Amazon and Alphabet catch up to Microsoft's AI lead: Analyst
Microsoft was among the hot stocks on Yahoo Finance's Trending Tickers page after D.A. Davidson downgraded the tech giant. Discussing artificial intelligence (AI) competition among big tech companies, D.A. Davidson managing director Gil Luria mentioned how Microsoft had a head start in AI due to their involvement with OpenAI. Luria highlighted Microsoft's early commercialization of AI products, giving them a significant lead over Amazon and Google who were caught off guard.
Advancements in AI
Luria noted that Amazon and Google have since invested heavily to catch up to Microsoft in the AI space. He mentioned how both Amazon Web Services (AWS) and Google Cloud Platform (GCP) have made strides in closing the gap with Azure. Luria emphasized that AWS and GCP's ability to deploy their own cost-effective chips in data centers gives them an advantage over Microsoft, who is yet to follow suit.
Reliance on Nvidia
Luria expressed concerns over Microsoft's heavy reliance on Nvidia GPUs, stating that it poses a financial risk to the company. He highlighted that Microsoft's over-investment in Nvidia chips could lead to margin pressures, impacting shareholder value. Luria suggested that Microsoft needs to reevaluate its chip strategy to maintain sustainable growth.
Future Outlook
Looking ahead, Luria explained that Microsoft's approach to investment in AI infrastructure will play a crucial role in shaping its future performance. He emphasized the importance of balancing investment in data centers with margin considerations. Luria stated that a strategic cooling down of investment could position Microsoft for accelerated earnings growth.
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