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Microsoft set for AI-powered revenue surge as stock pulls ahead

Microsoft set for AI-powered revenue surge as stock pulls ahead

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Microsoft set for AI-powered revenue surge as stock pulls ahead

 Microsoft (MSFT.O), opens new tab is expected to report a 15.8% jump in quarterly revenue, its best growth in nearly two years, as rising adoption of its products infused with generative AI fuels demand for its cloud services.

Thanks to its early lead in artificial intelligence, Microsoft is likely to cement its lead as the biggest company by market value this year. The software giant snagged the top spot on Friday, with a valuation of $3 trillion, toppling by a small margin Apple (AAPL.O), opens new tab, the most valuable company since 2011.

Results on Tuesday from Microsoft, which has committed to invest more than $10 billion in generative AI posterchild and ChatGPT maker OpenAI, will set the tone for expectations from AI this year, after investors poured billions of dollars into the technology in 2023.

Any boost to companies’ toplines will still be small for the next few months, analysts have said. Nevertheless, Wall Street will watch closely to see if these investments are starting to show returns.

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“Gen AI has emerged as the top priority for (chief information officers) and Microsoft is uniquely well positioned, with the majority of CIOs expecting to use a Microsoft AI product in the next 12 months,” Morgan Stanley analyst Keith Weiss said in a note dated Jan. 11.

The Windows-maker over the last three months has widely rolled out its main AI tool – the $30-a-month “Copilot” for its Microsoft 365 service that can draft emails, make presentations and collate meeting highlights.

“We expect AI contribution to Azure growth to increase, with our checks pointing to strong demand for Azure AI services,” said Jefferies analyst Brent Thill in a research note.

“It’s worth highlighting that we expect the situation at OpenAI will have a minimal impact, if any, on Azure’s AI contribution in (the second quarter),” he said.

Growth in Microsoft’s cloud business is also picking up as customers buy computing power in anticipation of using its AI services. This has helped Azure win market share as it competes with Amazon.com’s (AMZN.O), opens new tab AWS and Alphabet’s (GOOGL.O), opens new tab Google Cloud.

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Microsoft forecast 26% to 27% growth for Azure in the second quarter ended Dec. 31. Analysts from Visible Alpha expect Azure to grow 27.7%.

“It’s too early to be modeling revenue contribution from GenAI before 2025 for any software company not named Microsoft,” said RBC Capital Markets analyst Rishi Jaluria.

Microsoft said in October it expects its December-quarter gross margin for the cloud business to be mostly flat from a year earlier as it spends to expand its AI infrastructure to meet growing demand. Second-quarter operating expenses are expected to surge the most in five quarters, according to LSEG.

A recovery in the personal computers market is expected to lift revenue growth in the company’s Windows and devices business to the most in four years.

For its Windows-based business segment, which includes its recent acquisition of gaming firm Activision, the company forecast second-quarter sales growth of about 16% to 19%. Last week, Microsoft said it would let go of 1,900 employees at Activision Blizzard and Xbox, representing about 8% of the overall Microsoft Gaming division.

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Microsoft’s shares climbed 57% last year. Along with a rally in other tech stocks, including Alphabet and Nvidia (NVDA.O), opens new tab, Microsoft helped fuel a 24% surge in the S&P 500 (.SPX), opens new tab in 2023. 

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Sam Altman’s OpenAI signs content agreement with News Corp

Sam Altman’s OpenAI signs content agreement with News Corp

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Sam Altman's OpenAI signs content agreement with News Corp

Sam Altman-led OpenAI has signed a deal that will give it access to content from some of the biggest news publications owned by media conglomerate News Corp, the companies said on Wednesday.

The deal comes weeks after the Microsoft-backed AI giant clinched an agreement to license content from the Financial Times for the development of AI models.

Access to troves of data can help enhance content produced by OpenAI’s ChatGPT, the chatbot that can generate human-like responses to prompts and create summaries of long text. 

Such partnerships are also crucial for the training of AI models and can be lucrative for news publishers, which have traditionally been denied a slice of profits internet giants earn for distributing their content.

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OpenAI, which kickstarted the AI frenzy when it launched its chatbot in 2022, had also struck a content deal with social media platform Reddit last week.

OpenAI did not disclose the financial details of its latest deal, but the Wall Street Journal, which is owned by News Corp, reported that it could be worth more than $250 million over five years.

The tie-up also includes a guarantee that the content will not become available on ChatGPT immediately after it is published on one of the news websites, the WSJ report said.

The agreement will give OpenAI access to current and archived content from several News Corp publications, including the Wall Street Journal, MarketWatch, the Times and others.

News Corp shares climbed about 4% after the bell.

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AI disclosure required in campaign ads, FCC chair says

AI disclosure required in campaign ads, FCC chair says

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AI disclosure required in campaign ads, FCC chair says

U.S. Federal Communications Commission Chairwoman Jessica Rosenworcel on Wednesday proposed requiring disclosure of content generated by artificial intelligence (AI) in political ads on radio and TV.

Rosenworcel is asking her colleagues to vote to advance a proposed rule that would require disclosure of AI content in both candidate and issue advertisements, but does not propose to prohibit any AI-generated content within political ads. 

The rule would require on-air and written disclosures and cover cable operators, satellite TV and radio providers, but the FCC does not have authority to regulate internet or social media ads or streaming services.

The agency has already taken steps to combat misleading use of AI in political robocalls.

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There is growing concern in Washington that AI-generated content could mislead voters in the November presidential and congressional elections. Some senators want to pass legislation before November that would address AI threats to election integrity.

“As artificial intelligence tools become more accessible, the commission wants to make sure consumers are fully informed when the technology is used,” Rosenworcel said in a statement, adding the proposal “makes clear consumers have a right to know when AI tools are being used in the political ads they see.”

The FCC said the use of AI is expected to play a substantial role in 2024 political ads. She singled out the potential for misleading “deep fakes” which are “altered images, videos, or audio recordings that depict people doing or saying things that did not actually do or say, or events that did not actually occur.”

Advocacy group Public Knowledge called on Congress to extend oversight of AI in political advertising to digital platforms.

Requiring disclosure of AI “protects a vital public interest and is a commonsense step for preventing deceptive political advertisements,” the group’s policy counsel Nicholas Garcia said.

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AI content in elections drew new attention in January after a fake robocall imitating President Joe Biden sought to dissuade people from voting for him in New Hampshire’s Democratic primary election.

In February, the FCC said robocalls using AI-generated voices are illegal. The declaratory ruling gave state attorneys general new tools to go after the entities behind the robocalls, Rosenworcel said.

The FCC in 2023 finalized a $5.1 million fine levied on conservative activists for making more than 1,100 illegal robocalls ahead of the 2020 U.S. election.

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Meta’s Rayban integrates Instagram, Amazon Music, Calm App

Meta’s Rayban integrates Instagram, Amazon Music, Calm App

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Meta's Rayban integrates Instagram, Amazon Music, Calm App

 Meta has unveiled a series of updates to its Ray-Ban smart glasses, enhancing user experience with innovative hands-free functionalities.

These enhancements include seamless integration with popular platforms such as Instagram, Amazon Music, and the meditation app Calm.

One of the standout features of this update is the ability for users to effortlessly share images from their smart glasses directly to their Instagram Story without the need to reach for their phone.

Users can simply capture a photo with the smart glasses and command, “Hey Meta, share my last photo to Instagram,” or opt to take a new photo in the moment by saying, “Hey Meta, post a photo to Instagram.”

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This move by Meta echoes the functionality introduced by Snap Spectacles in 2016, which allowed users to capture photos and videos with their smart glasses for direct sharing to Snapchat Stories.

Meta’s Ray-Ban smart glasses now offer hands-free integrations with Amazon Music and the Calm app. With voice commands like “Hey Meta, play Amazon Music,” users can enjoy streaming music without the need to handle their phone.

The Calm integration allows users to access mindfulness exercises and self-care content by simply saying, “Hey Meta, play the Daily Calm.”

Expanding its style offerings, Meta has introduced new designs in 15 countries, including the U.S., Canada, Australia, and parts of Europe.

Among these styles are Skyler in Shiny Chalky Gray with Gradient Cinnamon Pink Lenses, Skyler in Shiny Black with Transitions Cerulean Blue Lenses, and Headliner Low Bridge Fit in Shiny Black with Polar G15 Lenses. These glasses are available for purchase on both Meta’s and Ray-Ban’s websites.

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The introduction of these new features comes on the heels of Meta’s AI upgrade to the smart glasses, which integrated multimodal AI capabilities.

This enhancement empowers users to interact with their environment more effectively, enabling features such as real-time translation using the built-in camera and Meta AI.

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