This software stalwart “missed the mobile revolution, it’s not going to miss AI”

Artificial intelligence, one of the hottest topics in markets since December’s rollout of ChatGPT, was among areas of focus for Munro Partners’ Nick Griffin during a panel session at Livewire Live 2023 on Tuesday 12 September.

The rapid rise in valuations for the dominant players in the space – the so-called “Magnificent 7” – in the year so far caught many by surprise. Especially when compared to the stuttering line traced by the S&P 500 during the same period.

Just how sustained the rally will be remains an open question for many, but not the Munro Partners’ CIO. He pointed to Microsoft (NYSE: MSFT) as a prime example and explained why the tech industry stalwart isn’t sitting this one out.

Griffin believes the thinking from inside Microsoft is something like this: “We became number one in the PC revolution; we missed the mobile revolution; we’re not going to miss the AI revolution.”

Microsoft’s share price is up more than 37% in 2023 so far. The software behemoth reported US$56.19 billion in revenue in its fourth-quarter results last week, versus US$55.47 billion expected by Refinitiv, up 8% year on year.

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The company’s CEO, Satya Nadella, recognises the important role AI will play in growing profits for technology firms in the next several years. It invested US$13 billion in the company behind ChatGPT, OpenAI, in January.

“They effectively went all in with Co-Pilot, increasing their capex by $15 billion and that’s flowed throughout the system. As Microsoft goes, so does Amazon, Google – then all the semiconductor companies start to perform accordingly.”

The standout example here is chipmaker Nvidia, its share price up more than 300% year-to-date.

“The big thing that’s shifted this year is the secular story, alongside some other secular stories that are out there…that are ultimately getting people to look past the macro, seeing across the valley to the other side,” Griffin said.

“You’re seeing that with AI but also with the energy transition. We’re talking a lot less macro than we were this time last year.”