Microsoft’s stock soars to all-time high as its leaders project $10 billion in AI revenue.

Microsoft shares experienced a breakthrough on Thursday as JPMorgan Chase analysts highlighted the software giant’s significant potential for growth in the field of artificial intelligence.

The stock reached a new all-time high of $348.10, rising 3.2% and surpassing the previous record set in November 2021, the same month the Nasdaq composite index reached its peak. The market experienced a widespread rally following the Federal Reserve’s announcement the previous day that it would keep interest rates steady.

Throughout the year, artificial intelligence (AI) has been an increasingly popular topic of discussion, especially after the release of the viral ChatGPT chatbot developed by OpenAI, a company supported by Microsoft. Technology companies have been quick to integrate AI into their products and features, emphasizing its potential for cost savings, particularly in light of ongoing recession concerns.

Microsoft is poised to benefit greatly from the success of ChatGPT and related products. In addition to making substantial investments in OpenAI, the company also provides the necessary computing power. Furthermore, Microsoft holds an exclusive license for OpenAI’s models, including the GPT-4 large language model, which can generate human-like responses to textual input.

These OpenAI tools have been integrated into Microsoft’s Bing search engine and the Windows operating system. During a special event in February to announce the Bing Chatbot, Microsoft CEO Satya Nadella expressed his excitement about the current state of technology.

Investors are eager to see how these developments will impact Microsoft’s earnings and revenue.

Earlier in April, Microsoft’s Chief Financial Officer Amy Hood predicted a fourth-quarter growth of 26% to 27% year over year in constant currency for the Azure cloud, with AI services contributing 1 percentage point of that growth. During a public discussion with Microsoft’s Chief Technology Officer Kevin Scott, Hood elaborated further, stating that “the next generation AI business will become the fastest-growing $10 billion segment in our company’s history.”

Over the past four quarters, Microsoft has generated a total revenue of nearly $208 billion.

Scott provided further insight into Hood’s prediction, saying, “Given its versatile nature, we expect the $10 billion annual recurring revenue (ARR) to manifest in various ways. Organizations can utilize our infrastructure for training their own models, running open-source models, or making API calls to our cutting-edge models developed in partnership with OpenAI.”

In response to these positive developments, JPMorgan analysts raised their price target for Microsoft stock from $315 to $350.

Above all, the analysts wrote, “While Microsoft continues to face challenges in the cloud market, the company is strategically positioning itself for success in fields such as Security, Teams, Power Apps, and its forward-looking investments in OpenAI/ChatGPT.” The analysts maintained a buy rating for Microsoft stock.

With a 46% increase in share price this year, Microsoft has fully recovered from its losses in 2022 when investors anticipated rising interest rates and economic headwinds, leading to a rotation out of technology stocks. Negative sentiment surrounding cloud growth and a shrinking PC market had also contributed to pessimism on Wall Street. However, with the renewed optimism surrounding AI and cost-cutting measures implemented by tech companies, market sentiment has significantly improved. The Nasdaq composite index has surged 32% this year, outperforming the S&P 500.

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