With Microsoft’s stock soaring close to its all-time high, the tech giant has been riding the wave of artificial intelligence (AI) to exceptional financial heights. Boasting a remarkable 57% gain in 2023 and an additional 12% increase this year, Microsoft’s stock continually breaks new records and shines bright in the realm of investments.
Renowned for its Windows operating system, Office suite, and Teams collaboration platform, Microsoft has recently entered the domain of generative AI, swiftly integrating AI capabilities across its array of products and services.
The Strategic Leap into Generative AI
Microsoft’s success in the AI space isn’t merely happenstance; it’s the result of diligent groundwork. While generative AI gained prominence in early 2022, Microsoft took a significant leap by investing $1 billion in AI startup OpenAI back in 2019, initiating a long-standing partnership that propelled the technology forward.
Through this collaboration, Microsoft leveraged supercomputers to train large language models that form the foundation of generative AI. These models enabled bots to execute impressive tasks such as creating accurate images from voice commands, answering complex queries, and finalizing code for software applications.
Microsoft piloted one of these bots, GitHub Copilot, within GitHub after acquiring the company in 2018. Despite initial imperfections, Copilot garnered significant user traction following its launch in late 2021.
Cashing in on the AI Wave
Projections abound about Microsoft’s potential gains from its AI ventures. The company charges users $30 per user per month for Copilot within Microsoft 365. Analysts foresee substantial revenue growth from this endeavor, with estimations ranging from $10 billion to a whopping $100 billion in additional revenue by 2027.
Trading at approximately 36 times forward earnings, Microsoft stock carries a premium compared to the S&P 500 index. Yet, the promising revenue outlook stemming from the Copilot strategy indicates that Microsoft remains an attractive investment option despite its lofty valuation.
As the AI landscape continues to evolve, Microsoft’s innovative strides position it favorably for sustained growth, keeping investors intrigued by its potential for further expansion.