Sep 11, 2023

Microsoft has experienced a three-day price rebound following a recent downtrend, and is now seeking to break through resistance.

MSFT Weekly Chart

MSFT: Weekly Chart

Microsoft’s stock price is currently trading at $334.27, down from its recent high of $370.

The price action of the stock is significant because it has been a beneficiary of the hype surrounding AI this year, which some are beginning to doubt.

“We are still in the relatively early stages” of a new tech cycle, said Jay Jacobs, BlackRock US Head of Thematic and Active Equity ETFs.

Jacobs said, “This is a $15 to $20 trillion theme over the coming decades. This is going to massively upend several aspects of the economy. Not just technology, but if we look at health care, if we look at services, if we look at productivity, it’s going to have a really incredible impact.”

In a recent report titled “Why AI is not a bubble?”, a Goldman Sachs analyst argues that there is no evidence that the AI trend is about to burst, stating that “we believe we are still in the relatively early stages of a new technology cycle that is likely to lead to further outperformance.”

“The big takeaway here is that most of the AI stock market moves this year have been really concentrated in just a few names, some of these mega-cap tech names that, to be fair, are massive platforms and really some of the pioneers in the space,” Jacobs said.

Following the initial hype and subsequent adjustments to market valuations, some companies are having difficulty achieving gains. Shares in C3.ai dropped on Thursday after the software developer lowered its goal of becoming a profitable company by the fourth quarter of this fiscal year, citing growing investments in artificial intelligence.

“Q1 results do not suggest that C3 is benefiting from growing demand for AI. Metrics such as average total contract value and a largely unchanged fiscal 2024 revenue outlook do not point to any meaningful AI tailwinds either,” BofA’s Brad Sills said to clients.

In a note to clients, Brad Zelnick of Deutsche Bank said, “C3.ai’s fiscal Q1 results are unlikely to allay concerns about customer traction and commitments, the path to profitability, steady-state margins of the business excluding Baker Hughes, and the level of generative AI monetization on its platform relative to management’s very bullish commentary.”

Analysts are also looking for signs of earnings traction beyond chipmakers like Nvidia in the early stages for the likes of Microsoft.

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