‘AI All-Star’ Microsoft’s rosy earnings spark rally in tech stocks

After strong earnings, Microsoft Corp (MSFT.O) shares rose 8% premarket on Wednesday, lifting tech stocks.

If premarket gains persist, Microsoft (MSFT) will surpass Saudi Aramco (2223.SE) as the world’s second-most valuable firm. Its $2.2 trillion valuation is $400 billion behind Apple Inc. (AAPL.O).

Piper Sandler’s Brent Braceli called the stock “AI-All Star” after 18 analysts boosted their price targets. Microsoft’s cloud computing and Office productivity software units beat expectations, surprising investors who predicted a dismal quarter.

Microsoft’s results are encouraging for an industry that has cut off tens of thousands of workers due to a slowing economy.

Amazon.com Inc (AMZN.O) and Meta Platforms Inc (META.O) climbed, while Alphabet Inc (GOOGL.O), which is competing with Microsoft in AI, fell 1.3%.

Google’s parent firm posted better-than-expected quarterly results, although its search engine gained just 2% compared to Bing’s 10% increase, which is benefiting from ChatGPT integration.

CEO Satya Nadella mentioned AI 50 times in a 60-minute earnings call on Wednesday.

Nadella noted that over 2,500 Azure-OpenAI service clients, including Coursera, Mercedes-Benz, and Snap Inc., had integrated AI into their products.

“Given the significant head start OpenAI has over other generative AI engines and Microsoft has over its hyperscaler (large-scale data center) competitors, we believe that Azure may gain share as generative AI continues to proliferate into many more corners of software and the economy,” D A Davidson analyst Gil Luria said.