Microsoft CEO Satya Nadella speaks at the company’s Build developer conference in Seattle, May 23, 2023.


Microsoft shares climbed to a record high Thursday after analysts in JPMorgan Chase touted the software maker’s growth prospects in artificial intelligence.

The stock rose 3.2% to close at $348.10, surpassing its previous all-time high set in November 2021, the same month the Nasdaq hit its peak. U.S. indexes enjoyed broad-based gains after Wednesday’s announcement from the Federal Reserve be late to increase interest rates.

Artificial intelligence has been a hot topic all year after Microsoft-backed OpenAI released the ChatGPT chatbot in November, which quickly went viral. Tech companies have rushed to build the technology into products and features, touting their ability to use artificial intelligence to cut costs as recession fears persist.

Microsoft is the main beneficiary of the rise of ChatGPT and tangential products. At the top of his massive investment in OpenAI, the company provides basic computing power. Microsoft also has an exclusive license to OpenAI models, including GPT-4 a large language model that can spit out natural-sounding words in response to human text.

Microsoft has incorporated OpenAI tools into its Bing search engine and even Windows operating system. At the company’s event in February, it announced its Bing Chatbot, Microsoft’s CEO Satya Nadella he said, “It’s an exciting time in tech.”

Investors want to see what all this means for Microsoft’s earnings and revenue.

In April, Microsoft CFO Amy Hood said she expected fiscal fourth-quarter growth for the Azure cloud to be 26% to 27% year-over-year in constant currency, with 1 percentage point of that coming from AI services. In a public discussion with Microsoft technology chief Kevin Scott on Monday, Hood provided more details, saying that “the next-generation AI business will be the fastest-growing $10 billion business in our history.”

Over the past four quarters, Microsoft generated total revenue of nearly $208 billion.

Scott went deeper into Hood’s prediction.

“Because it’s really a very general platform, we have a lot of different ways to get that $10 billion ARR first,” he said. ARR stands for Annual Recurring Revenue.

“People all want to use our infrastructure, whether they’re training their own models, whether they’re running an open source model that they have, or whether they’re making API calls to one of the big frontiers. models we built with OpenAI,” Scott said.

After the event, JPMorgan analysts raised their price target to $350 from $315.

“While MSFT continues to hit a broad wave of cloud optimizations weighing on Azure growth, we see it planting longer-term seeds for success in security, teams, Power Apps, and now and forward-looking investments in OpenAI/ChatGPT,” the analysts wrote. , who have the equivalent of a buy rating on Microsoft stock.

Thanks to Microsoft’s 46% rally this year, the stock has regained all of its losses from 2022, when investors abandoned technology in anticipation of rising interest rates and economic headwinds.

Negative sentiment around cloud growth and a shrinking PC market led to pessimism on Wall Street last year. But excitement around artificial intelligence, along with cost-cutting measures that tech companies have put in place, has sparked renewed bullishness. The Nasdaq is up 32% this year, doubling the S&P 500’s gains.

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