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Microsoft (MSFT) Was The AI Darling, But A Lot Has Happened and It Lost The Lead To Musk and Others

Austin Smith

Published: December 19, 2024 10:38 am

Key Points:

• Supported by its investment in OpenAI, Microsoft’s (NASDAQ: MSFT) early lead in artificial intelligence is facing challenges from increasing competition
• Rivals such as Elon Musk’s xAI and other worldwide AI startups are quickly advancing and therefore challenging Microsoft’s apparent hegemony in the artificial intelligence market.
• Rising questions about Microsoft’s near-term future, its growth challenges— compounded by rising Azure expenses and losing competitive advantages in cloud and software—have left it behind other mega-cap tech peers.
• While Microsoft may be on shaky footing, The Next Nvidia stocks are soaring. Learn more about the next AI stocks that could go parabolic.

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Transcript:

[00:00:00] Douglas McIntyre: So let’s let’s look at Microsoft. Microsoft stock has not done well compared to the other mega tech companies Apple has had a big surge. So,

[00:00:11] Douglas McIntyre: you

[00:00:11] Douglas McIntyre: they can claim they’re doing well Here’s what worries me if I’m a Microsoft shareholder. It looked like they were the hands down winner AI, when they cut the open AI deal.

[00:00:24] Douglas McIntyre: Several things have happened since then. One, it appears that there’s a falling out between Microsoft and open AI. I thought that open AI would never use anything other than Microsoft products and that Microsoft would never do business with any other, you know, major aI company except open AI. not true. And now open AI has a whole bunch of competitors that are chasing it.

[00:00:51] Douglas McIntyre: ,

[00:00:51] Douglas McIntyre: I think are really nipping at its heels. I mean, Musk has put I don’t even want to think about how much money Musk has put into XAI. He has the largest AI data center in the world in Tennessee.

[00:01:06] Douglas McIntyre: huge.

[00:01:07] Douglas McIntyre: He just did a round values, uh, the company at $50 billion There are another or six, uh, companies that have, are venture capital funded in the United States. And now, you know, Russia, China, you keep getting, hearing these, these stories in the press all the time about, Um, what people are what’s getting done, particularly in China and, big players, ByteDance, who you mentioned, I mean, a lot those companies have decided they’ve basically got the technical know how to move into these businesses.

[00:01:47] Douglas McIntyre: And so much, um, of the code that’s available for, uh, AI is available. I mean, it’s, you know, it’s, it’s

[00:01:58] Lee Jackson: it’s not a secret,

[00:01:59] Douglas McIntyre: right. Or you don’t either, in some cases, you don’t even have to license it. I think, I think that Microsoft. Made a bad investment with open AI. I think that they pay too much. They bought too much of it. It was the falling out was almost immediate. And then the amount of money that they’re spending on it to get it into Azure and all the other products they’ve got.

[00:02:25] Douglas McIntyre: If a company that’s getting out over at skis. It’s Microsoft. Microsoft is out on

[00:02:32] Lee Jackson: could very well be on to something because remember, and I could be wrong about this, but didn’t Altman leave, go to Microsoft, and then leave Microsoft and quickly go back to OpenAI? I mean, he didn’t stay too long. And, um, yeah, I mean, they keep saying that there, there are a non, there are a nonprofit entity and all of that’s nonprofit.

[00:02:58] Lee Jackson: Well then where’s the money going to continue to come from?

[00:03:01] Douglas McIntyre: Well, listen, they’ve been able, they’ve been able to raise money without being a for profit company. But I think the theory there is among the venture capitalists that that will change. Now there’s some risk. There’s always a chance that. You know, it won’t happen, but that’s obviously the bet.

[00:03:18] Douglas McIntyre: But if, if you’re looking at Microsoft right now, I know it’s sort of inexpensive compared to the other, uh, mega techs that have gone up this year, but I would be cautious if I’m looking at Microsoft right now, that, it’s AI play will look less and less intelligent over the next couple of years.

[00:03:41] Lee Jackson: Yeah, and it’s, you know, it’s been two years since all that came out and, you know, that’s a lot of water under the Wall Street bridge on any given, uh, new product, new design, new path forward, and, um, You know, I mean, they were smart to make us who are such a big part of their business because for years they dominated AWS just in new accounts because they were undercutting AWS and everybody, but they can’t do that anymore because they’re, you know, their cost of doing business went up as they, Scaled out and you just can’t keep offering such a lower price that you’re not making any money yourself.

[00:04:24] Lee Jackson: So Where’s it going to come from because it’s not going to be any sort of new you know operating system or software or something like that because the That’s nothing. So yeah, I think you’re right. I think, you know, it had a really good run that started in about this time in in September or November in the fall of 22 and had a good year, but boy, it is, it has kind of slowed down compared to the other big tech competition.

[00:04:54] Douglas McIntyre: I don’t like it. I don’t Microsoft now.

[00:04:57] Lee Jackson: Yeah. I’d sell too.