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THE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & LifestyleTHE BIZNOB – Global Business & Financial News – A Business Journal – Focus On Business Leaders, Technology – Enterpeneurship – Finance – Economy – Politics & Lifestyle

Technology

Technology

Microsoft surpasses Alphabet in cloud race with OpenAI bet and enterprise focus

Microsoft Photo Credit: SOPA Images
Microsoft Photo Credit: SOPA Images Microsoft Photo Credit: SOPA Images
Microsoft Photo Credit: SOPA Images
Microsoft Photo Credit: SOPA Images Microsoft Photo Credit: SOPA Images

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With its early investments in OpenAI and emphasis on large clients, Microsoft is outpacing Alphabet in the competition to profit from generative artificial intelligence. This is causing concerns that Google’s parent company may lose market dominance in cloud computing.

The first quarter of 2018 saw a resurgence in growth for Microsoft’s Azure platform, driving up the company’s shares (MSFT.O) by 3.6%. Firms preparing to roll out AI capabilities were the driving force behind this increase.

Contrarily, growth at Alphabet’s cloud division slowed to a near three-year low due to greater exposure to smaller clients, which caused the company’s shares to fall 6%. Microsoft has concentrated on its core corporate clients, who currently utilize many of its software services, in the fight to find the next cloud industry growth driver, while Google has turned to startups.

“The need for AI propelled Microsoft’s expansion. A similar demand was seen among Google’s larger clients. Still, Morningstar analyst Ali Mogharabi said that the company is more exposed to high-growth and startup clients, who have been more active in their cost-control initiatives.

If share losses persist, Alphabet’s market value could decline by more than $100 billion, raising concerns that the company’s focus on startups and cautious adoption of AI services are limiting the technology’s potential advantages. Microsoft’s market capitalization was expected to increase by around $90 billion due to gains in its stock.

“Google is entering as a small competitor here, while Microsoft is leveraging its established software relationships,” stated Krishna Chintalapalli, portfolio manager at Parnassus Investments, an investor in Alphabet and Microsoft.

According to the data, he added that enterprise clients make the most cloud-related purchases, while smaller companies are cutting down.

The September quarter saw a three-point increase in Microsoft’s cloud business due to the company’s strong usage of AI. CEO Satya Nadella says over 40% of Fortune 500 businesses utilize the test version of OpenAI’s “Copilot” AI service.

The company’s 365 service, which can condense a day’s worth of emails into a brief update, will go live next month for $30 a month.

According to analysts, this will increase the use of its AI services even more. Along with incorporating AI into goods like its iconic Pixel phones, Alphabet recently experimented with integrating generative AI into its search engine.

“Unlike many others who are touting their AI story, Microsoft is capable of delivering meaningful AI products to their customers,” stockbroker D.A. Davidson stated.

The software giant had at least 19 brokerages increase their price targets, with a consensus outlook of $400. That was sixteen percent more than the corporation’s $342.78 premarket share price. Numerous analysts expressed optimism for Alphabet’s core search business but cautioned that the cloud business would continue to be sluggish.

“It’s unclear just how widespread Google Cloud optimization efforts are and how far along customers are in the journey, but expect these headwinds to persist for at least a few more quarters,” Bernstein analysts stated. In 2023, AI is anticipated to become a bigger growth driver for Alphabet with the anticipated release of Gemini, a suite of large-language models.

CEO Sundar Pichai stated that “early findings are quite positive (for Gemini). Microsoft is trading at 28.5 times its projected 12-month earnings, while the parent company of Google is trading at 24.93 times.


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