Money Morning Director of Tech & Venture Capital Research Michael A. Robinson has just targeted a massive new growth industry. One that could be worth $8.3 trillion by 2035. And that's just the U.S. market.
And he's also found one of the best tech stocks to buy to profit from this industry.
Before we discuss this tech stock, here's a look at the industry Robinson is excited about...
Robinson is talking about artificial intelligence (AI): a technology that could explode from a $420 million market in 2014 to a $5 billion over the next five years. That's a compound annual growth rate of nearly 54%.
And the profit potential doesn't stop there. As I mentioned earlier, a study by techemergence.com indicates the U.S. AI industry could be worth $8.3 trillion by 2035.
"This technology, which had found very few uses until computing power had become exponentially bigger and faster, is now being deployed everywhere," said Robinson on Oct. 28. "But the most important AI work is being done in cybersecurity, intelligence, and for the military."
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Even in just the most recent election cycle, we've seen private servers being hacked, which became a huge focus of the presidential election. WikiLeaks published some 35,000 hacked emails from Hillary Clinton's campaign chairman, John Podesta.
Artificial intelligence can help prevent hacks like this by finding patterns to "think on the fly," according to Robinson. AI can help build strong, impenetrable networks that can protect sensitive information.
AI is a big development - and opportunity - for investors. But one of the best "AI stocks" out there might seem odd at first. Sure, this company just makes software. But it also has some interesting plans in the works to capitalize on the burgeoning AI industry...
Here's one of the best tech stocks to buy now...
One of the Best Tech Stocks to Buy to Play AI Growth
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Microsoft Corp. (Nasdaq: MSFT) has already laid the foundation for a successful AI program.
Back in September, the company announced that it formed the Microsoft AI and Research Group, which brings over 5,000 computer scientists and engineers together to develop AI for apps, services, and infrastructure. The group is led by tech visionary Harry Shum, a 20-year Microsoft veteran with a history of leading successful projects for Microsoft, like its Bing search engine.
And more recently, Microsoft just partnered with an AI nonprofit called OpenAI, which is also backed by Tesla Motors Inc. (Nasdaq: TSLA) CEO Elon Musk and Silicon Valley entrepreneur Peter Thiel. OpenAI will work with Microsoft to run large-scale experiments on the software giant's Azure cloud platform.
What's more, Microsoft is already a contractor with one of the biggest future beneficiaries of AI: the U.S. government.
It takes a vast amount of time and energy to become a major U.S. contractor. It also takes a lot of time to become a leading enterprise software provider. Microsoft has accomplished both of these feats, according to Robinson.
"Buying into tech doesn't mean buying the coolest or fastest-growing firm," Robinson said. "It means finding companies that are on track to dominate the competitive sectors it wants to compete in. And when you're stepping into the fast-moving waters of AI, it's wise to start with quality first."
The U.S. Navy, Army, and Air Force already make up three of Microsoft's top software customers. Microsoft builds a flight simulator for the Army, for example. But get this - Microsoft gets about half of its federal revenue from outside the military. That money comes from the intelligence community, which is currently seeing the biggest growth of any government sector, according to Curt Kulcan, vice president of Microsoft's U.S. public sector division.
Microsoft is in the perfect position to profit from its AI program through its existing relationship with government intelligence agencies...
And considering that less than 1% of medium-to-large companies in the United States are doing work on AI, Microsoft can easily grow its AI dominance in both the public and private sector, Robinson said.
Based on 34 analyst ratings, Microsoft stock has an average rating of "Overweight," according to FactSet. This means that analysts expect Microsoft stock's return to be better than the overall tech industry. Microsoft stock has a target price of $64.35, which is nearly 6% higher than its current Microsoft stock price of $60.83 as of Thursday intraday.
The Bottom Line: The Microsoft stock price is poised to gain as the software giant continues developing its AI program. The company will leverage its relationship with the U.S. government to become a major force in the AI market.
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