MSFT - Microsoft Downgrade: Here's The Reality Check On Azure Vs. Amazon's AWS

2024-06-18 09:20:51 ET

Summary

• Last year, at the beginning of this AI revolution, Microsoft Azure was considered to be in the lead out of all the major cloud providers.
• There has even been speculation that Azure could eventually overtake Amazon’s AWS as the cloud leader.
• However, recent research suggests that the tables could be turning against Microsoft/ OpenAI and enable Amazon to sustain its dominance in the cloud market.

It has been well over a year now since the generative AI revolution began, with semiconductor and cloud provider stocks being seen as the "picks and shovels" of this era. While Microsoft ( MSFT ) Azure was initially considered to be in the leading position out of the major cloud service providers to benefit from this major technology shift, recent research suggests that it may be losing its edge, which could enable Amazon's ( AMZN ) AWS to sustain its leadership position.

In the previous article on Microsoft , we simplified some of the jargon used by executives on the earnings call to help investors understand how Azure is positioned to generate long-term recurring revenue/profits amid the AI revolution. In the previous article on Amazon , we discussed the tech giant's generative AI deployment opportunities on the e-commerce side. In this article, we discuss recent trends in how enterprises are adopting AI, and how they threaten to undermine future demand for Microsoft/OpenAI's flagship GPT models, which is indeed the reason behind the downgrade of MSFT to a 'hold'.

The initial bullish perception of Microsoft relative to Amazon

Before we delve into bearish developments, let us first revisit the initial bull case on MSFT and laggard perception of AMZN....

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