Microsoft Closes at Record High on New OpenAI Optimism

Microsoft CEO Satya Nadella speaks at the OpenAI DevDay event in San Francisco on November 6, 2023.

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Microsoft ended Tuesday’s trading session at a record high of $360.53, following renewed optimism about the growth of a key partner in the artificial intelligence space. The 1.12% daily increase gives the software company a market value of around $2.68 trillion.

The major US indexes all posted gains on the day, with the S&P 500 recording its seventh consecutive rise, while Microsoft made its eighth. The title has not experienced such a streak since January 2021.

At an event in San Francisco on Monday, OpenAI, Microsoft’s strategic AI partner, announced a series of updates, including price reductions and plans to let users create custom versions of the ChatGPT chatbot. Microsoft CEO Satya Nadella was on hand for the affair and noted that developers building applications with OpenAI’s tools could quickly get to market by deploying their software on Microsoft’s Azure cloud infrastructure.

Microsoft invested $13 billion in OpenAI, granting it an exclusive license to OpenAI’s large GPT-4 language model, which can generate human-like prose in response to a few words of text. Last week, Microsoft announced the release of an AI add-on for its Office productivity app subscriptions and an assistant in Windows 11, both based on OpenAI models.

“What’s good for OpenAI is good for Azure in our view,” UBS analysts led by Karl Keirstead wrote in a note distributed to clients Monday. “If OpenAI now actively courts software developers to build applications using ChatGPT/GPT-4, reducing prices and improving model performance, this could lead to greater OpenAI consumption of Azure and constitute a modest advantage for Microsoft.” Analysts have a buy rating on Microsoft stock.

Oppenheimer analysts, with the equivalent of a buy rating, said OpenAI’s pricing updates confirm OpenAI’s status as a category leader.

When OpenAI succeeds, it is “mutually synergistic” for Microsoft, they wrote. Microsoft said in a regulatory filing in October that OpenAI is its “strategic partner” in AI.

Also on Tuesday, the maker of cloud monitoring software Data Dog told investors that its clients were starting to relax their cost-cutting plans. Datadog can monitor infrastructure in Azure and other public clouds, such as Amazon Web Services. Amazon ended the day up 2.13% but has yet to surpass its July 2021 closing record.

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