Club name Microsoft has a lot to offer. Cloud business Azure is doing well, its gaming business is very strong and its office software is great. But one area worries Jim Cramer: Copilot. The company’s generative artificial intelligence chatbot — which was released to much fanfare in late 2023 and aimed at boosting productivity — hasn’t caught on with users as quickly as expected. “I had a great person from Microsoft last week and I had more confidence in the Copilot,” Jim said at the Investing Club’s monthly meeting in December. “That said, if you were to ask me which Mag 7 stock I’m least confident about when it comes to earnings, it would be this,” Jim added. “I know office AI is doing better than consumer AI, so maybe that can make it less of a concern. But I do have some fear given the high expectations for 2025.” Microsoft is the worst-performing megacap name in the portfolio so far this year. Shares are up 20%, lagging the S&P 500’s nearly 27% gain and well behind Meta Platforms (up 75%) and Nvidia (up 160%). That’s a big turnaround from the stock’s performance in 2023, when Microsoft soared 57%, driven by investor excitement over its lead as a pioneer in the heated generative AI arms race. That included Microsoft’s early support of OpenAI, the buzzy startup behind ChatGPT. But in 2024, the story changed. Skepticism about the company’s AI strategy has weighed on investor sentiment. For example, during the October quarter, shares of Microsoft fell after management forecast a slight slowdown in revenue growth for cloud computing company Azure, while AI spending continued. Wall Street has been wary of the success of Microsoft’s Copilot virtual assistant as competition for AI toolsets also increases. This comes as Club Holding Salesforce has been touting its AI product suite, called Agentforce, for the past year. As a result, we sold a number of Microsoft shares in December. In the new year, investors should see signs that Microsoft’s AI efforts will ultimately benefit the company’s bottom line. That’s a key way the stock can perform as stellar as 2023’s meteoric rise. So during any quarterly 2025 earnings report, Wall Street will be keeping a close eye on revenue growth within Microsoft’s cloud computing division. Management’s comments on Copilot adoption will also be critical. If the company fails to impress, it could easily negatively impact its share price in the future. Another tailwind for Microsoft stock is the expected PC refresh cycle. Following the surge in demand for electronics caused by the Covid pandemic in 2020, more and more consumers are gearing up to upgrade their devices. Now that it’s time for many to upgrade to newer models, this bodes well for sales of Microsoft’s devices and Windows OEM software. (Jim Cramer’s Charitable Trust is long MSFT, META, NVDA, CRM. See here for a full list of the stocks.) As a CNBC Investing Club subscriber with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charity’s portfolio. If Jim has talked about a stock on CNBC TV, he will wait 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTMENT CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY, ALONG WITH OUR DISCLAIMER. No fiduciary obligation or duty exists nor is it created by your receipt of any information provided in connection with the Investment Club. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Signage from Microsoft Corp. in New York, USA, on Friday, October 25, 2024.
Jeenah Moon | Bloomberg | Getty Images
Club name Microsoft has a lot to offer. Cloud business Azure is doing well, its gaming business is very strong and its office software is great.
