Microsoft's AI lead puts Amazon cloud dominance on watch
Upcoming quarterly reports from U.S. tech giants may show Microsoft is closing the gap on cloud-computing market leader Amazon.com as more businesses switch to its services, attracted by a clutch of generative AI features that are powered by OpenAI's technology. The Redmond, Washington-based software giant has beaten rivals Amazon and Google-parent Alphabet to the market with AI services including the Copilot, a set of genAI tools that work in Microsoft's business apps, that was rolled out in November for $30 a month.
Its earnings on Thursday will be an indicator of AI adoption and could influence the movement of technology stocks as a rally in the sector eases this month amid worries that interest rates in the U.S. could stay high for longer.
Wall Street analysts expect Microsoft - which overtook Apple as the world's most valuable firm earlier this year - to report that the billions of dollars it has invested in generative AI were attracting clients to its Azure cloud-computing service.
"Azure is benefiting from a halo effect around Microsoft's AI strategy," said RBC Capital Markets Rishi Jaluria, who expects Microsoft to take Amazon's market share.
Jaluria added that cloud providers should broadly benefit from signs of stabilization in technology spending, which has been pressured by high-interest rates and economic uncertainty.
In the first three months of 2024, Microsoft's revenue is expected to have grown 15% and Alphabet's 12.6% - their second-highest rate in nearly two years. Amazon's revenue could rise 11.9%, its worst in three quarters.
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