The technology sector is in focus as leading AI company Nvidia (NVDA) prepares to report its results on Wednesday. As expectations around AI rise across the technology sector, investors are anxious to see when companies will start seeing returns on their investments.

Rishi Jaluri, Managing Director of Software Equity Research at RBC Capital Markets, discusses his outlook for the technology sector and expectations in AI with Catalysts.

Jaluria believes it will be “really difficult” to get short-term returns from AI investments, but argues that it is better for these companies to overinvest rather than underinvest. “This is really a generational technological shift,” and stresses that investors need to be patient.

Despite the general caution, Jaluria identifies only one company that he believes will make significant money from generative AI in the next twelve months: Microsoft (MSFT). He outlines three key factors Microsoft needs for AI growth. First, the company needs to show investors acceleration, or what AI could look like in the Azure business without capacity constraints. Second, other software companies need to develop AI modules, as Microsoft will benefit from this ecosystem growth. Finally, Jaluria stresses the importance of “actual use and adoption of AI in Microsoft’s portfolio outside of the Azure line.”

Click here to watch the full episode of Catalysts for more expert insights and the latest on market developments.

This article was written by Angel Smith