Microsoft Stock Surges 4% as Aggressive AI Tool Pricing Impresses Investors

In a surprising move, Microsoft Corporation witnessed a 4% surge in its shares on Tuesday after announcing the pricing for its artificial-intelligence-powered Office documents, hinting at a potentially significant financial boost. The software giant unveiled the Microsoft 365 Copilot, an AI-driven service that allows businesses to instantly summarize documents, generate emails, and enhance Excel analysis. The offering is set at $30 per user per month for Microsoft 365 E3, E5, Business Standard, and Business Premium customers. Analysts are optimistic about the price point, predicting substantial growth in Microsoft’s cloud AI market revenue by 2025.

Wedbush Securities analyst, Dan Ives, expressed enthusiasm about the pricing, deeming it “very bullish” for Microsoft’s potential in the cloud AI market. He estimates that this move could result in an annual 20% increase in cloud revenue by 2025. Moreover, Ives predicts that over 50% of Microsoft’s installed base will embrace this AI functionality for enterprise and commercial purposes, which could be transformative for the company under the leadership of CEO Satya Nadella.

Following the pricing revelation, Microsoft’s market cap soared by $142.9 billion on Tuesday, representing the ninth-largest one-day market cap gain for a U.S. company. The aggressive pricing strategy is seen as a decisive step towards Microsoft’s endeavor to overhaul its Office apps with AI-powered Copilot services. Analysts believe that the pricing might set a new standard for Generative AI add-ons in the industry, leaving other software/AI vendors struggling to compete at the same level.

In addition to the pricing announcement, Microsoft unveiled plans to collaborate with Meta Platforms Inc., allowing it to make Meta’s AI language model, Llama 2, available to businesses for the first time. The strategic partnership also promises to provide developers building software on Microsoft’s Azure cloud-computing platform with free access to Llama 2. This move not only strengthens Microsoft’s AI capabilities but also positions the company as a leader in the AI technology market.