AI Helped Make Microsoft the World’s Most Valuable Stock. Staying There Relies On a $30/Month Subscription. – The Average Joe
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    AI Helped Make Microsoft the World’s Most Valuable Stock. Staying There Relies On a $30/Month Subscription.

    Noah Weidner

    February 14, 2024

    Microsoft (NASDAQ:MSFT) has a message for the market: we are so back. Over the last year, the tech giant overtook Apple (NASDAQ:AAPL) as the world’s most valuable company — fueled by a $10B investment in OpenAI and breakneck growth in its Cloud business.

    After talking the talk, analysts will want to see it walk run — and CEO Satya Nadella hopes that the key to scaling AI could be its AI companion, Copilot. The product plugs OpenAI’s GPT-4 into popular Microsoft products like Windows, Word, and Teams — and can write emails, organize information, and summarize meetings.

    Not ready for takeoff: Despite supposedly strong demand for Copilot, Microsoft is struggling to convince AI-skeptical companies to shell out for its new and unproven AI companion, which RBC Capital analyst Rishi Jaluria says “has to be a success” for Microsoft’s recent stock boom to stand up (WSJ).

    • While Microsoft claims it saves the average user 1.2 hours per week, Copilot is still in testing — and frequently makes errors in apps like Excel and PowerPoint.
    • Companies have reportedly pushed back against its required minimum of “300 subscriptions” and $30/mo per user price.

    AI-infused products are becoming the standard

    Although analysts previously projected Copilot to contribute an extra $10B in annual revenue for Microsoft, nearly 5% of its total in 2023, competition is heating up — and it’s uncertain whether businesses can justify paying an AI tax to access AI features across hundreds of different software subscriptions.

    • Last week, Google announced.) its Google One Premium AI Plan, a $20/mo subscription with 2TB of storage, access to its new Gemini Ultra model, and Gmail, Drive, and hardware device compatibility.
    • Yesterday, Nvidia announced a free Chat with RTX desktop app, enabling users to interact with AI models to find information in files on their computers.

    Worth the price? As more players enter the AI market, businesses and analysts may be overestimating the immediate benefits of AI compared to what it could do for them in 20 years. Copilot’s $30/mo subscription price might alienate it from the cheaper competition, which could leave Microsoft with no choice but to either pack more value into the product or drop the price.

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