Gene Munster from Deepwater Asset Management discussed the significant role of AI in driving Microsoft’s Azure growth, noting a revenue acceleration linked to its partnership with OpenAI, while emphasizing the need for clearer metrics on Microsoft’s AI initiatives. He also highlighted Meta’s strong investment in AI, with over 500 million monthly active users of Meta AI, positioning the company well for future growth.
In a recent discussion, Gene Munster from Deepwater Asset Management provided insights on the performance of Microsoft and Meta, particularly focusing on the impact of artificial intelligence (AI) on their growth. He emphasized that Microsoft’s Azure cloud service is a key driver of its growth, noting an acceleration in revenue from 29% to 31%. Munster highlighted that a significant portion of this growth, approximately 12%, can be attributed to Microsoft’s relationship with OpenAI, indicating that AI is becoming increasingly integral to their business model.
Munster expressed his anticipation for more concrete details regarding the adoption of Microsoft’s Co-Pilot feature during their earnings call. He pointed out that while Microsoft had previously mentioned that 40% of GitHub revenue is linked to Co-Pilot, they have not provided specific numbers on Co-Pilot customers or its direct impact on revenue. He indicated that this lack of transparency makes it difficult to assess the true financial implications of their AI initiatives.
When discussing Microsoft’s valuation, Munster suggested that the stock appears expensive at its current levels. He believes that while Microsoft is one of the more stable companies among the megacaps, it has not yet reached its full potential in terms of valuation relative to its growth prospects. He compared Microsoft to Google, suggesting that Google may be better positioned to capitalize on AI opportunities, which could influence investor sentiment and stock performance.
Switching gears to Meta, Munster provided an overview of the company’s recent earnings call, noting that Meta AI has surpassed 500 million monthly active users. He highlighted the significant investment in AI infrastructure, with Meta training its LLaMA 4 models on a massive cluster of over 100,000 H-100 GPUs daily. This investment underscores Meta’s commitment to AI and its potential to drive future growth.
Overall, Munster’s analysis suggests a cautious but optimistic outlook for both Microsoft and Meta. He believes that while Microsoft has a solid foundation in AI, it needs to provide clearer metrics on its initiatives to justify its valuation. Meanwhile, Meta’s aggressive investment in AI positions it well for future growth, as indicated by its recent performance and ambitious goals.