MICROSOFT achieved a historic US$3 trillion market valuation on Wednesday (Jan 24), in the latest example of how optimism over artificial intelligence has fuelled a seemingly unstoppable advance in the software giant.

The stock rose as much as 1.3 per cent to US$403.95, resulting in a market capitalisation of US$3 trillion. The threshold cements Microsoft’s status as one of the largest public stocks. It briefly surpassed Apple in value – which last year became the first company to hit US$3 trillion – but subsequently dropped back below the iPhone maker, with the two trading places ever since.

The Redmond, Washington-based company is one of the so-called Magnificent seven that fuelled the market’s advance over 2023, gaining about 57 per cent. The advance continued into this year, with a 7.4 per cent rise that exceeds the 4.6 per cent gain of the Nasdaq 100 Index. Microsoft accounts for 7.3 per cent of the S&P 500 Index.

Much of the gain reflects investor enthusiasm over AI and its potential to accelerate growth in both earnings and revenue. Microsoft, through its partnership with OpenAI, is seen as one of the biggest beneficiaries of AI. It has released AI-supported services to customers.

Demand for AI services, along with cloud computing to support it, is projected to support Microsoft’s long-term growth trends. Revenue is expected to rise nearly 15 per cent in its 2024 fiscal year, faster than the overall tech sector, according to data from Bloomberg Intelligence.

This kind of growth has resulted in Microsoft being one of the most popular stocks on Wall Street. More than 90 per cent of the analysts tracked by Bloomberg recommend buying shares, and the average analyst price target points to upside of about 7 per cent from current levels. BLOOMBERG

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