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Microsoft’s stock has underperformed compared to its peers over the past year, with its performance lagging behind tech-heavy Nasdaq. Year-over-year, Microsoft’s Azure cloud growth remains stagnant, while Alphabet and Amazon have shown accelerated expansion. The company kicks off tech earnings season this Wednesday with reports from Microsoft, Meta, and Tesla. Investors closely monitor Azure as it forms a significant part of Microsoft’s business strategy.
Recent developments include Azure no longer being an exclusive provider for OpenAI queries, which may affect future growth prospects. This shift comes alongside the announcement of a potential $500 billion AI infrastructure initiative involving SoftBank, OpenAI, and Oracle. Microsoft has invested heavily in AI through OpenAI, focusing on GPU capital expenditures to support model training.
Analysts predict that changes to Azure’s exclusive use could enhance Microsoft’s ability to attract more cloud capacity elsewhere, potentially improving capex efficiencies and returns on investment. Kevin Walkush, a portfolio manager at Jensen Investment Management, believes the long-term benefits of AI investments in Microsoft are significant, despite the company’s current underperformance.
This week’s earnings reports will provide insights into Microsoft’s financial health as it navigates the tech landscape with peers Alphabet and Amazon leading growth among U.S. tech megacaps. Investors remain optimistic about Microsoft’s future potential, particularly given its strategic focus on AI-driven growth.
Source: https://www.cnbc.com/2025/01/28/microsofts-underperformance-has-investors-looking-to-cloud-for-growth.html