<div id="readability-page-1">Shares of Microsoft (MSFT -1.02%) are up 18% this year (returns as of June 27), and that has pushed the stock to a new all-time high. It's been a traditionally safe stock to own, but it's definitely expensive these days, trading at around 38 times its trailing earnings. The business has many growth opportunities and has been a big player in artificial intelligence (AI), which has investors bullish on its long-term future. But given its high valuation, should you consider waiting for a dip in price before adding the stock to your portfolio? <div><img src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjMxMzIvaW52ZXN0b3ItbG9va2luZy1hdC1zdG9ja3Mtb24tYS10YWJsZXQuanBnJnc9NzAw?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="700" height="467" original-src="https://imageproxy.pbkrs.com/https://g.foolcdn.com/image//query-b3A9cmVzaXplJnVybD1odHRwczovL2cuZm9vbGNkbi5jb20vZWRpdG9yaWFsL2ltYWdlcy84MjMxMzIvaW52ZXN0b3ItbG9va2luZy1hdC1zdG9ja3Mtb24tYS10YWJsZXQuanBnJnc9NzAw"/>Image source: Getty Images. </div> <h2>Microsoft's stock is trading at a higher earnings multiple than its 10-year average</h2> Entering trading this week, Microsoft's valuation was at record levels, with a market cap of $3.7 trillion. It's one of the most highly valued stocks on the market today, trailing only Nvidia. But market cap alone doesn't tell investors if a stock is overpriced or not. Looking at a stock's price-to-earnings (P/E) multiple can be an effective way to gauge its relative value. You can compare it to other stocks or even look at its historical average. And based on its 10-year average P/E, Microsoft does indeed look like an expensive stock right now. <img src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/f4837958eb2b2f0ce456fb6d424c6d02.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="720" height="441" original-src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/f4837958eb2b2f0ce456fb6d424c6d02.png"/> MSFT PE Ratio data by YCharts The stock doesn't look wildly expensive based on the above figure, but investors do appear to be paying a higher premium for the business these days. A higher P/E multiple can be justifiable if a business is performing particularly well and growing at a higher rate than normal, or if it has a big growth catalyst -- such as AI. <h2>Microsoft's growth rate has been higher than normal</h2> In recent years, Microsoft has expanded through its acquisition of video gaming company Activision-Blizzard and its heavy investments in AI. Currently, its AI business is generating revenue at an annual run rate of $13 billion, which is a modest amount for a tech company whose sales over the trailing 12 months have totaled $270 billion. <img src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/5f106a3ecccca9b86a013f276bbd1487.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" width="720" height="441" original-src="https://imageproxy.pbkrs.com/https://media.ycharts.com/charts/5f106a3ecccca9b86a013f276bbd1487.png"/> MSFT Operating Revenue (Quarterly YoY Growth) data by YCharts There's still potentially much more growth ahead if demand for AI-powered PCs picks up. Unfortunately, with consumers scaling back on spending amid turbulent economic conditions, it may take some time before that may have any sizable impact on its operations. <h2>Should you buy Microsoft stock today?</h2> Microsoft is a good long-term investment, but I wouldn't buy it today. At such a high valuation, I don't think it's generating nearly enough growth to justify such a high premium, especially when there are many cheaper AI stocks to choose from; there's not nearly a compelling enough reason to invest in Microsoft right now. I'd put the stock on a watch list, but I wouldn't buy it at its current valuation. There's not much margin of safety and if there's a slowdown in tech spending, especially if companies worry about an economic downturn, then there could be considerable room for the stock to fall. </div>

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Microsoft's stock has risen 18% this year, reaching an all-time high, but is now trading at a high P/E ratio of 38, above its 10-year average. While the company has growth potential, particularly in AI, its current valuation may not be justified given the economic climate. Analysts suggest waiting for a price dip before investing, as there are cheaper alternatives in the AI sector and potential risks of a tech spending slowdown.

- Microsoft (MSFT) shares have risen 18% this year, reaching an all-time high, but are currently trading at a high valuation of around 38 times trailing earnings.  
- The company's market cap stands at $3.7 trillion, and while its growth in AI presents opportunities, its price-to-earnings ratio suggests it may be overpriced compared to its historical average.  
- Although Microsoft is considered a good long-term investment, the current high valuation and potential economic downturns lead to a recommendation to wait for a price dip before purchasing.

Should You Buy Microsoft Stock Now or Wait for a Dip?