Microsoft is predicted to record its strongest quarterly growth in nearly two years, with anticipated revenue increase of 15.8%. The company has swiftly adopted generative AI by forming an alliance with industry leader OpenAI, propelling Microsoft to lead the market with a whopping $3 trillion valuation. This surpasses Apple as the most valuable company.
Microsoft has invested an astonishing $10 billion in OpenAI, indicating high AI expectations in the approaching year. By aligning with OpenAI, Microsoft has fortified the latter’s hegemony in the generative AI market by providing it with the necessary cloud resources to deploy and host its models. This consolidation reveals the escalating interest in AI investments, a trend that was dominated by tech companies in 2023.
Tech analyst Keith Weiss from Morgan Stanley observed that generative AI has become the chief priority for information officers. He commented that a substantial number of these officials project to utilise a Microsoft AI product within the subsequent 12 months. Microsoft has further leveraged its OpenAI alliance by creating new advancements complemented by OpenAI’s GPT models. One such example is the Copilot project within its Microsoft 365 suite.
Growth possibilities in Microsoft’s cloud sector, especially Azure, are viewed optimistically by analysts due to the predicted surge in demand for AI services. Brent Thill, a Jefferies analyst, believes that the contribution of AI to Azure’s growth will increase. However, he suggests that OpenAI’s circumstances would not dramatically affect Azure’s performance in the short term.
Competition with other cloud services like Amazon’s AWS and Google Cloud is intensifying. Despite this, Microsoft’s AI investments are securing a larger market share for Azure. Microsoft forecasts Azure’s growth to rise by 26% to 27% in the second quarter. In line with its cloud sector support, Microsoft is creating the Azure Maia 100 and Azure Cobalt 100 chips, specifically designed for AI.
Despite challenges, including an 8% layoff in the Microsoft Gaming division, the company’s stock performance remains strong with a 57% increase in the previous year. This growth significantly contributes to the rallying tech sector.
