Microsoft has crossed the $3 trillion valuation threshold thanks in no small part to investors buying into the company’s AI vision.
The only other business to have achieved this market capitalization is Apple.
However, Microsoft’s big bet on AI is set to be tested in the coming months as customers get to grips with its AI-infused products, including cloud-based tool Copilot.
CEO Satya Nadella is rightly being lauded for Microsoft’s achievement, yet the Windows-maker has made some significant missteps along the way. For example, its disastrous foray into Windows Phone, and then the company’s experiment with foldable Surface devices running Android.
And who can forget Windows 8?
Microsoft’s revenues have soared in the decade since, reaching today’s valuation in part due to the company going all-in on AI. Redmond has put billions into OpenAI and, at least as far as the stock price is concerned, is reaping the rewards.
The company’s share price has soared from $246.27 on March 1, 2023 to $404.64 today – that’s a 65 percent uplift in less than twleve months. Who says AI hype doesn’t pay?
The megacorp has also wielded the ax, which tends to please investors, and it has made some savage job cuts in the past year.
Several observers worry the valuation raises troubling questions about the direction of the tech sector in 2024.
Mark Boost, CEO of Civo, said of Microsoft: “Its AI-first strategy, built on Azure, is founded on shaky ground. Hyperscalers have leveraged their dominance to overcharge and under-deliver for customers.”
Microsoft’s AI technology has not been universally welcomed by customers. While the more mature GitHub Copilot is a useful tool for developers – as long as users understands its limitations and benefits – the addition of Copilot to the company’s productivity cash cow, Microsoft 365, has been met with indifference in some quarters.
Performance issues have caused headaches for Copilot Pro but, more seriously, many users appear unable to discern the benefits of the technology, particularly for the price Microsoft wishes to charge. $30 per user per month is an awful lot for something that might not have an immediate benefit.
Takeshi Numoto, Microsoft Vice President and Chief Marketing Officer, who replaced Chris Capossela in 2023, will have his work cut out persuading customers to buy into Microsoft’s AI vision to justify the company’s $3 trillion valuation.
Numoto is not alone. In its most recent set of results, IBM boss Arvind Krishna waxed lyrical about AI and customer demand, although it was difficult to avoid the fact that, according to the published figures, AI was a blip in the company’s revenues.
So 2024 is going to be an important year for AI. Microsoft’s record valuation and the words from IBM’s CEO clearly indicate the high hopes the industry has for the technology. The financial results over the next 12 months will be a clear indicator of whether those hopes are shared by the people paying the bills. ®
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- Source: https://go.theregister.com/feed/www.theregister.com/2024/01/25/microsoft_valuation_3_trillion/
