Microsoft shares have soared to an all-time high of $348.10, following analysts at JPMorgan Chase touting the software maker’s growth prospects in artificial intelligence (AI). The stock rose by 3.2%, topping its prior all-time high reached in November 2021, the same month the Nasdaq peaked. The Federal Reserve’s announcement on Wednesday that it would hold off on increasing interest rates led to a broad rally in U.S. indexes. AI has been a hot topic all year, with tech companies rushing to embed the technology into products and features.
Microsoft’s Involvement in AI
Microsoft is a major beneficiary of the rise of AI and tangential products. On top of its hefty investment in OpenAI, the company provides the underlying computing power. Microsoft also has an exclusive license on OpenAI’s models, including the GPT-4 large language model. This model can spit out natural-sounding words in response to a human’s text input. Microsoft has incorporated OpenAI tools into its Bing search engine and even the Windows operating system. In February, at the company’s event to announce its Bing Chatbot, Microsoft CEO Satya Nadella said “it’s an exciting time in tech.”
The Impact on Microsoft’s Earnings and Revenue
Investors are keen to see what the rise of AI means for Microsoft’s earnings and revenue. In April, Microsoft finance chief Amy Hood said she expects fiscal fourth-quarter growth for Azure cloud of 26% to 27% year over year in constant currency, with 1 percentage point of it coming from AI services. On Monday, in a public discussion with Microsoft technology chief Kevin Scott, Hood provided more specifics. She said that “the next generation AI business will be the fastest-growing $10 billion business in our history.” In the past four quarters, Microsoft has generated almost $208 billion in total revenue.
JPMorgan Analysts’ Price Target for Microsoft Stock
Following the event where Hood provided more specifics, JPMorgan analysts lifted their price target to $350 from $315. The analysts wrote that “While MSFT continues to encounter a broad wave of cloud optimizations weighing on Azure growth, we see it planting the longer-term seeds for success across Security, Teams, Power Apps and now the forward-looking OpenAI/ChatGPT investments.” The analysts have the equivalent of a buy rating on Microsoft stock.
Microsoft’s involvement in AI has boosted its growth prospects, leading to a record high in its shares. The company’s use of OpenAI tools in its Bing search engine and Windows operating system has been a significant factor in its success. Investors are keen to see how the rise of AI will impact Microsoft’s earnings and revenue. Following the announcement by Microsoft finance chief Amy Hood that “the next generation AI business will be the fastest-growing $10 billion business in our history,” JPMorgan analysts lifted their price target from $315 to $350.
Leave a Reply