Microsoft’s shift to AI creates world’s second $3 trillion company

‘As one of the magnificent seven technology companies, Microsoft is a stock market darling’

MICROSOFT became the second-ever company to exceed a $3 trillion (£2.4trillion) valuation yesterday, after its focus on artificial intelligence (AI) drove an investor rally.

The valuation follows Apple hitting the milestone in June last year. Microsoft’s shares rose more than 1.45pc during trading yesterday in New York, on a day when America’s benchmark S&P 500 index also hit a record high. Microsoft, known as one of the “magnificent seven” technology companies that have fuelled the growth in US stock indexes over the past year, has concentrated heavily on adding artificial intelligence features to its services.

It has become the biggest investor in the highest-profile AI startup, Openai, which is behind the CHATGPT chatbot, pumping in $10bn (£7.9bn) at the start of last year. The tie-up helped investors to see Microsoft as ahead in AI compared with younger rivals, such as Google and the Facebook owner, Meta. Since then, it has announced a string of Ai-related innovations to its core products, including adding an AI digital assistant called Copilot to its Edge web browser and its Office software.

It also added an AI chatbot to its Bing search engine last February in an attempt to gain traction against Google, but independent analysis suggests that the company has found growing market share to be difficult.

The company, which is the second-largest cloud computing provider, has also been developing its own Ai-supporting chips as it steps up its fight against Amazon and Google to run artificial intelligence tools on behalf of companies.

Sophie Lund-yates, lead equity analyst at Hargreaves Lansdown, said: “As one of the magnificent seven, Microsoft is a stock market darling. There’s bubbling excitement about the group’s AI tools, broader cloud products, as well as ongoing recognition for its resilient bread and butter software.”

But she cautioned that some of Microsoft’s revenue relied upon the number of new computers being sold and “there has been some weakness here”.

Microsoft, which was founded in 1975, became the biggest player in software in the 1980s and 1990s after striking a deal with IBM to produce the operating system for its personal computers, which became adopted as the industry standard.

However, the software giant has faced increased competition since the start of this century from the rise of software accessed through web browsers, and the popularity of rival operating systems from Google and Apple.

Since the start of the year, Microsoft shares have been vying with Apple’s for the mantle of the world’s most valuable company, with the iphone maker briefly losing its top ranking to Microsoft earlier this month.