The stock price of Microsoft Corporation (MSFT.US) is at a low point, when will AI investments realize growth promises?

Recently, many large stocks related to artificial intelligence have lost their former glory, and perhaps no company is in a worse situation than Microsoft Corporation (MSFT.US). For months, the stock price of this software giant has been performing poorly. Due to disappointing financial performance reports, the market has begun to reevaluate when Microsoft Corporation's investment of hundreds of billions of dollars in the field of artificial intelligence will more noticeable profit growth. Although Wall Street analysts almost unanimously see the long-term potential of Microsoft Corporation, and the drop in stock price has greatly reduced its valuation premium, in the context of increasing political uncertainty and weakening economic data leading to a general market downturn, the factors driving the stock price up in the short term seem very limited. Jenny Montgomery Scott's Chief Investment Strategist Mark Luccini stated, "Microsoft Corporation is known for its stable cash flow, predictable profits, and non-cyclical (like the chip industry) subscription-based revenue, but even so, it has not been able to stand alone in the market turmoil. In the past, people have said that artificial intelligence can improve productivity and bring in huge profits, but now it seems that this still needs time to be verified." Among the "Big Seven" stocks, Microsoft Corporation's stock has set a record for the longest time without reaching a new high. Since reaching its peak in July of last year, its stock price has fallen by about 17%, with Monday closing at the lowest level since January 2024. In the past six months, the performance of Microsoft Corporation's stock price has sharply contrasted with the Nasdaq 100 index and the ETF tracking the software industry during the same period. At the end of January, the financial report released by Microsoft Corporation not only explained why it has been difficult to excite investors recently, but also showed why many still have confidence in it. This report revealed that the growth of Microsoft Corporation's Azure cloud computing business was disappointing, partly due to the company's insufficient number of data centers to meet market demand. Although its artificial intelligence services have grown, the process of monetizing these products is slower than many investors expected. The failure of the artificial intelligence business to achieve breakthroughs as expected has become a major challenge for Microsoft Corporation. According to data compiled by Bloomberg, the financial report released in January marked the third consecutive quarter for Microsoft Corporation to report a stock price decline, making it the longest lasting period in more than a decade. What has disappointed investors even more is the continued increase in Microsoft Corporation's investment in the field of artificial intelligence, leading to a significant increase in capital expenditures. The company is expected to invest $80 billion in artificial intelligence data centers in the current fiscal year, although TD Cowen recently pointed out that Microsoft Corporation has canceled plans to lease some data centers in the United States. Since the emergence of Chinese artificial intelligence startup DeepSeek in January, several companies focusing on artificial intelligence, including Microsoft Corporation, have faced challenges. DeepSeek claims to have found a more efficient method of creating artificial intelligence models, requiring fewer high-performance servers and computing chips. Chip manufacturer NVIDIA Corporation is one of the companies most affected among the "Big Seven," and Microsoft Corporation is also under scrutiny for its partnership with the developers of ChatGPT, OpenAI, a direct competitor of DeepSeek. Michael Kirkbride, portfolio manager at Evercore Wealth Management, said, "In the face of competition from DeepSeek, there is indeed a big question as to whether OpenAI can adapt flexibly. Although the long-term cooperation between Microsoft Corporation and OpenAI should be beneficial, this question will to some extent pull down the valuation of Microsoft Corporation before it is resolved." The valuation of Microsoft Corporation has dropped significantly. Currently, its expected P/E ratio is less than 27 times, the lowest level in nearly two years, far below the peak of 35 times in July of last year. This multiple is only slightly higher than its average of about 26 times in the past ten years. Although the artificial intelligence business may not significantly boost Microsoft Corporation's stock price in the short term, Wall Street remains optimistic about the company's ability to achieve growth through this technology in the future. Analysts predict that Microsoft Corporation's revenue for the fiscal year 2025 will increase by about 13% and accelerate in the following two years. This fiscal year, Microsoft Corporation's net profit is expected to increase by 11%, followed by an accelerated growth in the next two years. This potential for continued growth is one of the reasons why over 90% of analysts tracked by Bloomberg recommend buying Microsoft Corporation stock. In addition, Microsoft Corporation's stock price is currently 30% lower than the average target price given by analysts, the largest discount in over two years. Arup Datta, portfolio manager at McKenzie Investment Company, is one of the optimists about Microsoft Corporation's stock. He said, "Microsoft Corporation and other companies in the 'Big Seven' previously saw excessive increases in stock prices, but now they have corrected."The valuation is more attractive and even seems somewhat undervalued compared to peers. At the same time, Microsoft Corporation has always had outstanding qualities, excellent innovation capabilities, and huge long-term growth potential. From the current perspective, the development trend is still good.Bonjour! Comment a va?