Source: Beast Finance Author: Beast Finance
Key Indicators for Microsoft Stock
There are plenty of indicators right now that Microsoft (MSFT) has invested heavily in artificial intelligence.
Earlier this year, Microsoft invested $10 billion in OpenAI, the developer of the artificial intelligence chatbot Chat GPT, according to media reports. As part of the deal, Microsoft is expected to own 49 percent of OpenAI and be entitled to three-quarters of OpenAI's proceeds until Microsoft fully recoups its investment.
Separately, according to S&P capital IQ, sell-side analysts predict that Microsoft's capital spending is expected to grow at a compound annual growth rate of 10%, from $26.8 billion in fiscal 2023 (June 30) to $38.7 billion in fiscal 2027. The sell-side analysts' predictions are also in line with Microsoft's comments in its third-quarter fiscal 2023 earnings report that the company is "expanding its investment in artificial intelligence infrastructure to meet growing demand."
How does Microsoft compare to other artificial intelligence stocks?
JPMorgan Chase (JPM) recently released a research report called "Generative AI CIO Survey" after surveying the chief information officers of 85 large enterprises. The report shows that Microsoft's investment in artificial intelligence has achieved good results and has become the global leader in generative artificial intelligence.
According to the report, Microsoft is expected to account for two-thirds of global "cloud-based AI activity/spending" in the "next three years." In contrast, JPMorgan highlighted in a research note that Amazon (AMZN) and Alphabet's share of "cloud-based AI activity/spending" will each fall to around 15% over the same period.
In view of JPMorgan Chase's research report, Beast Finance believes that Microsoft is currently considered the world's largest generative artificial intelligence company, and Microsoft's large-scale investment in the field of artificial intelligence is also a correct decision.
What is the influence of Microsoft in the field of artificial intelligence?
Beast Finance believes that Microsoft has considerable influence in the field of artificial intelligence, and it should be regarded as a key representative of the rise of global generative artificial intelligence.
At an investor event hosted by Microsoft CFO Amy Hood and CTO Kevin Scott on June 12, 2023, Microsoft emphasized that its "next-generation artificial intelligence business will be the fastest growing business in our history." Looking ahead, sell-side analysts expect the AI business to contribute $100 million in revenue to Microsoft over the next four years.
Considering that Microsoft is willing to continue to invest more funds in the field of artificial intelligence, Beast Finance believes that Wall Street analysts' predictions on Microsoft's growth opportunities in artificial intelligence are reasonable. JPMorgan Chase's survey of 85 chief information officers of large enterprises also shows that 32% of them plan to "significantly increase (in Microsoft's artificial intelligence-related products) spending" in the next three years.
Therefore, it is reasonable to conclude that Microsoft's influence in the field of artificial intelligence is very large.
What are Microsoft's future growth prospects?
Beast Finance believes that Microsoft's growth prospects are very good. Driven by artificial intelligence-related opportunities, the company also expects its free cash flow compound annual growth rate to reach 18% in the fiscal year 2024-2027.
Based on a comparison of Wall Street analysts' revenue forecasts for Microsoft's AI business ($100 billion) and Microsoft's consensus forecast for its 2027 revenue ($322 billion), AI-related products and services could generate as much as 30 percent of Microsoft's fiscal 2027 revenue in the coming years. Additionally, Microsoft is expected to account for two-thirds of global generative AI spending, according to a JPMorgan research note.
In addition, Beast Finance believes that investors should also pay attention to two other indicators of Microsoft, which also suggest that Microsoft's future growth prospects are very bright.
The first key indicator is that the customer scale of Microsoft's Azure OpenAI service has expanded from 2,500 as of March 31, 2023 (data source: Microsoft's financial report for the third quarter of 2023) to 4,500 in May this year. This trend of rapid customer growth also lends support to Microsoft's revenue growth potential in artificial intelligence.
Another key indicator is Microsoft CEO Satya Nadella's view that in the next few years, "technology will also double from 5% of revenue to 10% and beyond as technology moves from a back-office cost center to a defining feature of every product and service". As JPMorgan Chase & Co. surveyed 85 CIOs of large companies, Microsoft has gained the trust of CIOs of large companies, which puts it in a better position than other companies to capture a significant share of corporate technology spending.