Check out recent headlines about Microsoft (NASDAQ:MSFT), and you’ll see plenty about recent boardroom drama at OpenAI. I’m of course talking about the firing, and subsequent rehiring, of OpenAI CEO Sam Altman. This news was of some relevance to MSFT stock, and not only because the tech giant has invested billions into the ChatGPT developer.
Yet despite this boardroom drama, don’t expect this news to have much bearing on Microsoft’s future price performance. Here’s why you should count on the factors that made MSFT a strong performer in 2023 will propel shares even higher during 2024.
MSFT Stock, the OpenAI/Altman Saga, and Why it Shouldn’t be Your Focus
As InvestorPlace’s Larry Ramer explained last week, it seems like investors are just as excited that Altman is coming back to OpenAI as they were about him coming to work for Microsoft directly. This makes sense.
The only way Microsoft would’ve lost because of the Altman saga would’ve been if he moved to a competing big tech firm with generative AI ambitions. For example, Google parent Alphabet.
However, that’s not the only takeaway here for MSFT stock investors. That’s not all. As Ramer also pointed out in his article, Microsoft has the resources and cash to attract all the generative AI talent it wants.
Altman’s “return” to OpenAI doesn’t change much regarding the company’s key advantages in this space. Moreover, while an integral factor in the future success of any company looking to conquer this newest technological frontier, talent alone may not be the most important factor.
Instead, the most important factor has to do with success in monetizing AI technology developed by the brightest minds in the field. Microsoft has, of course, made the right first moves in this area. Over the next few years, this leaves the company poised to profit considerably from this new technology.
What Instead Will Drive Shares Even Higher in 2024
To the skeptics, present and future AI-related growth is already baked into the valuation of MSFT stock. In their view, after soaring 57.5% higher throughout 2023, returns in the coming year will be far less impressive, as the company “catches up to its valuation.”
Admittedly, Microsoft’s continued rally has been due as much to investors expecting a resurgence in growth as it’s been because of growth itself bouncing back. That said, while looking forward, the market hasn’t gone overboard. As I noted a few weeks back, generative AI technology started having a noticeable impact on Microsoft’s bottom line starting last quarter.
Generative AI will likely have an even stronger impact on MSFT’s results in the quarters ahead. As demand for this technology keeps climbing, the company is well-positioned to not just meet raised expectations, but beat them. Therefore, Microsoft’s valuation (forward earnings multiple in the low-30s) is sustainable.
It’s why MSFT has additional room to run over the next twelve months, and why the stock (based upon long-term earnings forecasts) could really add to this year’s gains over the next few years.
The Bottom Line
The Altman saga has come and gone, but what’s most important remains in motion. This tech giant continues to be the generative AI front-runner.
Don’t get me wrong. It’s not set in stone that shares will continue to surge in the immediate-term. Much like what transpired in the late summer/early fall, there could always be another temporary round of weakness.
However, irrespective of near-term price movements, this stock remains a strong buy.
Entering or adding to a position at current prices (just a few dollars below Microsoft’s all-time high) could still prove to be a profitable move in hindsight.
If there’s a pullback/sell-off (assuming it’s due to market volatility, and because of something materially-affecting Microsoft’s future prospects), you’ll perhaps can scoop up MSFT stock at a can’t miss price.
MSFT stock earns an A rating in Portfolio Grader.
On the date of publication, neither Louis Navellier nor the InvestorPlace Research Staff member primarily responsible for this article held (either directly or indirectly) any positions in the securities mentioned in this article.
