Gene Munster discussed the nascent yet rapidly growing adoption of Microsoft’s Copilot, noting that while only 5 million of 450 million Office users are currently engaged, 60% of Fortune 500 companies are already utilizing it, with usage doubling quarter over quarter. He expressed optimism about Microsoft’s AI initiatives and their potential for future growth, while also highlighting a cautious investment stance compared to Meta, due to differing performance and valuations.
In a recent discussion, Gene Munster provided insights into the adoption of Microsoft’s Copilot, highlighting that while the user base is currently small—around 5 million out of 450 million Office users—there is significant growth potential. He noted that 60% of Fortune 500 companies are already utilizing the product, and usage has doubled quarter over quarter. Munster emphasized that this growth, albeit from a small base, indicates a positive trend for Microsoft, suggesting that the company is experiencing typical growing pains as it develops and refines its AI offerings.
Munster addressed concerns regarding Microsoft’s Azure growth, particularly when isolating the AI component, which appears flat. He acknowledged that while the Azure numbers may not be as exciting without the AI aspect, the overall excitement surrounding AI remains strong. He believes we are in the early stages of a bull market driven by AI, which could lead to significant growth in the coming years. Munster expressed confidence that the features being developed will eventually excite consumers and drive further adoption.
When discussing investment strategies, Munster compared Microsoft and Meta, noting that Meta has significantly outperformed Microsoft in recent times. He pointed out the valuation differences, with Meta trading at a lower multiple compared to Microsoft. Despite both companies having substantial exposure to AI, Munster indicated that his portfolio currently favors Meta over Microsoft, reflecting a cautious approach to investing in Microsoft at this time.
Munster also explored Microsoft’s decision to charge a subscription fee for its AI assistant rather than incorporating it into existing software packages. He suggested that the pricing strategy hinges on the perceived value of the AI features. Drawing parallels to the evolution of technology pricing, he noted that as products deliver more value, companies can justify higher prices. He cited the example of iPhones, which have seen significant price increases over time as their value has grown.
In conclusion, Munster remains optimistic about the future of Microsoft’s AI initiatives, believing that as the company continues to enhance its offerings, consumers and enterprises will be willing to pay more for these advanced features. He views the current phase as a period of adjustment and growth, with the potential for Microsoft to solidify its position in the AI market as it develops more compelling products.