Software giant Microsoft continues to provide more fuel to propel the big tech rally as the company beat analysts’ expectations. One of the catalysts for big tech will be the adoption of artificial intelligence (AI).
Microsoft’s peers have been developing their own uses for AI as consumer adoption continues to grow. Microsoft, however, was a bit more modest in terms of its outlook, leaving investors to wonder about whether the company can sustain its AI revenue.
“Though Microsoft underwhelmed a bit with its fiscal first-quarter forecast, Evercore ISI’s Kirk Materne said the company was correct to take a conservative view of AI revenue timing for the year ahead,” a MarketWatch report noted.
Despite the lack of future guidance, global investment firm Morgan Stanley was still bullish on Microsoft’s stock, particularly its positioning when it comes to AI. That confidence also spilled over into the company’s ability to generate revenue in the coming months.
“Bottom-line, the lack of hand holding does not diminish our confidence in Microsoft’s positioning for Generative AI, nor their ability to accelerate revenues into solid double-digit territory in FY24. Rather, the aggressive ramp in capex suggests a potentially stronger demand curve for Generative AI versus what we’ve already embedded in our model,” according to Morgan Stanley.
Overall, the big trend, as mentioned, will be the growth of AI, but other factors can contribute, such as platform consolidation and cloud computing.
“Trends around platform consolidation, shift to cloud, and AI are driving more customers to Microsoft and increasing the company’s enterprise wallet share,” investment bank William Blair said.
4 Trading Options
Traders who align themselves with Morgan Stanley’s bullishness can play off the strength using the Direxion Daily MSFT Bull 1.5X Shares (MSFU). The ETF provides an extra dose of leverage without having to use a margin account to amplify gains.
Traders looking at the big picture can also get more broad exposure to tech’s rally with the Direxion Daily Technology Bull 3X ETF (TECL). With its triple leverage, TECL is certainly not for the weak of heart, given that the fund seeks daily investment results equal to 300% of the daily performance of the Technology Select Sector Index.
To play short-term moves to the downside, traders can also use the Direxion Daily MSFT Bear 1X Shares (MSFD). For the broader move, traders can use the bearish Direxion Daily Technology Bear 3X ETF (TECS).
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