- BMO Capital lowered the firm's price target on Microsoft Corporation (NASDAQ:MSFT) to $500 from $515 while keeping an Outperform rating on the shares as part of a broader software note.
- On July 8, Microsoft started replacing OpenAI and Anthropic with its own models in software products such as Excel and Outlook as it looks to reduce AI costs.
- Tens of thousands of AI prompts in the spreadsheet and email applications are now being completed each week with Microsoft's internally built MAI models, according to a person familiar with the work.
- On July 6, Microsoft's Xbox announced a major reorganization, cutting 3,200 jobs as part of a significant restructuring effort.
Microsoft Corporation (NASDAQ:MSFT) is facing increased scrutiny as BMO Capital has lowered its price target to $500 from $515, maintaining an Outperform rating. This adjustment comes amid expectations of modest growth in Azure services.12
BMO noted that it anticipates capex consensus estimates to continue rising, reflecting the ongoing investment in cloud infrastructure. The firm expects a slight upside to consensus Azure growth estimates for the June quarter.
In a strategic shift, Microsoft is transitioning from using external AI models from OpenAI and Anthropic to developing its own in-house AI models for applications like Excel and Outlook. This move is aimed at reducing costs associated with AI integration. Reports indicate that tens of thousands of AI prompts are now being processed weekly through Microsoft's internally built MAI models.3
This shift in strategy reflects a broader trend in the tech industry as companies seek to control costs while enhancing their AI capabilities. The decision to develop proprietary models may also position Microsoft more favorably in the competitive landscape of AI-driven software solutions.
As Microsoft navigates these changes, the market will be watching closely to see how these developments impact its financial performance and stock valuation.
“BMO Capital's downgrade reflects concerns over Microsoft's growth potential, despite maintaining an Outperform rating. Meanwhile, the company is transitioning to its own AI models, completing tens of thousands of prompts weekly, as it seeks to cut costs associated with external AI partnerships.”
Insider Monkey
Yahoo Finance
