Microsoft Shares Hit an All-Time High

In the last week of January, shares of the tech giant hit an all-time high and pushed the company’s market value above $3 trillion for the first time ever. Only Apple has managed to pass the $3 trillion valuation level, so Microsoft’s achievement is notable. The amazing performance follows news of the company’s venture into generative AI software.

Wall Street investors are interested to find out more about the company’s progress regarding its Copilot software for Microsoft 365, which could generate billions of dollars in revenue. Microsoft Copilot is a chatbot developed by Microsoft and is based on a language model launched as Bing Chat on 7 February 2023, as a built-in feature for Microsoft Bing and Microsoft Edge.

Microsoft is up nearly 70% in the last 12 months

The stock’s strong performance reflects the company’s move into generative artificial intelligence software across its product lines. Microsoft’s earnings report after the close of trading on Tuesday (30 January) should provide further insights into its progress to date. Analysts expect revenue to come in at $61 billion, up 15.7% from a year ago, with profits of $2.76 per share, up from $2.32 reported in 2023.

All three of the company’s business segments are anticipated to deliver double-digit growth in the quarter. Productivity and Business Processes, which includes Office, revenue is expected to increase to $18.7 billion, up 10.3%. For Intelligent Cloud, which includes Azure, analysts expect revenue to rise to $25.3 billion, up 17.5%. More Personal Computing, including Windows, gaming, and Surface hardware, is forecast to report revenue of $16.8 billion, up 17.8%. The latter will partly reflect the company’s acquisition of Activision Blizzard. Microsoft anticipates Azure in the quarter to grow 26% to 27%.

Analysts will be looking at the rollout of the Copilot software for Microsoft 365. The AI-based companion app is priced at $30 a seat per month.

Piper Sandler analyst Brent Bracelin explains that Microsoft investors may also focus on the firm’s cloud business. Azure growth could rise to the 29% to 30% range. In three years, he believes the company’s overall cloud business could increase to $200 billion.

Tech layoffs

Microsoft is not the only company which is downsizing. Many tech companies are downsizing, with around 23,670 workers being laid off from 85 tech companies just in January. Back in March, almost 38,000 tech employees were laid off.

In the week between 22-26 January 2024, Microsoft cut 1,900 positions in its gaming division. Earlier in the month, Google and Amazon cut several hundred jobs. Unity is also cutting 25% of its staff, and Discord 17% of its employees. Last year, investors praised the cost-cutting measures as companies cut down their workforce to respond to rising inflation, interest rates hikes, and recession worries. While the economic outlook has improved, such measures may continue. Last year 277 tech companies cut around 90,000 jobs. The January increase shows that companies are budgeting for the year ahead and they know they can do more by cutting down costs.

The AI hype

Artificial intelligence is all the money and new generative AI technologies are proving extremely helpful in automating customer service and creating marketing campaigns. AI has generated worries about the diminishing need of human labour and how this will impact workforce.  So many tech companies are laying off people, so they can invest more in developing AI products. By reducing numbers of employees, they can reposition themselves for AI.

Microsoft Gaming CEO Phil Spencer said his company’s layoffs were part of a bigger “execution plan” that would limit “areas of overlap.”

Microsoft hires nuclear development director

Microsoft hired Erin Henderson, PhD, MBA, PMP, as a Director of Nuclear Development Acceleration as the company is looking for new ways to keep its data centres operating.  Henderson has worked for 13-years at the Tennessee Valley Authority, where she served as the General Manager of Transmission Projects. She plans to create a global strategy for small modular reactors and microreactors to power Microsoft’s data centres.

Henderson’s new role will help further the data centre R&D team’s success. Microsoft collaborated with Terra Praxis, a nonprofit that promotes the transformation of old coal plant sites into modern SMR homes in order to develop a generative AI model to speed up the prolonged and costly nuclear regulatory and licensing process.

The stock: MSFT

Microsoft’s stock has skyrocketed in recent months, as the company continues to focus on AI. Already, Microsoft’s announcement of the pricing for its Copilot for Microsoft 365 service has helped give its stock a healthy boost. More recently, AI announcements have become more frequent as new features and products made the news on a weekly basis. Microsoft’s stock price has moved from $107 in January 2019 up to around $404.

This is a massive change from the time when the former CEO Steve Ballmer was in charge. In the last 10 years, since February 2014, when Microsoft CEO Satya Nadella took charge, the company has slowly become beiger and bigger, with acquisitions of Minecraft developer Mojang, LinkedIn, GitHub, and Xamarin. In recent years, Microsoft’s move into AI territory came with the acquisition of several AI companies and investments of more $10 billion into OpenAI.

Microsoft’s Copilot

Copilot is Microsoft’s general term for a variety of AI products. There are targeted Copilots for various Microsoft products, such as Copilot for Microsoft 365, which integrates with Microsoft Office apps like Word, Outlook, and OneNote. That Copilot is only available for businesses for $30 per user per month. There’s also a $20-per-month Copilot Pro subscription for individuals that provides integration with Office apps and priority access during busy hours.

Copilot is what is called generative AI, or genAI for short. This means that it can generate different kinds of content from text to images and videos. For text generation, Copilot uses a large language model (LLM) based on the GPT-4 model, developed by a company called OpenAI in which Microsoft is the biggest investor. The tool is trained on enormous amounts of articles, books, web pages, and other widely available text so it can answer questions, summarise content and write articles.

Like OpenAI’s ChatGPT, Copilot operates as a chatbot. If you ask it a question it will create a response. You can ask further follow-up questions or restart with a new question. 

With Microsoft’s recent rally and investments into AI technology, the future looks bright. If you want to explore trading opportunities with tech giants such as Microsoft using CFDs, then IronFX offers plenty of tools and resources to get you started. Head over to the website to explore educational material or register a demo or live trading account.

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