There has recently been a great deal of excitement in the still young artificial intelligence (AI) sector. The focus was on Sam Altman, the head of OpenAI, probably the world's best-known AI company. The Board of Directors surprisingly gave the 38-year-old the boot due to communication problems. OpenAI partner and financial backer Microsoft seized the opportunity and offered Altman a job at the software giant. A few days later, however, the potential job change was a thing of the past. Altman reached an agreement with OpenAI to return and the company is now once again led by the "new" old founding CEO.
The chaotic days at the development company show how important the topic of artificial intelligence is to Microsoft. And regardless of how the personnel rochade would have ended, the company would have emerged as a winner either way. Microsoft benefits on the one hand from access to OpenAI's large language models and on the other from the expertise of programmer Altmann. As the reinstated CEO, Altmann has now promised to "build on the strong partnership" with Microsoft.
For Microsoft CEO Satya Nadella, who publicly welcomes Altmann's return to OpenAI, there are currently two overarching themes: Cloud and AI. The two technologies are also the major growth drivers within the Group, as the hype surrounding AI is fueling demand for high-performance computing and cloud services. Cloud growth jumped to 29% in the most recent quarter thanks to sustained demand for chatbot-like services such as ChatGPT. In the fall, Microsoft presented its new AI assistant "Copilot". "When I started 30 years ago, we wanted to bring computers into every home. Today, we want to bring Copilot to every device," says CEO Nadella. The software was launched in the Windows 11 system at the end of September, and the AI assistant, which can, for example, summarize a day's emails in a quick update, then moved into Microsoft's Office suite at the beginning of November.
Microsoft is investing heavily in data centers in order to spread the AI software quickly. Expenditure in the opening period of 2023/24 rose from USD 10.7 billion in the previous quarter to USD 11.2 billion. This is the highest level of investment since the 2016 financial year, and management expects this to increase further each quarter and ultimately amount to more than USD 44 billion for the year as a whole. The efforts are already paying off. According to Bob O'Donnell, principal analyst at TECHnalysis Research, the Azure cloud service has recently gained market share: "It could be that Microsoft's very strong messaging on its AI technology is causing companies to consider it more seriously."
The Redmond-based company doesn't just want to earn money with AI-related services. Microsoft has also recently been putting out feelers in the direction of hardware. At the Ignite developer conference in mid-November, the company pulled its own AI chip out of the hat to the surprise of the specialist audience. With the secretly developed "Maia 100 Accelerator", which is set to be launched on the market as early as next year, Microsoft is not only directly attacking market leader Nvidia, but is also ensuring that the global shortage of high-performance processors is counteracted. Maia 100 will initially only be used for its own offerings such as Copilot and other Azure Open AI services.
The billion-dollar AI efforts are also reflected in the balance sheet. Microsoft was able to exceed analysts' expectations in terms of both revenue and profit in the most recent period from July to September. "The results showed that AI products are boosting sales and are already contributing to revenue and profit growth," states Jesse Cohen, analyst at Investing.com. Microsoft also surprised positively with its outlook: Azure growth of 26% to 27% is forecast for the current second quarter, compared to the expert average of 25.1%.
The hype surrounding AI has also long since taken hold of the shares, causing Microsoft shares to increase by more than 50% this year alone. Due to the "flagpole" in the chart, it might not hurt to transfer some of the profits into a less risky investment in the software giant. Leonteq's new soft callable barrier reverse convertibles fit perfectly into this strategy. The product structure, which is also ideal for new entrants, leaves Microsoft shares with significant correction potential after the rally without jeopardizing the attractive earnings opportunity. The BRCs, which are offered in CHF and USD, each have a risk buffer of 25%. If Microsoft leaves the barrier intact during the maximum term of 15 months, the maximum yield will be achieved. The coupons amount to 7.00% p.a. for the CHF variant and 10.00% p.a. for the USD-denominated paper. For both products, the issuer's soft callable function allows early termination after six months at the earliest.
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