Microsoft reached a historic market valuation of three trillion dollars this Wednesday, an example of how business expectations generated by artificial intelligence (AI) have driven the software giant's inexorable advance. In line with the rest of the so-called Magnificent Seven (the big tech companies), Microsoft shares rose 1.6% to $405.13 per share, giving it a market capitalization of just over $3 billion.
This record solidifies Microsoft's status as one of the largest publicly traded securities. The shares of Microsoft and Apple have been fighting for the top spot as the highest capitalized stock on Wall Street since the beginning of the year, and in fact the iPhone maker, which was the first company to reach a capitalization of three trillion dollars last year, briefly lost out in early January his crown to the software giant. In a never-ending battle, Microsoft soon placed itself below the iPhone maker in value again, and the two have swapped places ever since. Apple currently has a market valuation of $3.03 trillion.
The software manufacturer belongs to the select technology club that drove the market upswing in 2023 with an increase of around 57%. The progress continues this year, with the 7.7% gain outpacing the 4.9% gain for the Nasdaq 100 index. Microsoft accounts for 7.3% of the S&P 500 index, which closed last week with its best numbers in two years.
Much of the increase can be attributed to investor enthusiasm for artificial intelligence and its potential to accelerate profit and revenue growth. Backed by its investment in OpenAI, maker of ChatGPT, Microsoft is seen as the favorite to dominate the generative artificial intelligence (AI) market ahead of other tech heavyweights such as Alphabet, owner of Google; Amazon, Oracle and Meta, the parent company of Facebook.
Using OpenAI, Microsoft has launched new versions of its core productivity software products as well as its Bing search engine, which is expected to better compete with Google's dominant search offering. Microsoft, through its partnership with OpenAI, is one of the biggest beneficiaries of this commitment to AI and already offers its customers services generated or powered by AI.
Demand for these services, along with support for cloud computing, is expected to support Microsoft's long-term growth trends. Ahead of second-quarter results due later this month, revenue is expected to grow 15% in fiscal 2024, faster than the technology sector as a whole, according to Bloomberg Intelligence calculations.
Microsoft's exponential growth has made the Satya Nadella-led company one of the most popular stocks on Wall Street. More than 90% of analysts surveyed by Bloomberg recommend buying shares, and the experts' average price target suggests an upside potential of about 7% from current levels.
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