Microsoft’s collaboration with OpenAI, the company behind ChatGPT, has sparked a fresh round of AI innovation.
The sector is already undergoing a shakeup. Google’s search monopoly is under hitting due to Microsoft’s integration of OpenAI with its Bing browser. Additionally, Microsoft’s Bing appears to have greater legitimacy now that ChatGPT has become so popular.
Because of this, experts were cautiously upbeat about Microsoft’s investment in AI; the company’s quarterly earnings report, which was announced on Tuesday, revealed that the investment is already beginning to pay off.
Microsoft’s CFO Amy Hood stated during a conference call with investors that the company anticipates revenue growth at its cloud subsidiary, Azure, to be between 26% and 27% over the same quarter last year, with roughly 1 point from the AI services.
Analysts interpreted that as evidence that Microsoft’s significant investment in AI is already paying off financially. And that’s a hint that growth will continue to increase.
The need for AI, especially after the GPT announcements, will be a major driver of Azure, according to Bernstein analyst Mark Moerdler, who said that while AI has been a part of the Azure story for years, it has already generated 1% incremental growth.
Analysts interpreted that as evidence that Microsoft’s significant investment in AI is already paying off financially. And that’s a hint that growth will continue to increase.
The need for AI, especially after the GPT announcements, will be a major driver of Azure, according to Bernstein analyst Mark Moerdler, who said that while AI has been a part of the Azure story for years, it has already generated 1% incremental growth.
This, he continued, is a sign that Microsoft may be surpassing Google in the field of artificial intelligence, and that Azure may be on track to overtake Amazon Web Services, or AWS, as a larger and significant hyperscale supplier.
And investors appeared to like what they heard, pushing up the price of Microsoft stock by more than 7% on Wednesday. It has increased by more than 23% so far this year, versus a 6% increase for the whole market.
Microsoft CEO Satya Nadella made it clear on a call with analysts on Tuesday that increasing the company’s market share and investing in the “new wave” of AI were his main priorities.
Given that Microsoft made a $10 billion investment in the business earlier this year, a number of observers questioned the value that the OpenAI alliance is bringing to the organization.
Nadella claimed that the company’s efforts in AI are generating new revenue streams through new engagements with consumers. That appeared to be a positive indication to analysts, who stated that Microsoft is on the right route for monetizing its AI efforts.
Rishi Jaluria of RBC wrote in a note to clients, While the AI platform transition is early on and monetization is still emerging, management sounded as enthusiastic as you’d anticipate on the market opportunity.
Alex Zukin from Wolfe Research agreed and said that they believe the OpenAI masterstroke is generating not only major innovation inside the portfolio (Copilot & Teams Premium), but also as a way to drive new workloads.
In the end, according to Wedbush analyst Dan Ives, the AI story is still in its infancy, but Microsoft is taking the lead in this technological AI arms race.
