Microsoft MSFT has cemented itself among the top technology companies in the world, many analysts are wondering if the software and services giant now trades overvalued. Pair these doubts with overall market uncertainty as the Nasdaq dipped 3.6% on Wednesday, July 24 and it might start looking like time to sell Microsoft stock.

However, taking a closer look at potentially overvalued tech stocks like MSFT can help soothe the urge to take cash profits during an impending market crash. However, looking closely at its fundamentals could uncover whether much of its growth this year is a product of AI hype.

Moreover, the recent global IT outage on June 19 that swept across hospitals, airlines, first responders and even banks as a result of a faulty CrowdStrike CRWD software deployment underscores just how widely embedded Windows OS and Microsoft Azure are in the global economy.

As such, here are three reasons why Microsoft stock might just be worth holding even if the current market dip becomes a crash.

A Ubiquitous Product

As mentioned before, a single faulty update brought down nearly the entire global computer infrastructure due to impacting Windows OS.

While this was incredibly inconvenient for many businesses around the world, it confirms one aspect of Microsoft that analysts have been speculating about for years now, and that’s that it dominates the operating system market.

Since February 2024, it has been speculated that around 72% of all computers running in the world run on Windows OS in some form or another. This means that nearly three out of every four computers on Earth are customers of Microsoft’s software and are directly compatible with its future software releases.

The global presence of Windows also lends itself well to Microsoft’s current commitments to the artificial intelligence race, as it rushes to become the dominant player in that market as well. That’s because the company has vast oceans of user data to train its proprietary AI models and could continue to offer a competitive product.

Fair Fundamentals

Yet, it’s the excitement around these product factors that has carried Microsoft stock to where it is right now over the last 12 months. Thus, to determine whether its growth of 22% over that period results from AI-related hype and investor excitement, investors need to look at a few key metrics and trends from the last year of MSFT’s performance.

For starters, the company’s price-to-earnings ratio is one of the most reasonable in the current tech industry. Trading at 37.16x its earnings, MSFT is above the traditional mark of 25 for overvaluation but only slightly above the current tech industry average of 35.96x per the S&P 500 Information Technology Sector Index.

As such, investors can certainly expect a slight correction as both insiders and institutional investors sell to take profits. Yet, with a dip in value comes an opportunity to either hold or double down.

A Realistic Growth Ramp

Ultimately, the question isn’t whether or not MSFT is worth exiting completely, rather, will there be a better price in the future to buy at? I think the chances are high since much of the broader stock market has been locked in a high-octane rally with no serious stagnation or crashes to level the playing field.

For investors who currently own Microsoft, selling to buy at a lower price could be an exciting prospect. Investors looking to initiate a position in the stock might want to wait until it’s at least a little cheaper than the industry average.

Thus, Microsoft stock should be a hold for most investors right now as we wait for a broader market correction before resuming buying into the future of technological infrastructure through Microsoft’s products.

On the date of publication, Viktor Zarev did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

On the date of publication, the responsible editor did not have (either directly or indirectly) and positions in the securities mentioned in this article.

Viktor Zarev is a scientist, researcher, and writer specializing in explaining the complex world of technology stocks through dedication to accuracy and understanding.

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