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Microsoft’s AI Power Play: Shocking Leadership Change Sparks Stock Speculation

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Sam Altman’s removal from OpenAI’s CEO spot stunned the tech world, thrusting him into the lead role of Microsoft’s MSFT “advanced AI research team”.  Altman, co-founder of OpenAI, and Greg Brockman, the company’s ousted president, are set to join Microsoft after a contentious upheaval at OpenAI.

OpenAI, known for the popular AI application ChatGPT, is highly regarded in the AI space.

The influx of top talent from OpenAI to Microsoft could give the tech giant an edge in the enterprise AI landscape, intensifying competition with Amazon AMZN and Alphabet GOOGL. Investors are left pondering whether now is the time to acquire MSFT shares.

Microsoft’s AI Dominance

As the largest OpenAI shareholder, Microsoft’s ties run deep, investing $1 billion in the company in 2019 and providing exclusive cloud services to OpenAI.

Microsoft’s AI integration spans across various products, with its stock surging 58% this year. The software giant holds the top position in enterprise AI, while Alphabet dominates the consumer sphere and Amazon also vies for a piece of the pie.

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Image Source: Zacks Investment Research

Growth & Valuation

Microsoft’s projected annual earnings are set to rise by 13% in its current fiscal year and an additional 14% in the following year, reaching $12.71 per share. Total sales are expected to climb by 14% and 13% in fiscal years 2024 and 2025, amounting to $274.82 billion.

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Image Source: Zacks Investment Research

Microsoft’s stock trades at 33.2X forward earnings, commanding a premium over the S&P 500. However, it holds a slight discount compared to the Zacks Computer-Software Industry average of 36.3X, cementing its position as the leader in the field.

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Image Source: Zacks Investment Research

On the price-to-sales front, Microsoft’s P/S ratio of 11.3X surpasses the benchmark and its industry average.

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Image Source: Zacks Investment Research

Summing Up

Microsoft’s stock surged 2% following the news of Altman spearheading its AI research team, yet the valuation suggests potential buying opportunities ahead. Presently, Microsoft’s stock holds a Zacks Rank #3 (Hold).

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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