Jan 19, 2024

Microsoft will release its latest earnings next week, which will likely be the driver of tech stocks for the quarter. 


MSFT – Daily Chart

MSFT shares soared in 2023 from $219 to around $390 now. The support seen at $366 will provide support again. For traders, any negativity on AI adoption could see a sharp pullback. 

The year 2023 was full of AI hype that propelled tech stocks higher, but that now leaves them vulnerable. The life-changing predictions of ChatGPT and other tools have cooled down in recent months. That leaves tech stocks vulnerable. 

One of the critical drivers for Microsoft and the tech sector will be the company’s Copilot subscription. The tool was set to be a premium subscription for its 365 business productivity suite, and that will need to see a strong uptake in users. 

The big problem is that many companies were given lofty valuations for AI. However, much of that was driven by Nvidia. The company’s chips were in demand last year by companies seeking to test and build new AI tools. But they will still need to find a winning formula. The AI boom of last year is at risk in the coming earnings season. 

Traders will again focus on the growth of Microsoft’s cloud business as a vital component of the earnings. 

One analyst who is always bullish on tech is Dan Ives of Wedbush, who sees a positive outlook. 

“We believe the key narrative for 4Q earnings season is the beginning of the AI Revolution hitting the shores of the broader tech landscape”. 

Ives believes massive consumer spending and demand are pouring into AI’s second, third, and fourth derivatives across software, chips, and hardware. He says AI technology is gaining momentum in the mainstream, and he expects that to create further growth and new products. Ives added that a strong “year-end budget flush” will give cloud giants Microsoft, Amazon, and Google room to commit to further R&D or ventures.

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