On Wednesday, several major US tech companies experienced a decline in their stock prices due to the impact of Microsoft’s recent results. These results highlighted the intense competition for AI dominance, which has driven these tech giants’ share prices up in recent months, fueled by the excitement surrounding AI technology.
During early trading, Microsoft’s shares plummeted by 3.6 percent after the company revealed its ambitious plans for AI-related investments. Microsoft emphasized the necessity of making substantial AI investments before reaping significant bottom-line benefits. As a consequence of this decline, Microsoft’s market capitalization is expected to decrease by approximately $100 billion (approximately Rs. 8,20,100 crore) if these losses persist until the end of the trading day. Prior to this setback, the company’s shares had experienced a remarkable increase of 46.4 percent leading up to the previous day’s market close.
With the increasing integration of AI in its product lineup, Microsoft has demonstrated its prowess in capitalizing on the potential of this transformative technology. From AI-driven cloud solutions to sophisticated machine learning algorithms, Microsoft’s strategic investments in AI have yielded impressive results.
AI will generate a lot of revenue and earnings for such firms, but a lot of investors have been buying the rumor and now that we have earnings, they are taking profits. There’s still a lot of excitement around AI, but nobody quite understands what that means for the bottom line of many of these companies.
Paul Nolte, senior wealth advisor and market strategist for Murphy & Sylvest said.
Microsoft’s groundbreaking achievements in the realm of AI have caught the attention of other tech giants like Google, Apple, Amazon, Wipro and Facebook. These companies have also been investing heavily in AI research and applications. Google-parent Alphabet was an outlier. Its shares rose 5.6 percent after the company beat expectations for second-quarter results. Alphabet looks set to add about $100 billion to its market capitalization. The recent rally has driven up Microsoft’s valuation. The stock is trading at 31 times 12-month forward earnings, compared to a PE multiple of 20 for Alphabet.