One of the most famous entrepreneurs and philanthropists in recent history is Bill Gates. As a co-founder of Microsoft (NASDAQ: MSFT) , he helped pioneer modern computing and revolutionize how people communicate and work.
While he no longer manages the day-to-day business at Microsoft, Gates is still an active businessman. He and his ex-wife, Melinda French, built a charitable trust that is now worth roughly $46 billion. Perhaps unsurprisingly, Microsoft shares make up the largest fraction of the Bill & Melinda Gates Foundation Trust -- nearly one-third of the portfolio's total value.
Let's take a look at Microsoft's business, and assess why the technology stock could be a great buy for long-term investors.
Microsoft is one of a kind
Microsoft was founded 49 years ago out of a Harvard dorm room. Initially known for its Windows operating system, Microsoft has evolved into a much more sophisticated enterprise over the last half-century.
The company has made a number of strategic acquisitions that have helped it become one of the world's most diversified technology platforms. Today, Microsoft owns professional social networking site LinkedIn as well as video game giant Activision Blizzard.
While LinkedIn opened Microsoft up to a variety of different customer bases including sales and marketing professionals and corporate executives, Activision Blizzard represented an interesting supplement to the company's existing video game footprint in Xbox.
Moreover, Microsoft is one of the most ubiquitous workplace productivity platforms on the market. The company's Office Suite includes some of the most commonly used productivity software applications in the workplace, among them Excel and PowerPoint. In addition, the company's popular Teams service competes with Zoom , Salesforce , and other video conferencing and chat suites.
But perhaps Microsoft's biggest recent success has been with cloud computing . Despite intense competition from Amazon and Alphabet , the Azure cloud unit consistently remains one of Microsoft's top-performing sources of growth.
Furthermore, following a $10 billion investment in ChatGPT developer OpenAI, Microsoft is making it clear that artificial intelligence (AI) will become increasingly ingrained into its ecosystem and represents the next frontier in the company's evolution.
Image Source: Getty Images.
Holding Microsoft stock for the long run has paid off in spades
The chart below illustrates the total return of a $1,000 investment in Microsoft stock at the time of its initial public offering. Clearly, owning Microsoft for the long haul has been both a lucrative and wise decision. However, holding onto any single stock and reinvesting dividends for nearly 50 years requires unwavering financial discipline.
MSFT Total Return Price data by YCharts .
Is Microsoft stock a good buy right now?
Microsoft shares currently trade at a price-to-earnings (P/E) ratio of 37.8. By contrast, the average P/E of the S&P 500 is only 27.5. Not only is Microsoft stock trading at a significant premium to the broader market, but its P/E ratio and its price-to-free-cash-flow (P/FCF) multiple are both near their five-year highs. Simply put, Microsoft is not a cheap stock.
MSFT PE Ratio data by YCharts.
However, that doesn't necessarily make it a poor opportunity. In fact, I'd argue that Microsoft's premium is well-deserved. The company has proven over the course of decades that it can consistently innovate and introduce products and services that will be used by consumers across many different demographics and end markets.
The long-term returns of owning Microsoft stock have been hard to rival, and I think the company's newest chapter is just beginning to be written. AI is here to stay in some form or fashion for years to come, and Microsoft has a deep ecosystem into which it can integrate new AI-powered services -- from the workplace to personal computing, social networking, gaming, and more.
Just as the company disrupted and revolutionized personal computing and cloud infrastructure, I see AI as a major tailwind for Microsoft's business over the next several decades.
While the stock may be a bit pricey, it's hard to imagine a case in which Microsoft's growth prospects suddenly plateau or diminish. I think now would be a great time to scoop up shares of Microsoft and prepare to hold for the long run as the AI narrative continues to play out.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Adam Spatacco has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, Microsoft, Salesforce, and Zoom Video Communications. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .
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