One of the most notable changes in the tech landscape over the past year was the advent of generative AI. Sure, artificial intelligence (AI) has been around in some form or fashion for decades, powering a wide variety of everyday activities. The use of facial recognition and voice-controlled assistants on smartphones, tagging of photos on social media, and even recommendations on streaming video and e-commerce sites all come courtesy of AI. However, generative AI is different, capable of creating original content rather than merely analyzing existing information and using it to draw a conclusion.
Microsoft (NASDAQ: MSFT) has been at the forefront of the generative AI boom, thanks to its sizable investment in ChatGPT parent OpenAI and its decision to integrate AI into a broad cross-section of its products and services.
However, Microsoft just kicked off the new year by announcing one of its biggest changes in the past 30 years. While the change itself might seem trivial at first glance, it speaks to the growing influence of AI in every facet of everyday life.
The venerable PC keyboard
Microsoft recently announced the debut of Copilot, a suite of AI protocols designed to increase productivity when using the company’s products and services. When the company released the results for its fiscal 2024 first quarter (ended Sept. 30), it revealed that 40% of the Fortune 100 companies are using Copilot as part of Microsoft’s early access program. Soon after, Copilot was made generally available to its enterprise customers, and investors have yet to understand the full impact of AI on Microsoft’s results. Access to the technology is about to go much wider.
In a blog post published on Thursday, Microsoft announced that it was adding a “Copilot” key to the Windows PC keyboard. The new key will enable users to launch Copilot at the touch of a button, further expanding Microsoft’s growing AI reach. While that might seem important at first glance, consider this: It’s the first major change to the keyboard since the addition of the “Windows” key in 1994.
The blog post went further, announcing that it was “making 2024 the year of the AI PC.” Microsoft also teased big changes ahead, heralding a “significant shift” in which AI would be “seamlessly woven into Windows, from the system, to the silicon, to the hardware.”
This helps illustrate the speed at which AI is reaching into every corner of technology and highlights the importance of this paradigm shift.
Viewed through the lens of AI
Microsoft recognized the groundbreaking potential of generative AI, as evidenced by its $13 billion investment in OpenAI. The company extended its advantage by quickly integrating generative AI into its most popular products and offering a suite of AI tools via Azure. According to CFO Amy Hood, “The next-generation AI business will be the fastest-growing $10 billion business in our history.”
Much of that growth will come from the cloud. During its fiscal 2024 first quarter (ended Sept. 30), Microsoft revealed that it was stealing cloud share from its rivals. Azure revenue grew 29% year over year, outpacing Amazon Web Services (AWS) and Alphabet‘s Google Cloud, which generated growth of 12% and 22%, respectively. Digging a little deeper, Microsoft said “roughly three points” of Azure’s growth was due to increased demand for AI services.
Azure’s cloud growth had experienced seven consecutive quarters of slowing year-over-year growth before the recent uptick, according to data supplied by research firm Canalys. The report also noted the increased demand followed the debut of Copilot in September. This supports Microsoft’s contention that AI is at the heart of its current growth spurt.
Investors should pay heed
While estimates vary, experts concur that the opportunity represented by AI is vast. One of the more bullish prognostications comes from Ark Investment Management CEO Cathie Wood, who suggests that AI software alone could generate $14 trillion by 2030. A much more conservative estimate comes from Bloomberg Intelligence, which suggests that generative AI could grow at a compound annual growth rate (CAGR) of 42%, reaching $1.3 trillion by 2032.
Putting the potential size of the opportunity aside, Microsoft has successfully positioned itself to benefit from the growing demand for AI, which will ultimately benefit the company and its shareholders.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Danny Vena has positions in Alphabet, Amazon, and Microsoft. The Motley Fool has positions in and recommends Alphabet, Amazon, and Microsoft. The Motley Fool has a disclosure policy.
Microsoft Kicked Off 2024 by Announcing One of Its Biggest Changes in Over 30 Years. Here’s What It Means for Investors. was originally published by The Motley Fool
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