American powerhouse Microsoft (NASDAQ: MSFT) is under the microscope. The company’s innovative strides in artificial intelligence have put it in a dominant position, and unsurprisingly, this has attracted the attention of government oversight bodies. Yet, despite the specter of regulatory scrutiny, Microsoft’s stock maintains a ‘B’ rating, making it a tenacious hold for long-term investors.
Earlier in the year, Lina Khan, Chair of the Federal Trade Commission, expressed the agency’s intent to curtail deals that would “enable dominant firms to exert undue influence or gain privileged access in ways that could undermine fair competition.” Given Microsoft’s status as a leading figure, the company is in the FTC’s crosshairs. The potential implications of this regulatory attention demand examination.
Microsoft’s strategic move to pump $13 billion into OpenAI, the developer behind ChatGPT generative AI chatbot, turned out to be a stroke of genius. This investment provided the tech giant an advantageous start in the gen-AI battles that commenced in 2022.
Utilizing OpenAI’s technology, Microsoft has been able to integrate artificial intelligence into a host of products and services – Bing, Word, PowerPoint, CoPilot, and Azure. As a result, Microsoft now boasts a significant edge over its Big Tech competitors.
Yet, as Chair Khan cautioned, “There’s no AI exemption from the laws on the books.” To that effect, she noted that the FTC would be “looking closely at the ways companies may be using their power to thwart competition or trick the public.”
The FTC is expected to initiate an antitrust inquiry into Microsoft’s deal with OpenAI. This investigation may span months to years, implying that Microsoft’s investors should brace themselves for an extended legal skirmish.
“Oppenheimer said the OpenAI partnership is positive and sustainable, giving OpenAI access to the best AI infrastructure, critical data, and funding, and Microsoft exclusivity to the best AI model.”
However, this impending investigation does not necessitate a hasty sell-off of Microsoft shares. Instead, it indicates the importance for shareholders to remain informed about the latest developments.
Take note, Microsoft triumphed in acquiring Activision Blizzard in spite of an FTC investigation. This suggests that even a formidable regulatory body like the FTC is not without its limitations.
Wall Street analysts seem unphased by the FTC’s looming antitrust probe. In fact, Oppenheimer analysts recently increased their price target on Microsoft stock, lifting it from $450 to $500, while upholding their ‘outperform’ rating on Microsoft shares.
The crux of the matter is this: there are pros and cons to Microsoft’s dominance in the gen-AI sector. Microsoft’s commanding position in the AI war arena is commendable. Conversely, the company’s success has put it in the line of regulatory fire. Hence, it’s crucial for Microsoft to stay abreast of the latest news and developments in this ongoing saga.
As it stands, Microsoft stock holds a ‘B’ grading with no compelling reason for investors to relinquish their shares. Strategically speaking, if you’re in it for the long haul, stick around and hold fast.
Please note, as of the date of publication, Louis Navellier held a long position in MSFT. He did not have (either directly or indirectly) any other positions in the securities mentioned in this article. The primary author tasked with this article did not possess (either directly or indirectly) any positions in the securities discussed here.
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