Microsoft Q4 Earnings: Mixed Results Raise Concerns

Key Highlights

* Microsoft (MSFT) shares fell 6.3% following its fourth-quarter earnings report.
* Revenue narrowly exceeded analysts' estimates, driven by strong performance in Personal Computing and Business Services.
* Intelligent Cloud revenue grew 31%, missing expectations of 32-33%.
* Guidance for next quarter's Azure growth missed expectations, fueling concerns.

Investor Sentiment

* The market's reaction suggests concerns about capex, the impact of OpenAI on revenue, and the OpenAI relationship.
* However, Microsoft's strong revenue performance and commercial bookings growth buoy optimism.

Impact of OpenAI and DeepSeek

* Microsoft CEO Satya Nadella praised OpenAI's efforts, highlighting the open-source model's efficiency and affordability.
* The emergence of DeepSeek, a Chinese AI startup, challenges assumptions about AI development.
* DeepSeek's success questions the growth narratives of chipmakers like Nvidia, suggesting innovation is driven by resourcefulness.

Investment Considerations

* Microsoft shares have declined 0.8% year-to-date and are trading below their 52-week high.
* Generative AI is expected to significantly impact businesses.
* Investors may consider undervalued semiconductor stocks benefiting from the AI revolution.