Microsoft Corporation (MSFT)-Backed OpenAI Hits 1 Million Business Users, Analyst Downgrades MSFT Amid AI Competition

We recently compiled a list of the 20 Trending AI Stocks on Latest Analyst Ratings and News. In this article, we are going to take a look at where Microsoft Corporation (NASDAQ:MSFT) stands against the other AI stocks.

The latest developments in the AI industry from a business perspective highlight a growing momentum, driven by significant investments, innovative product launches, and both regulatory and market challenges. One notable development is the rise of Safe Superintelligence, a company founded by previous OpenAI bigwig Ilya Sutskever, which recently secured $1 billion in funding to advance AI systems with a focus on safety. This significant capital raise from major venture capital firms like Andreessen Horowitz and Sequoia Capital underscores the growing concerns around AI safety, as companies work to ensure that AI technologies are both powerful and aligned with human values. Similarly, the market selloff of Wall Street’s favorite GPU maker following a stellar earnings report, resulting in a market value loss of close to $280 billion, reflects investor anxieties over the sustainability of AI growth, compounded by concerns over regulatory scrutiny.

Read more about these developments by accessing 33 Most Important AI Companies You Should Pay Attention To and 20 Industrial Stocks Already Riding the AI Wave.

Another major business development that investors should keep an eye on is the purchase of  AirTrunk by investment firm Blackstone for over $16 billion. AirTrunk, a data center operator, significantly boosts the position of the investment titan in the rapidly expanding AI infrastructure market. Data centers are expected to require up to $2 trillion in investment globally over the next five years to meet the demands of AI technologies, and the AirTrunk acquisition signals strong confidence in this growth by top investment managers. Data center expansions are critical as companies like OpenAI and Anthropic roll out enterprise-grade AI services, which demand immense computing power. For example, Anthropic recently launched Claude Enterprise, a robust AI chatbot, that caters to organizations that need advanced features like larger context windows and GitHub integration, aiming to streamline business operations through AI.

Read more about these developments by accessing 10 Buzzing AI Stocks According to Goldman Sachs and Beyond the Tech Giants: 35 Non-Tech AI Opportunities.

Our Methodology

For this article, we selected AI stocks based on the latest news and analyst ratings. These stocks are also popular among hedge funds.

Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).

A development team working together to create the next version of Windows.

Microsoft Corporation (NASDAQ:MSFT)

Number of Hedge Fund Holders: 279

Microsoft Corporation (NASDAQ:MSFT) is a Washington-based technology company. Latest reports indicate that OpenAI, the generative artificial intelligence startup backed by Microsoft,  has crossed the 1 million paid users barrier in the ChatGPT for business section. OpenAI launched ChatGPT in late 2022 to kickstart the AI boom. The tech giant has invested more than $10 billion in the AI startup already, and is potentially considering another large investment, along with Apple and NVIDIA, as the valuation of the startup touches close to $100 billion. OpenAI is considering higher-priced subscriptions to ChatGPT, perhaps $2,000 per month, as it launches new models like Strawberry and Orion.

DA Davidson analyst Gil Luria recently downgraded Microsoft Corporation (NASDAQ:MSFT) stock to Neutral from Buy with an unchanged price target of $475. In a research note, the analyst noted that competition had largely caught up with Microsoft on the AI front, which reduced the justification for the current premium valuation. The note further claimed that Microsoft’s lead had now diminished in both the cloud business and code generation business, which would make it hard for shares to continue to outperform.

Overall MSFT ranks 6th on our list of the trending AI stocks on latest analyst ratings and news. While we acknowledge the potential of MSFT as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than MSFT but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

READ NEXT: $30 Trillion Opportunity: 15 Best Humanoid Robot Stocks to Buy According to Morgan Stanley and Jim Cramer Says NVIDIA ‘Has Become A Wasteland’.

Disclosure: None. This article is originally published at Insider Monkey.