As ChatGPT continues to create headlines by surpassing 100 million members in just over two months, investors are frantically buying any equities related to artificial intelligence (A.I.).
Enterprise A.I. platform C3.ai Inc. (NASDAQ: AI), robotic and business process automation A.I. platform UiPath Inc. (NASDAQ: PATH), AI-powered search platform Yext Inc. (NASDAQ: YEXT), AI-powered loan underwriter Upstart Holdings Inc. (NASDAQ: UPST), and A.I. chip maker NVIDIA Co. (NASDAQ: NVDA) are among the notable movers.
Anyone looking to make a direct investment in OpenAI, the creator of ChatGPT, will need more than luck The next best thing is to buy stock in a firm that has already invested and is integrating its capabilities into its apps with the world’s largest user base. This is Microsoft (NYSE: MSFT), the software giant. Furthermore, Microsoft may acquire a 49% share in OpenAI, the originator of ChatGPT.
OpenAI Investment
According to Fortune Magazine, Microsoft is negotiating terms for a $10 billion further investment in OpenAI. According to a copy of the term sheet obtained by a reporter, Microsoft will keep 75% of OpenAI’s income until its $10 billion investment is repaid. The corporation will thereafter revert to a 49% ownership position.
Other investors and founders are said to own the balance of the corporation. This is to prevent Microsoft from meddling with any company decisions.
Many people are resonating with Generative AI ChatGPT because it is a generative A.I. breakthrough. This sort of AI creates new content such as text, images, sounds, and music based on data that it has been “trained” on. In contrast to a search engine, which pulls existing content, GAI creates new content.
Unsupervised GAI means that the platform can learn patterns and create content without being explicitly informed on how to do so. Users can provide more information to create more specific results. GAI can be used to generate articles, blogs, songs, art, stories, and many other things.
ChatGPT Monetization and Integration
OpenAI announced the launch of a $20 per month ChatGPT Premium subscription, which will provide priority access and faster response times. It will shortly distribute invitations to existing users. With an estimated 100 million global users, it is impossible to predict how much revenue they will create. While they swiftly found a way to monetize ChatGPT, keep in mind that it has been in development for over a decade.
OpenAI earns money by licensing its models at various price points, with paid tiers for increased usage and capabilities. Developers can receive an API key to gain access to OpenAI’s models in order to create AI applications.
Microsoft is also incorporating ChatGPT into its Teams Previous work collaboration program, which will cost $10 per month after the $7 promotional offer expires in June 2023.
AI-generated intelligent summaries and notes, customized timelines, over 40 real-time live language translations, virtual appointments, and other features have been added to the premium service. It also intends to include the GPT-3.5 artificial intelligence language model in its Bing search engine.
How is the Rest of the Company Doing?
On January 24, 2023, Microsoft announced its fiscal second-quarter 2023 earnings report. Non-GAAP earnings per share (EPS) were $2.32, compared to the $2.31 consensus analyst forecast, a $0.01 increase. Total revenue increased by 2% to $52.75 billion, falling short of expert estimates of $53.17 billion.
The strong US currency harmed all segments. Its Productivity and Business Process segment revenue increased by 7% year on year to $17 billion. Microsoft Office Commercial sales increased by 7% year on year. Its Consumer category fell (-2%), compared to a 7% increase. It had execution issues in its Surface laptop business.
Strong Intelligent Cloud
Its Intelligent Cloud division increased sales by 18% to $21.50 billion, in line with an earlier estimate of $21.25 to $21.55 billion. Revenue from server goods and cloud services increased 20% year on year, led by a 31% increase in Azure revenue.
This was still lower than the previous guidance of 37%. It demonstrates that Azure’s growth is slowing. It fell short of the 35% growth rate achieved in the September quarter and the 40% growth rate achieved in the prior June quarter.
Weaknesses in Personal Computers
Personal computing was the weakest drag, with revenues falling (-19%) year on year to $14.20 billion. This was significantly less than the previous guidance range of $14.50 to $14.90 billion. Windows OEM revenue declined (-39%) year on year, while Windows Commercial revenue fell (-3%) compared to earlier forecasts of 8% growth.
Revenue from Xbox content and services declined (-12%) compared to a 3% increase in the prior quarter. Revenue from search advertising increased 10% year on year, compared to 16% in the previous quarter ending September 2022.
Inadequate Forward Guidance
During its conference call, Microsoft presented revenue guidance. As a result, shares lost their gap and sold down in the aftermarket. Revenue from Productivity and Business Processes is expected to increase from 11% to 13%, or $16.9 billion to $17.2 billion.
Intelligent Cloud is predicted to increase at a constant currency rate of 17% to 19%, or $21.7 to $22 billion.
The personal computing market is anticipated to be worth between $11.9 and $12.3 billion. Its revenue outlook is from $50.5 billion to $51.5 billion, falling short of the $52.69 billion billing consensus analyst estimates.
Customers are becoming more careful with their purchases, according to the company. Spending on advertising declined more than planned, affecting its search, news advertising, and LinkedIn Marketing Solutions.
Technical Analysis
MSFT’s weekly candlestick chart shows a rounding bottom as shares seek to retest the lip line, which also serves as the weekly market structure high (MSH) trigger at $267.98. Shares dropped from the lip line in August 2022 to $213.43 by October 2022.
On the breakout above $239.90, shares triggered the weekly market structure low (MSL), indicating shares might rise to $263.92 in December before falling back to $219.35m, a double support level. MSFT triggered the weekly MSL for the second time in January 2023, staging a four-week climb to retest the $263.92 lip line and go towards the $267.98 lip line.
The weekly 20-period exponential moving average (EMA) support is rising to $246.04, while the weekly 50-period M.A. resistance is falling to $260.64. The weekly MSL trigger levels for pullbacks are $250.02, $246.44, $239.90, $235.00, and $230.90.
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