Latest news with #Azure
CNBC
3 hours ago
- Business
- CNBC
What OpenAI's push for independence ultimately means for Microsoft's $14 billion investment
What began as a fairytale alliance between Microsoft and OpenAI has evolved into a public feud — leaving many to wonder: What does it all mean for investors? In recent weeks, there have been reports of rising tensions between the two companies as they look to renegotiate the terms of their contract. OpenAI wants to break free from Microsoft's tight hold on its products, compute power, and technology. It also needs permission from Microsoft to finalize a conversion into a more traditional corporate structure. For its part, Microsoft is angling for a bigger post-conversion stake than the AI startup is willing to give up. In an elusive pursuit of finding a middle ground, executives at OpenAI have even considered accusing Microsoft of anticompetitive behavior, according to a report in The Wall Street Journal. "They're in a game of high-stakes poker," Wedbush analyst Dan Ives told CNBC. The partnership started friendly enough. In 2019, Microsoft invested its first billion dollars in OpenAI to develop artificial technologies on its Azure cloud platform. That investment has since grown to $14 billion, and the value of the creator of the popular ChatGPT chatbot is more than $300 billion. While OpenAI was founded as a non-profit with the mission of ensuring AI was developed "to benefit all of humanity," the founders quickly found they needed to be for-profit to raise the kind of money needed to build out the technology. D.A. Davidson analyst Gil Luria called the talks the "most important thing that's happening right now in AI." Microsoft is currently locked into a quite favorable contract with OpenAI. The current agreement, which runs through 2030, includes intellectual property rights, exclusivity of OpenAI's application programming interface, or API for short, on Microsoft's Azure cloud, and 20% of OpenAI's revenue — which means Microsoft will continue to reap the rewards from OpenAI's success and has an incentive to foster further growth. A contractual clause regarding artificial general intelligence has become a major focal point for the reason why the two companies are at odds. If OpenAI can achieve so-called AGI — which is the idea that it could create a model to match or exceed human intelligence — the clause would void Microsoft's access to OpenAI's technology. Microsoft wants the clause removed as part of the renegotiation. In the meantime, the clock is ticking, and OpenAI could end up forfeiting billions of investment dollars, including $40 billion from SoftBank and other investors, if a deal isn't struck by the end of the year. In general, investors want to ensure that their returns are not capped as a result of OpenAI's current structure. "You're negotiating with one of the best in the world," Ives said, referring to Microsoft CEO Satya Nadella. "OpenAI losing Microsoft would be like trying to play baseball without a shortstop, and Microsoft knows that. So, they're leveraged." Ives has no hesitation about Microsoft's dominance as of late, even predicting it would be the next stock to follow portfolio name Nvidia into the $4 trillion market cap club. It's not all one-sided, though. OpenAI has played a significant role in Microsoft's growth. After all, it was OpenAI's viral release of ChatGPT in November 2022 that helped catapult and cement Microsoft's reputation as an AI frontrunner. Part of the collaboration, which expanded in both 2021 and 2023, centered around advancing Azure's AI infrastructure. Fast forward to Microsoft's fiscal 2025 third quarter earnings call, Chief Financial Officer Amy Hood said that revenue from its AI business was "above expectations," with commercial bookings up 18% thanks to OpenAI's commitment to Azure. The long-term financial upside is massive. If OpenAI fulfills its projections of revenue of more than $125 billion by 2029, the partnership could generate about $99 billion for Microsoft, Bernstein estimated in a June note. Regardless of what happens, Microsoft seems well-equipped to compete in the AI race, with no signs of taking its foot off the gas. The company recently onboarded roughly 24 new hires from Alphabet's Google DeepMind artificial intelligence research lab in efforts to advance its AI assistant, Copilot. Microsoft has also developed its own in-house artificial intelligence models. "Two years ago, OpenAI was the heart and lungs of the Microsoft AI story, but that's no longer the case," Ives said. For its part, OpenAI has outgrown Microsoft as its exclusive cloud provider. Earlier this year, the two sides revised their computing agreement , making it so Microsoft now has the "right of first refusal" when OpenAI needs more capacity. That coincided with the announcement of the Stargate initiative , OpenAI's joint venture with cloud provider Oracle and Softbank. OpenAI's latest contract , inked with Alphabet 's Google, serves as an indication of both its ambition and infrastructure needs. In addition, OpenAI has accelerated its offerings with products like ChatGPT Team and Enterprise that directly compete with Microsoft's Copilot suite. In June, OpenAI reported over 3 million paid enterprise customers, up from 2 million in February. An AI-powered web browser is reportedly next on OpenAI's rollout. OpenAI is also said to be working on productivity tools to rival Microsoft Office and Google Workplace. Microsoft's AI products are powered by the same models OpenAI is using to gain enterprise market share. Luckily for Microsoft, its stronghold in the enterprise world keeps it competitive. JPMorgan analysts said in a recent note that they "anticipate the enterprise market will be more challenging [for OpenAI] to unlock." MSFT YTD mountain Microsoft YTD In recent days, Microsoft's significant headcount reduction is being interpreted by some as a strategic cost control measure enabled, in part, by gains in AI-driven productivity. The stock has significantly outperformed in recent months following its Q3 release in April. Microsoft logged a record-closing high of nearly $512 per share on July 17. On Friday, it hit an all-time high above $515. The stock has gained more than 20% year to date versus the S & P 500's more than 8% advance in 2025. As the company continues to surge on AI momentum ahead of its fiscal fourth quarter earnings, set for release after Wednesday's close, Wall Street analysts mostly have buy-equivalent ratings on the stock. That includes Ives at Wedbush and Luria at D.A. Davidson. There are also some hold-equivalents, and that's where we come down. It's not our style to chase big rallies, especially ahead of earnings. Still, analysts agree, and so do we, that Microsoft should look to keep its relationship with OpenAI strong long beyond 2030 when the current deal expires. "Microsoft has an incentive to come up with a new deal with OpenAI that is maybe a little less restrictive so that OpenAI can raise this capital and keep growing," Luria said. "Microsoft wins either way. It's only a matter of how big the win is going to be." (Jim Cramer's Charitable Trust is long MSFT, NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust's portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
CNBC
4 hours ago
- Business
- CNBC
Investor Dan Niles' favorite picks for the rest of earnings season
Investor Dan Niles highlighted two of the "Magnificent Seven" tech cohort as his favorite stock picks for the rest of the second-quarter earnings season. This first of these two names was Microsoft , which reports its fiscal fourth-quarter earnings after next Wednesday's closing bell. Shares have surged about 22% this year. Part of the reason the stock looks attractive, the founder of Niles Investment Management said, is because "they had such a rough time last year." Azure, Microsoft's cloud computing platform, was "a disappointment" for the company three quarters in a row, he said. Microsoft finished 2024 with a 12% gain, while the S & P 500 rose 23% in that same time period. But things started picking up for the company after Microsoft partnered with OpenAI on the Stargate AI supercomputer in January of this year, Niles said. The OpenAI program runs on Azure, and OpenAI also announced it would make a "new, large Azure commitment." "Then they did the Stargate deal, where they restructured their agreement with OpenAI — and in the March quarter, they actually saw Azure reaccelerate. It grew 2% faster than it did in the December quarter. And I think you're going to see that continued benefit as you go into June," Niles, the founder of Niles Investment Management, said Friday morning on CNBC's " Squawk on the Street ." However, Niles did voice some caution that the bar may be high heading into Microsoft's print. "Obviously, everybody expects good results, which is the one concern." Niles' second stock pick for the season was AI poster child Nvidia , which reports second-quarter results on Aug 27. He said he became particularly bullish on the stock after it had to write off inventory that could no longer be sold to China due to a ban from Washington . However, last week the company said that it can continue selling its H20 chip to China, reversing this previous ban. "I got bullish on that after the write-down, and now China comes back into the models when it got taken out of the models, and you're seeing capex now really strong, driven by inference , which is much more sustainable than training," Niles said. AI inference refers to the process of coming up with conclusions using brand new data that's fed into a machine learning model. Training refers to the process of "teaching" a model so that it can recognize patterns. "Because we all want answers to our questions. We don't care about the training, and so I think you're going to see that continue to do well," Niles said. The H20 chip is less advanced and designed specifically to comply with U.S. export restrictions to China. Nvidia CEO Jensen Huang has voiced his desire to ship more advanced chips into the country.
Yahoo
5 hours ago
- Business
- Yahoo
Microsoft Reports Q4 Earnings on July 30. Time to Buy MSFT Stock?
Tech giant Microsoft (MSFT) will report its fourth-quarter earnings for fiscal 2025 on July 30. The company's stock has been on an impressive run, gaining roughly 31% over the past three months and recently hitting a record high of $514.64. This surge reflects Microsoft's solid growth led by significant demand for its artificial intelligence (AI) and cloud offerings. For instance, in the previous quarter, Microsoft reported revenue of $70.1 billion, marking a 13% increase compared to the same period last year. Earnings per share (EPS) also impressed, climbing 18% to reach $3.46. These numbers highlight the underlying strength of Microsoft's business, mainly driven by sustained demand for its Azure cloud services and AI-driven products. More News from Barchart This Self-Driving Car Stock Is Surging on a Major Nvidia Boost UnitedHealth Stock Spirals Lower Again. Don't Buy the Dip. UNH Stock Falls as UnitedHealth Confirms DOJ Probe. How Should You Play Shares Here? Markets move fast. Keep up by reading our FREE midday Barchart Brief newsletter for exclusive charts, analysis, and headlines. While Microsoft continues to see solid momentum in its business, the stock's rapid ascent has stretched its valuation. While Microsoft may still post strong results for Q4, the current price level reflects a lot of optimism already baked in. With this backdrop, let's take a look at analysts' expectations for Q4. Microsoft's Q4 Outlook: Momentum Driven by Cloud and AI Looking ahead to the upcoming earnings report, the momentum in MSFT's business will likely sustain. Microsoft's strategic investments in AI, including its partnership with OpenAI and the integration of AI tools across its product suite, could continue to drive top-line growth. Enterprise customers remain heavily invested in digital transformation, and Microsoft is well-positioned to capitalize on this trend. One of the clearest signs of strength in Microsoft's business is its growing commercial remaining performance obligations, a key metric that reflects future revenue under contract. That figure surged 34% year-over-year in the previous quarter to $315 billion, with management estimating that roughly 40% of this will convert into revenue over the next 12 months. This offers strong visibility and confidence in the company's earnings trajectory heading into Q4. Cloud remains a key growth catalyst for MSFT. Despite capacity constraints, Azure is expected to deliver robust results. Management is forecasting another strong quarter for its Intelligent Cloud segment, with revenue projected in the range of $28.75 billion to $29.05 billion. This segment continues to benefit from increasing enterprise cloud adoption and the growing use of AI-powered services. Meanwhile, Microsoft's More Personal Computing segment is expected to contribute between $12.35 billion and $12.85 billion in revenue for the quarter. Within this division, search and news advertising is poised for high-teens growth, supported by a rising user base and improved monetization per search. The gaming division is also set for solid gains, with mid-single-digit growth projected overall, and high-single-digit expansion in Xbox content and services. While the company's aggressive build-out of AI infrastructure may slightly pressure margins, Microsoft's ongoing focus on operational efficiency should help mitigate any near-term profitability concerns. Importantly, Wall Street remains bullish on the bottom line. Analysts expect earnings of $3.35 per share in Q4, up 13.6% from the $2.95 recorded a year ago. Adding to investor confidence is Microsoft's impressive track record of beating expectations. The company has outperformed analysts' earnings forecasts for the past four consecutive quarters — including an 8.13% beat last quarter. With a history of delivering both solid revenue growth and upside surprises, Microsoft looks well-positioned to exceed expectations once again and strengthen its position in the AI and cloud sector. Here's What Analysts Recommend for MSFT Stock Despite the recent surge in MSFT's stock price, analysts are bullish. Analysts continue to give Microsoft a 'Strong Buy' consensus rating as the company gears up to report its Q4 earnings. Analysts see more room for growth. The average price target for MSFT stock stands at $552.35, suggesting potential 8% gains even after the recent rally. Moreover, the highest price target for Microsoft stock is $626, representing around 23% upside from current price levels. Is Now the Time to Buy MSFT Stock? While its valuation may be somewhat stretched in the short term, Microsoft's fundamentals, earnings momentum, and leadership in high-growth areas such as AI and cloud computing make it a compelling long-term investment. On the date of publication, Amit Singh did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Hindustan Times
8 hours ago
- Business
- Hindustan Times
Microsoft CEO Satya Nadella explains layoffs in memo to employees: ‘Enigma of success'
Microsoft CEO Satya Nadella sent a memo to his employees on Thursday explaining why the company laid off thousands of staffers despite increased investments and recognition. CEO Satya Nadella emphasised that Microsoft wants to achieve its success by its ability to undergo the difficult process of "unlearning" and "learning".(Bloomberg) Microsoft has laid off more than 15,000 people so far this year. It also cut around 2,000 additional staff who were assessed as underperformers. Over the last three fiscal quarters, Microsoft's net income has totalled around $75 billion, Business Insider reported. The company is also spending $80 billion on investments for artificial intelligence (AI) infrastructure. Microsoft's stocks have also been on an upward trajectory, with the closing price hitting a record of over $500 for the first time on July 9. What did Satya Nadella say in layoff memo "Before anything else, I want to speak to what's been weighing heavily on me and what I know many of you are thinking about: the recent job eliminations," Nadella wrote in a memo to his employees. Satya Nadella went on to explain why, despite investing more than ever before and recognising at levels never seen before, Microsoft laid off employees. "By every objective measure, Microsoft is thriving—our market performance, strategic positioning, and growth all point up and to the right," he said. "We're investing more in CapEx than ever before. Our overall headcount is relatively unchanged, and some of the talent and expertise in our industry and at Microsoft is being recognised and rewarded at levels never seen before. And yet, at the same time, we've undergone layoffs," Nadella added. He further wrote, 'This is the enigma of success in an industry that has no franchise value. Progress isn't linear. It's dynamic, sometimes dissonant, and always demanding. But it's also a new opportunity for us to shape, lead through, and have a greater impact than ever before.' Nadella emphasised that Microsoft wants to achieve its success by its ability to undergo the difficult process of "unlearning" and "learning". In his memo to the Microsoft employees, Nadella also mentioned the 'why, what, and how' of the company's mission, priorities, and culture. ALSO READ | Microsoft layoffs: Why Perfect Dark reboot was canceled and The Initiative studio closed However, several employees have expressed disheartened feelings over their layoff from Microsoft, emphasising how they enjoyed working for the company, CNBC reported. After Nvidia, Microsoft is the world's most valuable public company. Its Windows and Office franchises continue to be the dominant force in the market, and its Azure cloud services have also reportedly seen faster growth in recent years.
Forbes
9 hours ago
- Business
- Forbes
From Torque To Talent: How AI Is Redefining Risk Operations In Fintech
Vijay Pandey Associate VP in Financial Services at Wipro LTD, is a futurist setting fintech trends through AI and strategic innovation. When power drills and wrenches were introduced, mechanics didn't disappear. They adapted. Physical strength was no longer the key to performance. Instead, technique, experience and torque ratings became the differentiators. This shift extended careers, reduced fatigue and made servicing faster and more cost-effective. More vehicles hit the road, and more service centers opened to maintain them. Now, imagine that same transformation in lending, mortgage and risk operations. AI As The New Power Tool Financial services have traditionally relied on professionals with years of experience to navigate complex models, detect fraud and manage regulatory risk. AI is changing that. It's like giving a cyborg the job: Tasks that once took years of training are now completed faster, more accurately and more consistently. AI does not replace talent. It amplifies it. Junior analysts can perform like seasoned experts, while experienced professionals focus on strategic decisions instead of manual tasks. Generative AI is now embedded across the lending life cycle. From underwriting and funding to servicing and compliance, AI tools detect fraud, flag anomalies, extract data and enable predictive routing. This improves speed, accuracy and customer experience, especially in high-volume areas like mortgage origination and loan servicing. AI also excels in voice interactions. Our AI-powered agents handle common customer queries such as payment assistance, loan status updates and dispute resolution. These agents automate high-frequency calls, reduce the need for human intervention and improve operational efficiency. IT's Shift To Subscription Models Services are evolving. What was once bespoke is now on-demand. Consider tech products. Previously, IT specialists manually configured networks and data centers. Today, cloud platforms like Azure and AWS allow users to spin up servers with a few clicks. The IT role has shifted to cloud and FinOps managers. These professionals optimize configurations for cost and performance. It's similar to portfolio analysts balancing risk and return. Bandwidth versus risk tolerance. Uptime versus return on investment. Configuration versus allocation. Skills are converging. Hyper-Personalization And AI Agents AI is not just about automation. It is about intelligence. Hyper-personalization allows financial institutions to tailor services to individual profiles in real time. For example, Northern Trust uses AI to deliver personalized investment insights and improve equity performance. AI agents are autonomous systems that reason, plan and act. They are reshaping financial operations. These agents are collaborators. They manage workflows, connect to data and make decisions within defined parameters. At the 2025 Febraban Tech conference, CEOs from Brazil's top banks described how AI is transforming their institutions into intelligent platforms. These platforms are connected, predictive and sustainable. AI is accelerating credit decisions, enhancing fraud detection and improving efficiency. Measurable Benefits Our experience shows that AI delivers real results. This includes faster loan processing through document extraction, fraud detection and routing; better accuracy in spotting red flags and inconsistencies; higher customer satisfaction due to quicker responses and fewer errors; a productivity boost in contract migration and document processing; and lower operational costs by automating common call types. Starting Your AI Journey These benefits are not theoretical. For example, AI models reach up to 90% accuracy, reducing false positives and costs. Additionally, in my experience, AI-driven processes cut underwriting processing time by 70%, speeding credit access. AI also simulates thousands of scenarios in seconds, improving stress tests and compliance. These capabilities do not just improve performance. They redefine it. To begin your AI journey, focus on high-impact, low-complexity use cases. Build a scalable data infrastructure and create a pilot-to-scale framework. Embed ethics and explainability early, and invest in talent and change management. Talent Shift From Operators To Architects As AI grows more powerful, human roles evolve. Like mechanics mastering power tools, financial professionals must learn to orchestrate AI systems. This requires hybrid talent. Professionals must understand both finance and technology. The future belongs to those who bridge data science and strategy. AI is the power tool, and no-code and low-code platforms are the new workbench. Those who master both will shape tomorrow's growth. Challenges And Considerations AI adoption brings risks and responsibilities. Here are four key challenges and how to address them: AI thrives on data, but financial data is sensitive. Institutions must prevent breaches and comply with laws like GDPR, CCPA and GLBA. Use encryption and synthetic data, and audit access regularly. AI models must be transparent, auditable and legally sound. Use explainable AI frameworks and ensure architecture supports compliance. AI can reinforce bias, especially in credit scoring and fraud detection. Without explainability, models may fail regulatory review. Use diverse training data, monitor outputs, and ensure transparency. AI requires new skills and cultural shifts. Barriers include resistance, lack of training and unclear roles. Launch certification programs, build cross-functional teams and encourage experimentation. Are You Ready To Pick Up The Wrench? We are on the brink of a financial revolution. Leaders are embracing AI to streamline operations and spark innovation. They are investing in technology and training to evolve with the tools. This shift is redefining roles and creating new opportunities. AI is not a threat. It is a catalyst. It is reshaping operations, unlocking performance and driving growth. So, whether you are in fintech, IT or operations, ask yourself: Are you still relying on muscle, or have you picked up the power wrench of our time? Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
