Surge in Microsoft’s stock driven by AI prospects and OpenAI’s GPT-4
Microsoft Corp’s shares have hit a record high, driven by its promising artificial intelligence (AI) prospects and the recent popularity of OpenAI’s GPT-4 model. The company’s stock climbed 3.2% to close at $348.10, the highest it has ever been. This significant rally of 46% this year followed a negative sentiment in 2022 when investors rotated out of technology in anticipation of rising interest rates and economic headwinds 1 .
The surge in Microsoft’s stock can be attributed to several factors. Microsoft executives predict $10 billion in annual AI revenue from developers using its Azure cloud or OpenAI’s models. AI has been a hot topic all year, especially after Microsoft-backed OpenAI released the ChatGPT chatbot in November, which quickly went viral. Tech companies have rushed to embed the technology into products and features, boasting their ability to use AI to drive cost savings as recession concerns persist. Microsoft is a major beneficiary of the rise of ChatGPT and tangential products. On top of its hefty investment in OpenAI, the company provides the underlying computing power and has an exclusive license on OpenAI’s models, including the GPT-4 large language model 1 .
Microsoft’s integration of OpenAI tools into its Bing search engine and even the Windows operating system underlines the importance of AI in its strategic outlook. In April, Microsoft finance chief Amy Hood anticipated 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 1 .
Microsoft has generated almost $208 billion in total revenue in the past four quarters. With the predicted $10 billion of annual recurring revenue from AI, Microsoft is planting the longer-term seeds for success across Security, Teams, Power Apps and the forward-looking OpenAI/ChatGPT investments 1 .
The exciting developments around AI and cost-cutting measures have spurred a renewed bullishness among investors, resulting in a broad rally in U.S. indexes. This optimism around AI and tech growth has been a significant driver for the Nasdaq, up 32% this year, doubling the gains in the S&P 500 1 .
Despite challenges like cloud growth and a contracting PC market, Microsoft’s stock performance and its AI prospects indicate a promising future. The company’s anticipated $10 billion in annual AI revenue signals a new era in tech, one where artificial intelligence plays a pivotal role.