Will Microsoft succeed in the next step?
WWhen it comes to searching the internet, there is no getting past Google. The American technology group wants this fact – something that has seemed to be cast in cement for a long time Microsoft now seem to falter. And this of all things with his search engine Bing, which is anything but highly regarded in the tech world and beyond. This coup should succeed, among other things, thanks to the help of artificial intelligence (AI) and a deal worth billions.
The chatbot software ChatGPT simulates a conversation with a human. She can answer questions like a human would. If not even “better”. It is also possible to create texts. The integration of ChatGPT could help Bing to break through. A possible entry by Microsoft into the company OpenAI on a large scale should therefore not come as a surprise.
Elon Musk is also back
The company co-founded by Tesla boss Elon Musk and specializing in AI is responsible for ChatGPT. The tech portal Semafor recently reported that Microsoft would like to invest 10 billion dollars in OpenAI, which would lead to a company valuation of around 29 billion dollars. In the long term, Microsoft is planning a 49 percent share in OpenAI.
It is precisely such news that Microsoft can use at the moment. Because the software company has suffered from the negative mood surrounding technology and growth stocks in recent months. This, in turn, was due to high interest rates, the inflationary environment and the gloomy economic outlook. This mood was noticeable, for example, in a weakening PC market and a dwindling buying mood among consumers. Even in the cloud division, which has been very successful for a long time, Microsoft has recently had to hear some negative tones.
Microsoft analysts convinced
Microsoft’s share price has come off the highs sharply, which could present investors with a good buy into a quality stock — especially since many analysts remain confident in Microsoft’s prospects. In the UBS Microsoft, for example, is one of the “Top Picks”. This means that, according to the Swiss market experts, Microsoft is best positioned in its industry (in this case the information technology segment) to outperform industry-wide over a 12-month time horizon.
The UBS analysts like the fact that Microsoft has developed into a leading provider in the areas of public and hybrid clouds in recent years. Large and small companies, but also public authorities, depend on the company’s services in this area. Overall, the group can come up with an attractive mix of growth through the cloud business and defensive properties. Recurring revenues, high cash flows and returns would ensure the latter.
New growth story for established business model
Other analyst firms also see Microsoft as a stock worth buying in the current situation. While UBS sees the price target at $250, RBC Capital and Jefferies expect prices of up to $285. At the current prices, this may not be too much price potential for a tech stock. But if you look at Microsoft’s historical chart, you can see that long-term investors have done well with the stock over the past decade. Over the decade, a Microsoft investment of 10,000 euros turned into a position in the portfolio of more than 104,000 euros. In view of such data, it should not bother an investor so much that the shares of the group, which is still operating successfully, recently marked a 12-month low.
The negative sentiment towards technology stocks in general and Microsoft in particular over the past year may soon reverse given the latest news flow. Should Microsoft actually succeed in changing the world of Internet search engines in the long term, there will be movement in a tech area that has so far been Google is dominated. Microsoft would finally have a new growth story to offer alongside its established business model. However, established Internet giants such as Yahoo! or Lycos – back then, the winner was Google.