a market-dominating titan with a massive competitive moat that arguably justifies a valuation premium over its peers.

With that in mind, it could be worth considering, but I’d suggest the margin of safety isn’t huge in the near term.

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It offered me a number of relatively uninspiring ideas. Two of them though, stood out for entirely different reasons.

Altria

One of the names it suggested to me was tobacco firm Altria (NYSE:MO). On the face of it, that sort of makes sense – the stock has a 7% dividend yield and there aren’t many S&P 500 names in that category.

The trouble is though, the company’s facing some pretty big risks. Its business is exclusively focused on the US, where the number of smokers has been falling sharply.

To be fair, raising prices and buying back shares have kept earnings per share drifting higher as sales have stagnated. But I’m not convinced this is a long-term solution to a declining customer base.

Other tobacco companies – such as British American Tobacco and Philip Morris International – have some promising nicotine pouch products that might offset this. But this isn’t really the case with Altria.

Altria and Philip Morris used to be one company. The latter however, acquired Swedish Match in 2022 (after their separation) and owns the US rights to Zyn – the nicotine pouch product as a result.

As ChatGPT pointed out to me, a 7% dividend yield could return a lot of passive income in the short term. But I think investors have much better opportunities available elsewhere.

Microsoft

At the other end of the spectrum, ChatGPT also suggested Microsoft (NASDAQ:MSFT). Now, that stock fell 10% in a day earlier this week, but the dividend yield’s still only 0.84%.

Microsoft is the opposite of Altria in many ways. It’s a business with a much more positive long-term outlook and it has a number of potential growth opportunities available.

The big risk with the company is that it might be in the process of wasting a lot of money. It’s investing heavily in artificial intelligence (AI) data centres and there’s no guarantee that will pay off.

To some extent, investors can’t do much but trust that Satya Nadella knows what he’s doing. And I do think the CEO has shown a lot of outstanding leadership qualities. 

Even the best operators make mistakes. But even beyond AI, Microsoft has an extremely strong position in its enterprise software division that makes it incredibly difficult to compete with.

I think there are good reasons to look seriously at Microsoft shares after the latest decline. But a dividend yield below 1% means I don’t see a case for buying it from a passive income perspective.

Dividend stocks

There’s more to income investing than just looking at dividend yields. Altria’s one of the highest in the S&P 500, but I think there are a lot of risks for the company in the near future.

Microsoft looks like a more promising overall investment to me. But at today’s prices, it would take a huge cash outlay to generate meaningful passive income from the stock.

In other words, I’m not that convinced by ChatGPT’s latest suggestions for dividend investors in the month ahead. I think there are some real opportunities right now, but not these ones.

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