Here is why Microsoft Corp is Leading the Surge in Tech Stocks
Software giant Microsoft Corp has been leading a stock price surge among major tech and internet companies, with its share price hitting a record high on Wednesday.
This rally in large technology stocks has added around $1.5 trillion to the total market capitalization of the Nasdaq 100 index over the past few days, indicating that the recent scepticism about these highly-valued market leaders may be subsiding.
Microsoft stock surges on strong quarterly results
According Janus Henderson Investors portfolio manager Jonathan Cofsky Microsoft ticks most boxes because of its robust business model. The software giant’s execution is currently running well and it appears to be the outright winner in artificial intelligence. Generally, Microsoft has the most cyclical tailwinds and minimal secular risks relative to other tech companies.
The stock has been on a surge for nine consecutive sessions, marking the longest rising streak in almost four years. Since the end of September, Microsoft shares have gained 15%, dwarfing the seven mega caps that have been the talk of 2023. The rise has led to a market cap of $2.7 trillion close to Apple Inc.’s market capitalization of $2.84 trillion.
Results for the recent quarter triggered the surge in stock price. In a season marked by mixed mega cap earnings reports, Microsoft reported a rebound in cloud growth thanks to increasing demand for AI products.
Although Wall Street’s view of tech giants never really weakened, entering into current earnings season, questions were raised regarding the company’s value and capacity for growth. These worries were partially confirmed by Alphabet Inc.’s lackluster cloud performance and Apple’s poor Chinese sales.
But now, it appears that sentiments are turning around. This is partially due to an optimistic outlook on fiscal policy, since the most recent jobs report hinted that rate hikes by the US central bank might be coming to an end. Treasury yields have fallen from historical highs as a result, which has eased a significant obstacle to tech prices.
Analysts bullish on Microsoft stock
According to Alliance Global Partners Mark Martiak, treasury yields may have peaked, and this will improve sentiment—particularly in the tech sector.
Additionally, Oppenheimer shares the same sentiment and named purchasing Microsoft stock to be top of its list for the end of 2023. On the other hand, Truist Advisory Services reviewed their rating on the sector at the beginning of the week citing strong balance sheet, earnings and cash flow generation which will continue supporting outperformance.
Based on the recent earnings, UBS Global Wealth Management, asserts that concerns over tech fundamentals cannot be justified currently since earnings growth is likely to sustain outperformance. UBS Global Wealth Management Americas investment officer Solita Marcelli said that the firm’s long-term positive outlook in the software and AI sector is supported by the latest earning results.
Since Microsoft is regarded an AI leader, the growth boost it received from that has helped to drive up its estimates. According to Bloomberg data, full-year projections for its net earnings have increased by 2.4% within the last month, whereas revenue projections have increased by 2.8% within the same time.