Microsoft’s $10B AI Bet: Stock Up 10%

At the beginning of the year 2024, there was a rapid rise in Microsoft’s stock price after the technology company invested $10 billion in OpenAI, a revolutionary company operating in the field of artificial intelligence (AI). The investment was based on OpenAI’s valuation and was meant to help Microsoft uplift its position in the increasingly dynamic AI market. Microsoft aimed to improve its ranking by offering innovative solutions, and thus, its Azure cloud services would be benefited to compete with the leader Amazon’s AWS in the market.

First off, Microsoft stock’s value visibly grew. Therefore, the company has been able to stay ahead of the overall market, at least during the initial half of the year. But by 2024, it began to underperform, as it rose by only 10%, which is small versus the broader market’s increase of 20%. The question is: why hasn’t Microsoft stock performed well despite its substantial AI investment?

Rising Competition: Microsoft’s $10B AI Bet Faces Investor Doubts

The idea that Microsoft’s $10 billion investment in OpenAI may have been premature has been entertained by an increasing number of investors. Instead of Microsoft’s original assumption that it would be the leader in the AI space and, therefore, more competitive, other companies like Alphabet and Amazon seem to be outpacing it. The latter example involves the displaying and modifying of data, such as the release of new sales reports or the reproduction of media files through Gemini AI’s link to the search engine results.

Amazon and Apple have also added AI characteristics to their iOS and AWS services, respectively. With these transformations, the risk exists that Microsoft’s head start in AI may be diminishing or even that it never existed.

In addition, the AI market’s low entry barriers—where companies with deep pockets can easily enter the space—raise questions about whether the investment Microsoft has made in these technologies will deliver the expected returns. This perceived risk is what is causing Microsoft’s share price to plummet, as investors fear the AI feature will only reflect positively upon the company several years from now.

Microsoft Stock Chart Analysis

MSFT/USD Stock Chart

We’ve been closely watching Microsoft Corp. (MSFT) shares, and the recent price action indicates a downward trend that has been consistent over the last few days. The stock opened at $417.05, and climbed to a $417.60 maximum point. However, shortly after that, they fell back. Finally, the day ended with a $416.01 close, a 0.25% decrease or $1.06 less than the completion day allocated.

From the chart, we notice that MSFT has been unable to break the $420 level, and their resistance is very strong. Since October 2, there have been descending highs and lows, suggesting a bearish trend. Although there are some times when the market goes up, the general market sentiment looks bearish and gives no room for optimism as volumes weaken and buyers simply aren’t in the game.

In the pre-market, the stock fell to $414.45, indicating further downside pressure could ensue. In case MSFT breaks through the $414 level, we might be in for more cutbacks. Alternatively, if the stock stands at this level, we could expect a recovery back to the $418-$420 interval. As we go forward, It’s crucial to take earnings reports into account.

For potential investors, now might be a good time to watch out for a buying opportunity, in particular, with the likely positive behaviour of Microsoft in the area of AI and the market uncertainties. Stay updated with all the details and be ready to modify your portfolio as necessary!

The post Microsoft Stock: $10B AI Gamble Stalls After 10% Surge appeared first on FinanceBrokerage.