**Diving into the Future of Microsoft: An AI Perspective**
A recent move by top-performing fund manager Stephen Yiu caught the attention of many investors when he revealed his decision to sell off Microsoft stock due to concerns about the tech giant’s future profitability. Yiu, the chief investment officer at Blue Whale Growth Fund, has been reducing his fund’s Microsoft position over the last six months, despite the fact that the fund is up 16.6% this year.
**AI’s Impact on Microsoft’s Business Model**
Yiu’s decision is based on his belief that Microsoft’s business model is on the verge of significant change with the rise of generative AI technology. He expressed his concerns during the Quality-Growth Investor Conference earlier this month, where he highlighted Microsoft’s heavy investment in generative AI technologies, including the acquisition of OpenAI, which has been a leader in AI research.
**The Financial Risks of AI-Powered Products**
One of Yiu’s main concerns is Microsoft’s new AI-powered product, Office 365 Copilot, which is priced at an additional $30 per user per month. While this may seem like a revenue booster for Microsoft, Yiu suggests that it could actually lead to a decline in the company’s profit margins, as the costs associated with providing AI services are significantly higher than those for traditional software.
**The Need for Continued Investment in AI Technology**
Yiu emphasizes the ongoing costs of AI technology, including the need for expensive AI chips and constant retraining and updating of AI models. He believes that Microsoft’s return on invested capital will decline, despite the consensus expectation among Wall Street analysts that the company’s stock will rise by 20% over the next 12 months.
**Conclusion**
In conclusion, the investment decisions of fund manager Stephen Yiu shed light on the potential impact of AI technology on Microsoft’s profitability. As the tech giant continues to invest in generative AI and AI-powered products, it faces risks associated with higher costs and lower profit margins. Yiu’s insights provide a unique perspective on the future of Microsoft in the face of advancing AI technologies.
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