Microsoft's AI capabilities are undervalued – Microsoft Corporation (NASDAQ: MSFT)



Artificial Intelligence ("AI") is a megatrend that all technology companies pay attention to. Gartner estimates that the value that companies will get from AI will reach $ 1.2 trillion this year (Source: Gartner says Global Artificial Intelligence Business Value will reach $ 1.2 billion in 2018). When most investors think about ways to invest in accordance with this AI theme, common ideas for investing in AI chip maker Nvidia (NVDA), the search engine for intelligence / everyday research assistant Google (GOOGL) (NASDAQ: GOOG) or the store that is everything that collects data about the buying behavior of everyone Amazon (AMZN). Microsoft (MSFT) is not very common in this conversion, but probably.

Since Satya was acquired as CEO of Microsoft, Satya Nadella has focused on AI. Nadella recently described that AI is the defining technology of our time & # 39; is (source: Microsoft CEO, when A.I emerged: & # 39; The future we will invent is a choice we make & # 39;).

As the number 2 provider of cloud computing services and a leading producer of productivity software, Microsoft is in a privileged position to offer KI services to businesses and consumers because the company has access to massive amounts of data and understands consumer behavior. Investors should start adding AI to the reasons why an investment in Microsoft might be interesting.

A quick overview of Microsoft

Microsoft is a ubiquitous technology company. Historically, the company focused on consumer technologies such as personal computers and operating systems. Consumer markets are viciously competitive and have a short life cycle of the product, resulting in a constant need to renew and advertise product lines.

More recently, Microsoft has stepped up its focus on the side of business technology. Enterprise technology is a better industry. Organizations are slow organizations that have high switching costs once they are locked into a technology that works. Companies are increasingly finding productive investments in technology by moving assets to the cloud and streamlining departments through more ubiquitous use of software. Enterprise technology now accounts for more than 50% of sales and two-thirds of operating profit.

Microsoft is organized into three segments: productivity and business processes, intelligent cloud and more personal computing.

Source: Microsoft 2017 10K.

Productivity and business processes: this segment consists of Microsoft software that aims to connect people and help them work together. Products include Office (Word, PowerPoint, Excel), Skype, LinkedIn and Dynamics (an ERP software).

Intelligent cloud: this segment consists of Microsoft solutions for public, private and hybrid cloud services. This includes Azure, SQL Server and related services for companies.

More personal computing: this segment consists of Microsoft's operating system, Bing search and hardware products such as Xbox and Surface tablet.

Microsoft quickly builds artificial intelligence possibilities

As mentioned above, Microsoft focuses most of its efforts on enterprise technology solutions. Enterprise technology for Microsoft includes:

1) Give companies the great apps they need to be productive and collaborate.

2) Providing effective storage, security and customer support around business processes and critical data assets.

The most direct result of strengthening companies with this software and services is that an incredible amount of data is produced. In the past, much of this data would have been lost because there was no effective way to store large amounts of data. That behavior has changed. There has been a big data wakefulness in recent years in which organizations have realized the potential value of data. Microsoft has played an important role in providing solutions to this storage problem with "large data". Microsoft & # 39; s Azure is the second largest solution for cloud computing behind Amazon & # 39; s AWS.

Only capturing and storing all data is not enough, companies need intelligent ways to use that data. Again, Microsoft has some elegant solutions for this, including the SQL database toolkit. However, most solutions today are very linear, in the sense that organizations generally pay attention to the information they already know, leaving a lot of potential untapped. This is one of the ways artificial intelligence can help. AI is very good at combing huge amounts of data (structured and unstructured) and finding interesting relationships that might not seem obvious at first glance. In other words, AI has the potential to make existing data more useful for the owners of the data.

There are many other use cases for AI when it comes to enterprise computing. AI can be used to improve business security by finding vulnerabilities that are difficult to detect. AI can also be used to generate predictive analyzes by studying historical data and applying pattern recognition. Predictive analyzes have enormous consequences for broad parts of the economy. Using predictive analytics, retailers can predict consumer demand at different times of the year, customer service companies can anticipate customer needs and healthcare organizations can better diagnose patients.

Because Microsoft is at the core of Big Data requirements for many large companies, the company has recognized the need for AI and made significant investments in AI capabilities. Microsoft builds what it calls an "intelligent cloud", where solutions such as machine learning are used to expose data relationships and predictive data analyzes, as described above.

Microsoft has created turnkey AI tools for developers through the Cognitive Services (source: Microsoft Cognitive Services). By offering developers better tools, the company has a high priority and is one of the main reasons why Microsoft has adopted GitHub (Source: Microsoft + GitHub = Empowering Developers – The Official Microsoft Blog).

The use of artificial intelligence is not limited to cloud applications. Microsoft has created a personal assistant named Cortana who can communicate with people via speech or text. There is a significant amount of AI behind the semantic engine that drives Cortana (source: Microsoft acquires AI company to make Cortana and bots sound more human). As technology improves, Cortana (like other assistants like Siri and Alexa) will become more useful and help users become more productive.

Microsoft is also working on ways to improve its flagship software such as Office with AI. This can be things like better spell checking in Word for auto-response messages on LinkedIn or Outlook.

There are truly limitless ways in which AI can improve Microsoft's existing products and result in new products. What investors need to know is that the company takes artificial intelligence seriously and is ready to be a leader in the field.

Disclosure: I / we have no positions in these shares and no plans to take positions within the next 72 hours.

I wrote this article myself and it reflects my own opinion. I receive no compensation for it (except for Alpha search). I do not have a business relationship with a company whose stock is mentioned in this article.


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