{"id":40549,"date":"2023-07-26T03:03:50","date_gmt":"2023-07-26T07:03:50","guid":{"rendered":"https:\/\/ifintechworld.com\/investing\/opinion-microsofts-ai-payday-will-take-time-and-investors-need-to-be-patient\/"},"modified":"2023-07-26T03:03:53","modified_gmt":"2023-07-26T07:03:53","slug":"opinion-microsofts-ai-payday-will-take-time-and-investors-need-to-be-patient","status":"publish","type":"post","link":"https:\/\/ifintechworld.com\/?p=40549","title":{"rendered":"Opinion: Microsoft\u2019s AI payday will take time, and investors need to be patient"},"content":{"rendered":"
\n

Investors who may have gotten ahead of their skis on artificial intelligence heard some sobering words from Microsoft Corp. on Tuesday, as its top executives reminded them that the payoff from AI will take some time, while spending will increase.<\/p>\n

In after-hours trading, Microsoft\u2019s shares
\n MSFT,
\n +1.70%<\/bg-quote>
\n fell nearly 4% during the company\u2019s earnings call, as executives tried to tamp down Wall Street\u2019s overexuberant expectations for the software giant and its head start in AI. <\/p>\n

\n

\u201cEven with strong demand and a leadership position, growth from our AI services will be gradual as Azure AI scales\u201d and its Copilot product reaches general availability, Microsoft Chief Financial Officer Amy Hood told analysts.<\/p>\n

She also warned that the company\u2019s capital spending will rise, and increase \u201csequentially each quarter,\u201d while Microsoft continues to spend on building out more of its cloud and data-center infrastructure to support the compute-intensive technology.<\/p>\n

Also read: <\/strong>Despite hype, tech earnings still won\u2019t show many results from AI yet<\/p>\n

Microsoft is seen by investors as one of the tech companies poised to generate a lot of early revenue from its partnerships and products that are incorporating AI, and its shares have soared about 46% so far this year. The company first invested $1 billion in OpenAI, the creator of ChatGPT, in 2019, and increased its investment to an estimated $13 billion, according to news reports. <\/p>\n

Microsoft does expect to see some AI-based revenue in the second half of its fiscal year, from the most immediate Microsoft AI product that investors are excited about: its 365 Copilot software. Earlier this month, the company said 365 Copilot, an AI-powered tool for its Office suite, would cost $30 per user, per month, a price that one analyst suggested could be more expensive than the software suite itself. The 365 Copilot product is based on OpenAI\u2019s GPT-4, the large language model that is also the basis for ChatGPT. <\/p>\n

\u201cWhile there is massive opportunity, we wonder about adoption, especially with a price point of $30 per user for Microsoft 365 Copilot,\u201d Scott Kessler, an analyst at Third Bridge, said in a note to clients earlier this week. Another analyst had projected that the software could generate an incremental $9 billion in revenue in its first year, but he was expecting some revenue in the second half of 2023.<\/p>\n

Both Hood and Microsoft CEO Satya Nadella told analysts Tuesday that Copilot will also fuel more use of Azure, its cloud computing service. Hood forecast that Azure would grow at a rate of about 25% to 26% in the fiscal first quarter, a very slight decrease from fourth-quarter growth, in which cloud services revenue grew 26% to 27%.<\/p>\n

It\u2019s still \u201cearly innings of the cloud migration itself,\u201d Nadella said, \u201cso there\u2019s a lot there still. And then on top of that, there is this complete new world of AI driving a set of new workloads. And so we think of that again being pretty expansive from a TAM [total available market] opportunity.\u201d<\/p>\n

But even with Microsoft\u2019s early moves in AI, it\u2019s still going to take awhile before much of the big spending turns into a revenue generator. Investors need to re-adjust their thinking and instead plan for a longer-yeah term view, versus hopes for immediate payoffs from AI.<\/p>\n<\/p><\/div>\n<\/div>\n

Read the full article here<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"

Investors who may have gotten ahead of their skis on artificial intelligence heard some sobering words from Microsoft Corp. on Tuesday, as its top executives reminded them that the payoff from AI will take some time, while spending will increase. In after-hours trading, Microsoft\u2019s shares MSFT, +1.70% fell nearly 4% during the company\u2019s earnings call, […]<\/p>\n","protected":false},"author":1,"featured_media":40550,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"video","meta":{"footnotes":""},"categories":[239],"tags":[83],"class_list":["post-40549","post","type-post","status-publish","format-video","has-post-thumbnail","hentry","category-investing","tag-featured","post_format-post-format-video"],"yoast_head":"\nOpinion: Microsoft\u2019s AI payday will take time, and investors need to be patient | iFintechWorld<\/title>\n<meta name=\"description\" content=\"Investors who may have gotten ahead of their skis on artificial intelligence heard some sobering words from Microsoft Corp. on Tuesday, as its top\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" 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