D.A. Davidson’s Gil Luria sees challenges for Microsoft amid AI race

  • D.A. Davidson’s Gil Luria downgrades Microsoft stock to neutral from buy
  • Luria cites Microsoft’s reliance on Nvidia chips as a disadvantage
  • Microsoft’s lead in cloud business diminished, says Luria
  • Operating margins expected to decline in fiscal 2025
  • Microsoft stock has gained 15.8% YTD while Amazon and Alphabet’s stocks perform better

Microsoft Corp.’s stock faced a setback as D.A. Davidson’s Gil Luria downgraded it to neutral from buy, citing concerns over the company’s reliance on Nvidia chips and reduced lead in cloud business. He maintained a $475 price target, implying a 9.1% upside from the closing price of $435.27. Microsoft has been an early adopter of generative AI through OpenAI, but Luria believes its rivals AWS and GCP are catching up in terms of using their own chips in data centers, giving them an advantage over Azure. This reliance on Nvidia chips is expected to reduce Microsoft’s operating margins in the future.

Factuality Level: 8
Factuality Justification: The article provides accurate information about the analyst’s change in rating for Microsoft stock and explains the reasons behind it, including a comparison with competitors AWS and GCP. It also includes relevant data on market performance and growth rates. However, it could be improved by providing more context on the analyst’s methodology or sources of information.
Noise Level: 3
Noise Justification: The article provides relevant information about Microsoft’s position in the cloud computing and AI market, but also includes some noise with the mention of a specific analyst’s opinion that may not be applicable to all readers. It could have been more informative by providing additional context or data to support the claims made.
Public Companies: Microsoft Corp. (MSFT), Amazon.com Inc. (AMZN), Alphabet Inc. (GOOGL), Nvidia Corp. (NVDA), S&P 500 (SPX)
Key People: Gil Luria (Analyst at D.A. Davidson)

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Financial Relevance: Yes
Financial Markets Impacted: Microsoft Corp., Amazon.com Inc., Alphabet Inc., and Nvidia Corp.
Financial Rating Justification: The article discusses the impact of Microsoft’s reliance on Nvidia for chips, which affects its margins and competitiveness with Amazon and Google in the cloud business, potentially affecting financial markets and company performance.
Presence Of Extreme Event: No
Nature Of Extreme Event: No
Impact Rating Of The Extreme Event: No
Extreme Rating Justification: No extreme event mentioned in the article
Move Size: The market move size mentioned in the article is a 0.4% decrease in Microsoft’s stock price in premarket trading and a 15.8% gain year to date.
Sector: Technology
Direction: Down
Magnitude: Medium
Affected Instruments: Stocks

Reported publicly: www.marketwatch.com