MSFT Stock Price Prediction: What Can Investors Expect in 2024?

Stock Market

Microsoft (NASDAQ:MSFT) remains a dominant force in the world of tech. When investors think of mega-cap tech stocks, MSFT stock is one that simply has to be in the discussion. In that regard, and considering the stock’s weighting in major indices, it’s likely that most passive investors already have significant exposure to this name. 

In the software-as-a-service (SaaS) sector, Microsoft continues to dominate. Impressively, Microsoft Azure serves 95% of the Fortune 500. Known for Windows and Microsoft 365, Microsoft is a software and cloud powerhouse that underpins modern businesses’ IT infrastructure.

Beyond its flagship products, it has a strong presence in various software areas. Expect a lot from the tech giant in 2024, one that’s worth an investment, even at its current valuation.

More Healthcare AI Tools from Microsoft

Impressively, Microsoft is revealing products to assist healthcare in efficiently accessing and utilizing their vast data. The health sector generates over 30% of global data, but its fragmented storage in various formats poses challenges. Approximately 97% of hospital-generated data remains untapped.

During the HLTH conference in Las Vegas, MSFT unveiled healthcare-specific features for the Fabric platform introduced in May. These tools merge data from various healthcare sources, simplifying access and standardization. They eliminate the time-consuming process of searching through disparate data sources one by one.

Microsoft has conducted Fabric trials with select healthcare customers, including Northwestern Medicine, Arthur Health, and SingHealth. It’s now available in preview. Doug King, CIO at Northwestern Medicine, expressed excitement about the potential for consolidating data to enhance patient care in healthcare settings.

MSFT Will Introduce Nvidia GPU-Like AI Chip

Microsoft is pushing AI innovations, possibly developing a new AI chip to reduce reliance on Nvidia (NASDAQ:NVDA) due to supply shortages, enhancing upcoming devices.

Microsoft’s AI chip, Athena, targets data center servers and competes with Nvidia’s H100 GPU. Athena’s debut is anticipated at the November 14-17 Ignite conference, The Information reported in April.

Athena’s creation responds to rising demand for AI chips, especially for LLMs, which require significant computing power. The scarcity of AI chips has inflated prices. Microsoft-backed OpenAI is considering production of its own AI chips, aiming to decrease reliance on Nvidia and cut costs while enhancing cloud services. Also, Google and Amazon are venturing into AI chip development, signaling a booming market.

What’s In Store for MSFT in 2024

Despite AI enthusiasm waning recently, Microsoft remains committed to capitalizing on this trend. While AI hasn’t substantially impacted their revenue, that might change soon.

Microsoft CFO Amy Hood expects its generative AI sector to become a $10 billion business faster than previous segments. While the exact timeline remains uncertain, this AI sector is set to make a more significant impact on Microsoft’s bottom line soon.

Moreover, Microsoft’s partnership with OpenAI offers various monetization opportunities. First, as OpenAI’s exclusive cloud provider, MSFT indirectly profits from products like ChatGPT. Second, they can connect developers with OpenAI models for custom applications.

Finally, embedding generative AI in enterprise software, such as Microsoft 365, enhances pricing power. This partnership positions Microsoft to benefit from the rising demand for generative AI in a market projected to reach $14 trillion in AI software revenue by 2030.

Expect Big Wins from MSFT

Microsoft’s enterprise software and cloud presence, coupled with the OpenAI partnership, presents substantial potential. With anticipated growth rates, the company could boost its revenue by around 15% annually. Therefore, this makes its current valuation at 11.9-times sales seem reasonable.

Despite a 39% year to date (YTD) increase, patient investors eyeing AI opportunities might consider a small position in this growth stock.

On the date of publication, Chris MacDonald did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Chris MacDonald’s love for investing led him to pursue an MBA in Finance and take on a number of management roles in corporate finance and venture capital over the past 15 years. His experience as a financial analyst in the past, coupled with his fervor for finding undervalued growth opportunities, contribute to his conservative, long-term investing perspective.

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