Source: PaxForex Premium Analytics Portal, Fundamental Insight
Microsoft's stock has surged by an impressive 40% year-to-date, largely fueled by its dominant position in the field of artificial intelligence (AI). Microsoft was an early investor in AI, affording it a significant head start over its rivals. Companies such as Amazon and Alphabet have been playing catch-up in the first half of the year, striving to match Microsoft's strides in the AI arena.
However, Microsoft also boasts a portfolio of high-performing productivity services that have garnered millions of users worldwide. The company's strong brand recognition and extensive user base position it as a potential go-to choice for anyone seeking AI services. Here are three key insights that savvy investors are aware of regarding Microsoft's current standing.
- Charting a Course Towards $10 Billion in AI Revenue
During the recent Goldman Sachs Communacopia & Technology Conference, Microsoft's Chief Financial Officer, Amy Hood, reaffirmed the company's ambitious projection: the AI division is poised to surge past the $10 billion revenue milestone at an unprecedented pace, eclipsing the achievements of all previous business endeavors.
Microsoft's strategic investment of $1 billion in the ChatGPT developer, OpenAI, in 2019, has proven instrumental in catalyzing its ascendancy in the AI realm. This partnership has granted Microsoft exclusive licenses to a multitude of OpenAI's AI models, serving as the catalyst for transformative enhancements across various in-house platforms. Notably, stalwarts like Word, Excel, Bing, and Azure have all undergone substantial AI-driven upgrades. Furthermore, Microsoft's subscription-based Microsoft 365 office suite is on the brink of introducing an array of AI-infused products, ushering in a new era of productivity.
AI's transformative potential extends its reach across a multitude of industries, spanning from education to healthcare, consumer goods, robotics, autonomous vehicles, and beyond. Yet, it is the tantalizing prospect of persuading businesses to integrate AI tools into their daily operations that appears to hold the greatest promise in the market's burgeoning landscape. In this realm, Microsoft stands as a formidable contender, poised for substantial gains.
With a commanding presence via its cloud platform, Azure, and an extensive arsenal of productivity tools, Microsoft is primed to emerge as the preferred destination for enterprises seeking AI services to supercharge their operational efficiency. The potent trifecta of iconic brands—Windows, Office, and Azure—may even bestow upon Microsoft an advantage in the market, eclipsing formidable rivals like Amazon in this transformative AI-driven landscape.
- Strategic Investment in the Semiconductor Arena
Microsoft is deeply entrenched in the world of semiconductor technology, as it lays a strong foundation for the long-term growth of the AI market. Recognizing the indispensable role of robust hardware in this industry, Microsoft has embarked on a steady journey of investments in various chip manufacturers, determined to inject vitality into an ecosystem predominantly dominated by Nvidia.
Earlier this year, a report from Bloomberg unveiled Microsoft's substantial financial and engineering support for Advanced Micro Devices' foray into AI chip expansion. Just this month, we witnessed another milestone, as the burgeoning chip startup, d-Matrix, secured an impressive $110 million in funding, with Microsoft featuring among its prominent backers.
As highlighted by Reuters, d-Matrix distinguishes itself from Nvidia by focusing on the "inference" facet of AI processing, avoiding direct competition in the realm of training large AI models. Microsoft's investment strategy here is a strategic diversification, aligning with a distinct segment of the chip market, separate from its engagements with AMD and Nvidia.
D-Matrix's revenue projection for 2023 hovers around $10 million, primarily stemming from customers procuring its chips for testing purposes. However, with the burgeoning demand for AI chips on the horizon, the company anticipates a substantial uptick, targeting annual revenues in the range of $70 million to $75 million within the next two years.
- Sustained Dividend Growth
In stark contrast to tech giants like Amazon and Alphabet, who have opted to forgo dividend offerings, Microsoft stands out as a dividend-friendly player, positioning itself at the upper echelons of the market. The company boasts a dividend yield of 0.81%, a notable figure when juxtaposed with Apple's 0.53%.
What truly underscores Microsoft's appeal to dividend-seeking investors is its consistent upward trajectory in dividend yield over the past decade. This remarkable journey has seen its cash dividend soar from $0.28 in 2013 to a commendable $0.68 this year. As Microsoft expands its foothold in the AI landscape, a domain projected to sustain a robust compound annual growth rate of 32% until 2030, the prospect of amplified earnings augments the potential for further dividend hikes.
While Microsoft's dividend yield may not rival that of industry peers like Verizon, which offers a substantial yield of approximately 7%, the company's unwavering commitment to growth cements its status as an attractive investment proposition, making its stock increasingly compelling at this juncture.
As long as the price is above 320.00, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 338.57
- Take Profit 1: 350.00
- Take Profit 2: 367.00
Alternative scenario:
If the level of 320.00 is broken-down, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 320.00
- Take Profit 1: 310.00
- Take Profit 2: 300.00
