Microsoft CEO Satya Nadella will speak at the company’s Build developer conference in Seattle on May 23, 2023.
microsoft
Microsoft shares surged to a record high on Thursday after analysts at JPMorgan Chase & Co. touted growth prospects for software makers in the artificial intelligence space.
Shares rose 3.2% to close at $348.10, surpassing the all-time high set in November 2021, the same month the Nasdaq hit its all-time high. US indices rose broadly after the US Federal Reserve (Fed) announced it would not raise rates on Wednesday.
AI has been a hot topic all year long since Microsoft-backed OpenAI released its ChatGPT chatbot in November, and it quickly spread. As recession fears persist, tech companies have rushed to incorporate technology into their products and features, boasting that AI can help drive down costs.
Microsoft has benefited greatly from the rise of ChatGPT and tangent products. The company provides the underlying computing power in addition to his significant investment in OpenAI. Microsoft also has exclusive licenses to OpenAI’s models, including the GPT-4 Large Language Model, which can spit out natural-sounding words in response to human text input.
Microsoft has built OpenAI tools into its Bing search engine as well as its Windows operating system. “It’s an exciting time in the tech industry,” said Microsoft CEO Satya Nadella at the company’s Bing Chatbot launch event in February.
Investors want to know how this will affect Microsoft’s earnings and sales.
Microsoft’s finance chief Amy Hood said in April that she expected fourth-quarter fiscal-year growth for the Azure cloud to be 26% to 27% year-on-year at constant currency, of which 1%. He said the points were due to AI services. On Monday, Hood made more specifics during a public forum with Microsoft’s head of technology Kevin Scott, stating, “The next-generation AI business is the fastest-growing $10 billion business in our company’s history. will be,” he said.
Over the past four quarters, Microsoft generated approximately $208 billion in total revenue.
Scott delved deeper into Hood’s predictions.
“There are a lot of different ways a $10 billion ARR can show up first, because it’s actually a very versatile platform,” he said. ARR stands for Annual Recurring Revenue.
“Whether you’re training your own models, running your own open source models, or making API calls to one of the big frontiers, anyone who wants to use our infrastructure. There are people, models that we built with OpenAI,” said Scott.
Following the event, JPMorgan analysts raised their price target to $350 from $315.
“MSFT continues to see a wave of broader cloud optimizations weighing on the growth of Azure, but the seeds of long-term success across security, Teams, Power Apps, and future-proofing OpenAI/ChatGPT investments. ,” the analyst wrote. , has a valuation equivalent to buying Microsoft stock.
Microsoft is up 46% this year, recouping all losses from 2022 when investors turned away from technology in anticipation of rising interest rates and economic headwinds.
Last year, negative sentiment about cloud growth and shrinking PC markets brought pessimism on Wall Street. But the excitement around AI, along with cost-cutting measures taken by tech companies, has created a new bullish mood. The Nasdaq is up 32% this year, doubling the gains of the S&P 500.
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