Investors got a scare this week after softer-than-expected earnings from Meta cast some doubt on the staying power of the AI boom. But Thursday’s results from Microsoft (NASDAQ:MSFT) and Alphabet (NASDAQ:GOOGL) may have put those fears to rest. Both companies reported solid results, with the strength resting on their AI initiatives.
Generative AI technology has been generating headlines throughout the tech world since the introduction of ChatGPT in November of 2022. It’s found uses in a wide array of applications, including online advertising, internet search, digital assistants, cloud computing – it seems every day, there’s another use for AI.
The strength of AI, as a revenue and profit driver, and the demonstrated strength of Microsoft and Alphabet, both ‘Magnificent 7’ stocks, has caught the attention of some of Wall Street’s top analysts, pros who’ve built their reputations on the depth of their insights and the quality of their recommendations. And now, they’re recommending investors buy into these two mega-caps in the wake of the earnings reports. Let’s take a closer look at them, and at the analysts’ comments.
Microsoft
We’ll start with Microsoft, the largest publicly traded stock on Wall Street. Beyond its dominance in software and PCs, Microsoft has become a leading driver in the adoption of AI. The tech giant recognized the potential of AI early on and became an investor in OpenAI, the firm that developed and released ChatGPT. Starting in 2019, Microsoft has invested a total of $10 billion in the AI developer, an investment that has brought direct benefits to the software company.
Those benefits can be seen in some of Microsoft’s own recent releases. Microsoft has worked to integrate AI tech into its Bing search engine, in an effort to make it more competitive with Google. In addition, the latest releases of Windows and Office have included Copilot, Microsoft’s new AI-powered online assistant. These are impressive AI moves, but they are not the end. Microsoft has also been adding AI features to Azure, its cloud computing platform. Azure provides more than 200 cloud-based applications to its subscribers, and these software tools will soon add value with AI upgrades.
The value of AI to Microsoft can be seen in the company’s recent earnings report, for fiscal 3Q24. The company’s $61.9 billion in revenue was just over $1 billion more than the forecast – and was up 17% year-over-year. The…
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