Microsoft (NASDAQ:MSFT) started as a software company in 1975. Its flagship Windows operating system is still used by billions of people around the world, despite its launch in 1985. But the company has grown well beyond its roots and is now widely present in sectors like cloud computing, gaming and artificial intelligence (AI).
Microsoft embraced AI in early 2023 when it announced plans to invest $10 billion in ChatGPT creator OpenAI. It has since integrated the startup’s technology across its entire product portfolio, bringing AI within reach of millions of customers around the world.
The partnership is already bringing financial rewards to investors, and it’s one of the main reasons why Microsoft is now the most valuable company in the world with a market capitalization of $3 trillion. However, that doesn’t mean it’s too late to invest in its stocks. In fact, when you look back in five years, you’ll probably be glad you took the plunge today.
AI Could Be Microsoft’s Most Valuable Opportunity
THE AI industry is still in its infancy, and yet Wall Street analysts already believe it has enough potential to add between $7 trillion and $200 trillion to the global economy over the next decade. AI chatbots can quickly generate text, images, videos and even computer code, which could lead to a productivity boom in the business world.
Naturally, thousands of companies are rushing to integrate AI into their operations. Microsoft is at the forefront of this initiative and has already successfully monetized the technology in measurable ways.
By combining its own internally developed models and OpenAI’s latest GPT-4, Microsoft has created an AI assistant called Copilot. It is already available in products like Windows, the Edge Internet browser, the Bing search engine and the Office 365 suite (Word, Excel and PowerPoint).
During the third quarter of fiscal 2024 (ended March 31), Microsoft said 60% of Fortune 500 companies were using Copilot for 365, with giants like Amgen, CompetentAnd Nvidia each purchasing more than 10,000 seats. This is a huge financial opportunity for Microsoft, as there are over 400 million existing 365 seats that could add Copilot to their plans by paying an additional fee.
Copilot for apps like Windows, Edge, and Bing presents a different opportunity for Microsoft. Finding information from an AI chatbot is much more convenient than using a traditional search engine like Google, which requires the user to browse web pages to find answers. Therefore, if Microsoft can capture enough traffic through the aforementioned applications, there could be an opportunity to create new revenue streams by selling advertising spots.
Cloud continues to shine, led by Azure and AI
Microsoft generated $61.9 billion in revenue during its fiscal third quarter, up 17% year over year and well above Wall Street’s forecast of $60.8 billion. Intelligent Cloud has remained the largest…
