On Thursday Eastern Time, Microsoft shares closed up 3.19% at $348.10, reaching a record high. This makes Microsoft the third major tech company, following NVIDIA and Apple, to achieve a new market capitalization high this year, with an estimated total value of $2.6 trillion. To date, Microsoft's shares have surged 45% this year, adding about $800.6 billion to its market cap.
This week, Microsoft CFO Amy Hood projected that the company could garner over $10 billion in annual revenue from developers of its Azure cloud or OpenAI model in the field of artificial intelligence. Hood previously estimated that Microsoft's Azure cloud business would grow 26% to 27% year-over-year in the fourth quarter, with 1% coming from AI services. She mentioned that the next-generation AI business would be the fastest to reach $10 billion in the company's history. In the past year, Microsoft generated nearly $208 billion in total revenue.
Currently, Microsoft is striving to introduce generative AI capabilities into its product and service suites to thoroughly revamp its entire Office product lineup, including Excel, PowerPoint, Outlook, and Word. This aligns with Microsoft's long-standing focus on technological implementation. CEO Satya Nadella emphasized that hyping technology for the sake of technology is meaningless; these technological transformations are useful only when they make a difference in the real world.
JPMorgan analysts raised Microsoft's target price from $315 to $350. The analysts noted, "Despite the ongoing slowdown in cloud business growth, similar to many cloud vendors, we believe it has sown the seeds for long-term success in security and forward-looking OpenAI/ChatGPT investments."
As the largest shareholder, biggest funder, and key tech partner of OpenAI, Microsoft announced in January that it would invest an additional $10 billion in OpenAI. In many respects, Microsoft now has a responsibility to turn the hype surrounding ChatGPT into a profitable business. While OpenAI is undeniably one of Silicon Valley's hottest startups right now, it also resembles one of Microsoft's most promising subsidiaries.
Analyst Kirk Materne from Evercore ISI projected that Microsoft's office application Copilots could be priced at $10 per month, which could translate into an additional annual revenue of up to $48 billion in the next four years. Materne estimates that by 2027, the revenue generated from OpenAI-supported features could reach $99 billion.
Microsoft has shaken the established power structure that Silicon Valley formed over the past decade or so, drawing not only investors' attention back to itself but also sparking a chase from erstwhile leading competitor Google. Kim Forrest, the Chief Investment Officer and founder of investment firm Bokeh Capital Partners, stated that Microsoft is the undisputed leader in the AI field, having entirely surpassed Google.
As the market's enthusiasm for AI continues to surge, tech stocks have had a great start this year. A slew of investors have directed their funds towards stocks that could benefit most from the AI revolution. Chip giant NVIDIA has been the biggest beneficiary, with its share price soaring 192% this year, making it the best-performing stock in the S&P 500 index.
