Microsoft CEO Satya Nadella speaks during the OpenAI DevDay event on Nov. 6, 2023, in San Francisco.<p></div></div></div><div class=
Microsoft CEO Satya Nadella speaks during the OpenAI DevDay event on Nov. 6, 2023, in San Francisco.

Justin Sullivan&sol;Getty Images

Nadella: Quarter powered by Microsoft Cloud

The reference to Nvidia  (NVDA)  is important, since the company is currently the big dog in the AI world, having seen its shares add nearly $2 trillion in market value this year. Some analysts say, however, that Microsoft is coming up right behind the AI-chip titan.

Microsoft, which is slated to report fiscal-fourth-quarter results this month, earned $2.94 a share in the April quarter, up from $2.45 a share a year earlier and surpassing the FactSet analyst consensus estimate of $2.82.

Related: Microsoft delivers an AI blow to Nvidia

Revenue totaled $61.86 billion, up from $52.9 billion and ahead of FactSet’s call for $60.85 billion.

Nadella said the company posted a “record third quarter” that was “powered by the continued strength of Microsoft Cloud, which surpassed $35 billion in revenue, up 23%.”

“We are seeing AI democratize expertise across the workforce,” Nadella said. “What inventory turns are to efficiency of supply chains, knowledge turns, the creation and diffusion, and knowledge are to productivity of an organization, and Copilot for Microsoft 365 is helping increase knowledge turns.”

Now, you’re probably fed up with all the predictions about AI being the virtual Godzilla of Next Big Things. But seriously, the people at McKinsey are forecasting some Very Big Things about generative artificial intelligence, which uses algorithms to derive original content — including audio, code, images, text, simulations, and videos — from existing content.

Think of Microsoft-backed OpenAI, which unleashed ChapGPT onto the world in 2022.

McKinsey research indicates that generative-AI applications could add as much as $4.4 trillion to the global economy annually, and “recent breakthroughs in the field have the potential to drastically change the way we approach content creation.”

“The opportunity for businesses is clear,” the consulting firm said in an April report. “Generative-AI tools can produce a wide variety of credible writing in seconds, then respond to criticism to make the writing more fit for purpose.”

Analysts cite GenAI postion

This has implications for a wide variety of industries, from IT and software groups, which can benefit from the instantaneous, largely correct code generated by AI models, to organizations in need of marketing copy, the firm said.

“In short, any organization that needs to produce clear written materials potentially stands to benefit,” McKinsey said.

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While many have reacted to ChatGPT (and AI and machine learning more broadly) with fear, the firm said, machine learning “clearly has the potential for good.”

“In the years since its wide deployment, machine learning has demonstrated impact in a number of industries, accomplishing things like medical imaging analysis and high-resolution weather forecasts,” McKinsey said.

Analysts say that Microsoft is well-positioned in the generative-AI space, a kind of GenAI Knight, if you will. (Or maybe you won’t.)

Related: Analyst adjusts Nvidia stock rating on valuation

Last month, Tigress Financial analyst Ivan Feinseth told investors Microsoft was “increasingly positioned to lead the AI revolution” through the integration of generative-AI functionality throughout its software stack and products.

Analysts at Argus cited MSFT’s GenAI strength on July 9 when they raised the investment firm’s price target on Microsoft to $526 from $475 and affirmed a buy rating on the shares.

Microsoft put itself near the center of the generative AI platform transformation, with only hardware supplier Nvidia having a greater claim.

Argus says in a research note that the Redmond, Wash., company will continue to pursue long-term growth through its GenAI and cloud investment.

Microsoft is also among the few names offering a complete integrated product set aimed at enterprise efficiency, cloud transformation, collaboration, and business intelligence while maintaining a large and loyal customer base, a large cash cushion, and a rock-solid balance sheet, the firm added.

Related: Veteran fund manager sees world of pain coming for stocks

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