Microsoft Stock Leads 3 AI Software Picks Worth Watching

Artificial intelligence is moving from buzzword to real-world infrastructure, and investors are looking for clear ways to get exposure while bond yields, inflation patterns and energy costs keep shifting across regions. Our AI Stocks screener focuses on companies directly tied to the ChatGPT and AI build out in semiconductors, software, large language models, cloud and broader digital transformation. Instead of trying to track every macro headline, you can use this theme to focus on businesses at the center of this technology shift. In this article, you will see 3 notable stocks filtered by this AI-focused tool.

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Microsoft (MSFT)

Overview: Microsoft is a global technology company that sells software, cloud computing, AI tools, and hardware, with flagship products like Windows, Microsoft 365, Azure, LinkedIn, and Xbox used by consumers, businesses, and governments worldwide.

Operations: Microsoft generates about US$135.3b from Productivity and Business Processes, US$128.4b from Intelligent Cloud, and US$54.6b from More Personal Computing, with revenue broadly split between the United States (US$162.8b) and other countries (US$155.4b).

Market Cap: US$2.9t

Microsoft sits at the center of the AI build out, with Azure and Copilot turning heavy data center spending into AI services that large customers are already paying for, while profitability and margins remain strong. The stock trades on a lower P/E than many software peers despite high earnings quality and robust free cash flow. At the same time, large capital expenditures, regulatory scrutiny around cloud and licensing practices, and recent insider selling present risks that investors may weigh against the potential of its AI-focused strategy.

Microsoft’s AI engine is already generating real revenue, but the main story lies in how that cash flow, capital spending and regulatory risk fit together in the analysis report for Microsoft

Tenable Holdings (TENB)

Overview: Tenable Holdings is a cybersecurity company that helps organizations see and reduce their overall attack surface, from traditional IT networks and cloud environments to web apps, identities, operational technology, and AI related risks. Its platforms use analytics and threat research to highlight the most critical vulnerabilities so security teams can prioritize what to fix first.

Operations: Tenable generates about US$1.0b in revenue from security software and services, with roughly US$539.2m from the United States and the rest spread across Europe, the Middle East and Africa, the Asia Pacific, and other Americas.

Market Cap: US$4.6b

Tenable Holdings gives you exposure to AI driven cybersecurity, as enterprises and governments seek unified tools to manage cloud, identity, OT and AI risks in one place. The company is moving toward profitability, with recent guidance pointing to over US$1.0b in annual revenue and a swing from prior losses to modest net income, while buybacks reduce the share count. At the same time, its reliance on federal contracts, higher debt funding, and competition from larger platforms raise questions about how durable its margins and growth could be. For investors focused on AI infrastructure and security, the balance between these strengths and risks is a key consideration.

Tenable’s push toward US$1.0b in revenue, a swing to modest net income and buybacks hints at an underappreciated shift in quality. However, the real story shows up in the analysis report for Tenable Holdings

ServiceNow (NOW)

Overview: ServiceNow is a cloud software company that helps large organizations run their everyday workflows, from IT support and security to HR, customer service and AI governance, so routine requests and complex processes move through one integrated platform instead of scattered tools and emails.

Operations: ServiceNow generates about US$14.0b in revenue from Internet Software & Services, with roughly US$8.3b from the United States, US$3.6b from Europe, the Middle East and Africa, US$1.6b from Asia Pacific and Other, and US$0.5b from the rest of North America.

Market Cap: US$112.2b

ServiceNow attracts interest because it looks less like optional software and more like core infrastructure for how large enterprises run workflows and manage AI in a controlled way. Earnings have grown strongly over the past 5 years and are projected to keep expanding. Yet the stock has underperformed the software sector recently and is trading well below some fair value estimates. This creates a tension between premium P/E multiples and potential upside. At the same time, investors need to weigh margin pressure, reliance on external borrowing, insider selling and very high executive pay. Meanwhile, new AI partnerships with groups like IBM, Accenture and Hitachi, plus strong subscription metrics, indicate that the platform’s AI monetization story is still unfolding.

ServiceNow’s AI partnerships and subscription engine suggest the story could be decoupling from recent share price weakness. It is worth seeing how the analyst forecasts for ServiceNow lines up with margin pressure, debt and executive incentives.

The three AI stocks covered here are only a starting point. The full Artificial Intelligence/ AI Stocks screener surfaces 659 more companies tied to semiconductors, software, LLMs, ChatGPT, cloud and broader transformation, each with its own potential catalysts and risks. To identify and analyze the highest conviction ideas for your watchlist, use the Artificial Intelligence/ AI Stocks screener so you can filter for the exact narratives, cash flow profiles and AI exposure that matter most to you.

Take Control of Your Investment Journey

If Tenable Holdings or any of these companies have caught your attention, register for FREE with Simply Wall St and add your companies to a Watchlist to monitor the share price against the fair value and track any new developments as they happen. Once you've made your move, manage your holdings with our Portfolio Command Center that filters out the noise to deliver only the most critical, actionable updates. Throughout your journey, our Community allows you to filter the best ideas from thousands of investor perspectives. By uncovering hidden catalysts and risks early, you'll accelerate your decision-making and stay one step ahead of the market.

Seeking Fresh Alternatives Beyond AI?

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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