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Microsoft Has A Headstart In The AI Boom

May 25, 2023 10:27 AM ETMicrosoft Corporation (MSFT)AMZN10 Comments
Hunting Alpha profile picture
Hunting Alpha


  • The AI boom has legs to go.
  • Microsoft is well-positioned to be an AI winner.
  • Broad-based share gains are likely to continue.
  • Microsoft is trading at a 29.9x 1-yr fwd PE, which is at a modest 5.4% premium to its average multiple since 2018; an acceptable price given the rosy prospects ahead.
  • I intend to phase in the buys over a period of weeks to potentially capture a discount buying opportunity enabled by market whipsaws.

Entrance of Microsoft headquarters building in Issy les Moulineaux near Paris, France

Jean-Luc Ichard


I think Microsoft (NASDAQ:MSFT) has a strong headstart in the current AI boom. I am fundamentally bullish on the stock for 3 key reasons:

  1. The AI boom has legs to go
  2. Microsoft is well-positioned to be an

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Hunting Alpha profile picture
Providing alpha-generating investment ideas.Investment process:1. Sourcing investment ideas based on a combination of top-down, bottom-up and momentum analysis along with an AI/ML model to identify the ones most primed for outperformance vs S&P500. The opportunity set includes almost 2000 and ETFs stocks across major stock markets in the world.2. Evaluating investment ideas by seeing if there is a brief, simple and sensible investment thesis on what can generate alpha vs the market over the next few months and quarters3. Translating narrative into numbers to see if the valuations support the thesisGeneralist approach; investing in any sector so long there is perceived alpha potential. This approach is not for long-term buy and hold investing, although the analysis will be useful even to those investors for timing the portfolio adds and trims. The typical holding period ranges between a few months to a few quarters to even a few weeks in some market conditions. By having a shorter investment holding period, there is the opportunity to maximize IRR of each stock pick, and the overall portfolio.Seeking Alpha Ratings History:It is a good idea to review the ratings history for the articles published by authors. This gives you another indication of how often the author's recommendations work out, which is a proxy for genuine investing and alpha-generating skill.If reviewing Hunting Alpha's rating history, look at how the stock performed in the short to medium time horizon immediately after article publication. The best way to track Hunting Alpha's portfolio holdings and performance is to follow on Twitter (https://twitter.com/SEEACTWIN) and Substack (https://seeactwin.substack.com), where more frequent updates are broadcast to the world.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Long position through a purchase of the stock, or the purchase of call options or similar derivatives in MSFT over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (10)

Hunting Alpha profile picture
UPDATE: I am changing my stance on Microsoft to a Neutral/Hold
This buy rating has generated alpha of 1.20% (Microsoft +1.75% vs SPX +0.55%)
The fundamental story is intact. This change in stance is more due to valuations and market sentiment.
A deeper discussion on the rationale for the change will come in another article.
good article.. msft/spy pair makes new all time high today (msft outperform)..prior all time high was set in november 2021... its trading "off the chart" rich relative to the market (spy) ..I liquidated
Hunting Alpha profile picture
@mmarek evans Thank you. It's a pleasant surprise to see that you too look at the relative charts. I do that for all my active stock picks to assess the stocks with genuine alpha potential. I share the relative charts in some of my articles too.

So far viewing things this way has been quite indispensable for generating alpha.

By "I liquidated", do you mean you were long MSFT and sold or that you were short MSFT?
@Hunting Alpha liquidated long
Proxy profile picture
"A.I. tools could spark another ‘roaring 20s’ for the stock market, says Ed Yardeni"
Hunting Alpha profile picture
@Proxy Thanks for sharing
Proxy profile picture
Microsoft is suggesting you put your Creative Intelligence to work looking for your next gig, and try something new on for size.

Extended version of new Linkedin TV commercial which started appearing this week ...
"Find Your Next Career Move"
Hunting Alpha profile picture
@Proxy Their LinkedIn hiring business is gaining share too. From the Q3 FY23 earnings call:

"Our hiring business took share for the third consecutive quarter. The excitement around AI is creating new opportunities across every function for marketing, sales and finance to software development and security. LinkedIn is increasingly where people are going to learn, discuss and up-level their skills with more than 100 AI courses."
Proxy profile picture
@Hunting Alpha Looks like Linkedin is going to be busy ....

"Almost 70% of US workers plan to leave their jobs this year — and Gen Z, millennials are blazing the trail. "

I think companies are going to need some AI to fill the gaps of lost workers.
Hunting Alpha profile picture
@Proxy Last I heard is that enterprises are still a bit cautious about fully outsourcing work to the consumer AI solutions like ChatGPT due to concerns of accuracy.

Of course, this may change very rapidly.

I suspect when datasets get trained on companies' own data, that's when it will become a much more compelling use-case proposition for companies. And that's where I think Microsoft has a lot to gain. I hear the Copilot traction is going great.
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