Club name Microsoft has lots going for it. Cloud business Azure is doing well, its gaming business is very strong, and its office software is terrific. But one area has Jim Cramer worried: Copilot. The company’s generative artificial intelligence chatbot — which was released with much fanfare in late 2023 and aimed at boosting productivity — hasn’t caught on with users as quickly as expected. “I had a terrific person from Microsoft on last week and felt more confident about the Copilot,” Jim said during the Investing Club’s December Monthly Meeting. “That said, if you asked me which Mag 7 stock I am least confident about when it comes to earnings, it would be this one,” Jim added. “I know office AI is doing better than consumer AI so maybe that can make it less worrisome. But I do have trepidation given the high expectations for 2025.” Microsoft has been the portfolio’s worst-performing mega-cap name so far this year. Shares are up 20%, trailing the S & P 500’s nearly 27% gain and well behind Meta Platforms (up 75%) and Nvidia (up 160%). That’s a big reversal from the stock’s 2023 performance, when Microsoft leapt 57%, driven by investor excitement about its first-mover advantage in the heated generative AI arms race. That included Microsoft’s early backing of OpenAI , the buzzy startup behind ChatGPT. But the narrative shifted in 2024. Skepticism of the firm’s AI strategy has weighed on investor sentiment. During the October quarter, for example, Microsoft shares declined after management forecasted a slight deceleration in revenue growth for cloud computing business, Azure, while its AI spend continued. Wall Street has been wary of the success of Microsoft’s virtual assistant Copilot as competition for AI toolsets heats up, too. This comes as Club holding Salesforce touts its AI suite of products, dubbed Agentforce, over the past year. In December, we sold some shares of Microsoft as a result. In the new year, investors need to see signs that Microsoft’s AI efforts will eventually benefit the firm’s bottom line. That’s a key way the stock can have a performance as stellar as 2023’s meteoric rise. So, during each quarterly earnings report in 2025, Wall Street will be closely watching revenue growth within Microsoft’s cloud computing division. Management’s remarks about Copilot adoption will be crucial as well. If the company fails to impress, that could easily ding the share price moving forward. Another tailwind for Microsoft shares is the expected PC refresh cycle . After the surge in electronics demand driven by the Covid pandemic in 2020, more consumers are gearing up to upgrade their devices. As it’s time for many to upgrade to newer models, this bodes well for sales of Microsoft’s devices and its 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 subscriber to the CNBC Investing Club 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 charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.
Microsoft Corp. signage in New York, US, on Friday, Oct. 25, 2024.
Jeenah Moon | Bloomberg | Getty Images
Club name Microsoft has lots going for it. Cloud business Azure is doing well, its gaming business is very strong, and its office software is terrific.
