Microsoft Rally in Trouble

Microsoft CEO Satya Nadella
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24/7 Insights

  • Microsoft Corp.’s (NASDAQ: MSFT) perceived lead in artificial intelligence may be slipping away.

Among the largest tech companies, Microsoft Corp. (NASDAQ: MSFT) has been viewed as the artificial intelligence (AI) leader because of its huge investment in OpenAI, totaling $15 billion over the past two years. This lets it flank rivals, particularly Alphabet, Amazon, and Apple. However, its stock price has stumbled in the past few months. It is now up 17% year to date, compared to an increase of 13% in the S&P 500. Inc. (NASDAQ: AMZN) is up 20% and Alphabet Inc. (NASDAQ: GOOGL) by 27%.

Microsoft’s primary trouble is its attempt to productize its AI advantage. Some of its work has caused privacy concerns. Image generation results have been weaker than expectations. Copyright legal challenges could be a long-term concern. The company pulled its AI Recall products. CNBC reported, “Industry experts have expressed concern over the potential for hackers to develop tools that can retrieve user information.”

In short, Microsoft’s head start, created by its early push into AI, has started to vanish.

Google’s AI products seem more mundane than Microsoft’s. However, they work. Google’s AI products focus on daily tasks. This included enhanced search results, text and speech translation, speech recognition convertible to text, and image enhancement. The most important of these short term may be better search results since search is a huge part of Google’s revenue.

Microsoft’s lead was supposed to leave Apple in the dust. The iPhone maker did not release any major iOS or hardware products based on AI—until last week. That impressed the market, and Apple Inc. (NASDAQ: AAPL) shares reached an all-time high.

Investors may think that Microsoft let its AI advantages slip away.

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