Microsoft Corp. MSFT hit an all-time high on Nov 20 as it secures OpenAI co-founders Sam Altman and Greg Brockman to lead its new in-house advanced AI research team. This move comes after Microsoft emerged as the major beneficiary of upheaval at OpenAI, ensuring the retention of "the golden child of AI" within its ranks.
Microsoft Hires Altman
The hiring of Altman and other key staff from OpenAI prevents potential defections to rival tech companies and strengthens Microsoft's position in the AI race against Alphabet’s Google GOOGL. As a result, Microsoft's shares rose by approximately 2%.
Analysts see this as a significant win for Microsoft, reducing concerns about OpenAI's leadership change and reaffirming its partnership with the company. While OpenAI replaced Altman with Emmett Shear, former CEO of Twitch, the risk of "brain drain" is largely contained with Altman and his team at Microsoft, according to analysts, as quoted on Bloomberg.
This development contributes to the overall positive performance of technology stocks in recent weeks, bringing both Apple and Microsoft closer to the $3 trillion market capitalization mark.
Billionaires Bullish on Microsoft
The recent 13-F filings of billionaires revealed that several iconic investors like David Tepper, Stanley Druckenmiller, Jim Simons and Frank M. Sands are bullish on Microsoft due to its proficiency in the AI field. Microsoft’s association with ChatGPT-famed OpenAI has made the former a key AI player (read: Billionaires Bullish on Big Tech: ETFs in Focus).
Microsoft’s Ignite Conference
Microsoft at its annual Microsoft Ignite conference announced Maia 100, its first homegrown artificial intelligence (AI) chip. It is a custom-designed chip optimized for AI tasks and generative AI. The company says that Maia represents a key component in Microsoft’s strategy to develop a vertically integrated approach to its infrastructure, in order to optimize performance and efficiency for its cloud and AI workloads, per financial express.
Microsoft’s Upbeat Earnings
Microsoft’s robust first-quarter fiscal 2024 results also bolstered investors' optimism in the company’s growth prospects. The world's largest software maker reported the strongest sales increase in six quarters, helped by higher demand for its cloud computing services amid growing enthusiasm about artificial intelligence. Microsoft is optimistic about the long-term prospects of its Azure business, as it expects revenues in this segment to continue its acceleration in the rest of the fiscal year (read: ETFs to Buy on Solid AI-Fueled Microsoft Q1 Earnings).
More Upside in the Cards?
Microsoft currently has an average brokerage recommendation (ABR) of 1.24 on a scale of 1 to 5 (Strong Buy to Strong Sell), calculated based on the actual recommendations (Buy, Hold, Sell etc.) made by 37 brokerage firms. The current ABR compares to an ABR of 1.30 a month ago based on 37 recommendations.
Of the 37 recommendations deriving the current ABR, 31 are Strong Buy and three are Buy. Strong Buy and Buy respectively account for 83.78% and 8.11% of all recommendations. A month ago, Strong Buy made up 81.08%, while Buy represented 8.11%.
Based on short-term price targets offered by 35 analysts, the average price target for Microsoft comes to $394.92. The forecasts range from a low of $232.00 to a high of $450.00. The average price target represents an increase of 4.63% from the last closing price of $377.44. However, the Open-AI drama may boost the target price even more, in the coming days.
ETFs to Tap
Against this backdrop, investors can play Microsoft-heavy ETFs like Select Sector SPDR Technology ETF XLK, MSCI Information Technology Index ETF FTEC, iShares Global Tech ETF IXN, Vanguard Information Technology ETF VGT and iShares U.S. Technology ETF IYW.
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