Microsoft Suffers Stock Price Drop Following Bet on AI Technology Development

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Microsoft reported a drop in the price of its stick following a massive $10 billion investment in the development of artificial intelligence technology.

Microsoft's stock prices dropped on Tuesday as the tech company reported slower growth in several parts of its businesses after it invested in artificial intelligence technology development.

The situation also comes as the tech company moved forward with partnerships with OpenAI, the creator of ChatGPT, an artificial intelligence chatbot, and Meta, the parent company of social media platform Facebook.

Microsoft Stock Price Drops

Despite the drop in stocks, Microsoft beat Wall Street expectations with $56.2 billion in revenue but fell short after its latest earnings reports showed that it had slow revenue growth for its cloud service, Azure.

The tech company's revenue from Azure was only found to have grown 26% in the fourth quarter of the year, which is 1% short of what was seen in the prior quarter. Also, Microsoft's earnings report comes when many are keeping a close watch on the artificial intelligence arms race, as per The Guardian.

Various tech firms have already seen their valuations rocket amid rapid investments in AI-powered technology coming to fruition. These include Microsoft's newly-revamped Bing search engine chatbot. Many have also seen this quarter as a test of whether or not tech companies could come through on those commitments.

In the last few weeks, Microsoft made announcements that have bolstered its position in the closely watched space. In a statement, the chairman and chief executive officer of Microsoft, Satya Nadella, said that organizations are asking how and how fast they will be able to apply the next generation of AI to address the biggest opportunities and challenges they are facing.

She added that at Microsoft, they are continuing to focus on leading the new AI platform shift, helping their customers use Microsoft Cloud, and driving operating leverage.

Nadella noted that the drop in stock price comes as it is still early innings of the cloud migration itself. She added that a completely new world of AI is driving a set of new workloads, according to Yahoo Finance.

Supporting the Development of AI Technology

Microsoft was also found to have increased its revenue by 7% for the fiscal year 2023, which was the lowest rate of annual growth that it has experienced since 2017. Baird Technology Desk Sector Strategist Ted Mortonson said that many people are looking for a higher number for Azure's growth.

He noted that it is obvious that the enterprise is still in this optimization stage of looking at its cloud spend. The situation comes after the tech firm announced a $10 billion investment in OpenAI in January.

On Tuesday, the parent company of Google, Alphabet, said that revenue from its cloud products, which includes Google Workspace productivity apps, rose by 28%. But following concerns about a worsening economy, organizations using cloud services provided by Microsoft, Amazon, and Google have opted to adjust their workloads to reduce costs in the last few months, said CNBC.