Microsoft Corp.’s shares hit an intraday record of US$468.5 on June 5, surpassing the previous peak in July 2024.

The stock has climbed over 30% since its low in April, adding more than US$800 billion to its market value.

Microsoft’s market capitalization now stands at US$3.48 trillion, putting it among the largest global companies alongside Nvidia Corp.

The rise is driven by strong growth in cloud computing and AI services, along with cost-cutting efforts like job reductions to manage AI-related expenses.

🔗 Source: Bloomberg

🧠 Food for thought

1️⃣ A tale of two AI giants: different risk-reward profiles

Microsoft’s record stock price reflects investor confidence in its balanced approach to AI, which contrasts sharply with Nvidia’s more volatile growth profile.

While Nvidia has delivered a staggering 2,524% five-year return compared to Microsoft’s more modest sub-200% return, Microsoft is increasingly viewed as the more stable long-term AI investment1.

This performance gap highlights how investors are valuing different AI strategies: Nvidia’s specialized chip leadership versus Microsoft’s integration of AI across established revenue streams like Azure, which grew 33% with AI contributing 16 points to this growth2.

Microsoft’s strong free cash flow growth rate of 14% with a 28.6% margin demonstrates how it’s successfully monetizing AI investments while maintaining financial discipline1.

The company’s market cap growth from $381 billion in 2014 to over $3 trillion in 2024 under CEO Satya Nadella shows how effectively Microsoft has transformed its business model to capitalize on cloud and AI opportunities1.

2️⃣ The AI transformation’s human cost in real time

Microsoft’s layoffs reveal how AI capabilities are already reshaping workforce requirements at major technology companies.

The company has cut approximately 6,000 employees (3% of its workforce) followed by an additional 305 workers, primarily in software engineering, product management, and legal roles – precisely the knowledge-worker positions most vulnerable to AI automation34.

CEO Satya Nadella’s statement that 30% of Microsoft’s code is now AI-generated, with projections that AI could write up to 95% of code by 2030, provides concrete metrics for how rapidly AI is transforming technical work35.

These workforce reductions are occurring simultaneously with Microsoft’s massive $80 billion investment in AI infrastructure this fiscal year, illustrating the company’s strategic reallocation of resources from human capital to technological capabilities5.

The pattern of balancing high AI investment costs with operational streamlining appears across the tech industry but is particularly visible at Microsoft, which is both a major AI infrastructure provider and an enterprise software developer whose own products are being transformed by AI6.

3️⃣ The $3 trillion club: what market valuations reveal about AI’s perceived winners

Microsoft and Nvidia’s neck-and-neck race for most valuable company status at approximately $3.45 trillion each demonstrates how investors view these companies as the primary beneficiaries of the AI revolution7.

The valuation parity is remarkable given the companies’ dramatically different business models – Microsoft’s diversified software and cloud business versus Nvidia’s more concentrated focus on AI chips and infrastructure.

While Nvidia recently reported impressive quarterly sales of $44.06 billion with 69% year-over-year growth driven by AI chip demand, Microsoft’s value proposition centers on its ability to monetize AI through established enterprise relationships and software platforms7.

Analyst consensus strongly favors both companies, with Microsoft receiving no sell ratings and an average price target of $514.07, suggesting continued investor confidence in its AI strategy despite already reaching record valuations2.

The significant gap between these two AI leaders and other tech giants indicates the market’s conviction that AI capabilities will drive substantial value creation, with Microsoft’s position highlighting how successfully integrating AI into existing products creates enormous market value.

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