Microsoft races past $4 trillion valuation after solid results

(Reuters): Microsoft soared past $4 trillion in market valuation on Thursday, becoming the second publicly traded company after Nvidia to surpass the milestone following a blockbuster earnings report.

The technology behemoth forecast a record $30 billion in capital spending for the first quarter of the current fiscal year to meet soaring AI demand and reported booming sales in its Azure cloud computing business on Wednesday.

Shares of Microsoft were up 6.6% at $546.33 in morning trading.

“It is in the process of becoming more of a cloud infrastructure business and a leader in enterprise AI, doing so very profitably and cash generatively despite the heavy AI capital expenditures,” said Gerrit Smit, lead portfolio manager, Stonehage Fleming Global Best Ideas Equity Fund.

Redmond, Washington-headquartered Microsoft first cracked the $1-trillion mark in April 2019.

Its move to $3 trillion was more measured than technology giants Nvidia and Apple, with AI-bellwether Nvidia tripling its value in just about a year and clinching the $4-trillion milestone before any other company on July 9.

Apple was last valued at $3.11 trillion.

Lately, breakthroughs in trade talks between the United States and its trading partners ahead of President DonaldTrump’s August 1 tariff deadline have buoyed stocks, propelling the S&P 500 and the Nasdaq to record highs.

Microsoft’s multibillion-dollar bet on OpenAI is proving to be a game changer, powering its Office Suite and Azure offerings with cutting-edge AI and fueling the stock to more than double its value since ChatGPT’s late-2022 debut.

Its capital expenditure forecast, its largest ever for a single quarter, has put it on track to potentially outspend its rivals over the next year.

Meta Platforms also doubled down on its AI ambitions, forecasting third-quarter revenue that blew past Wall Street estimates as artificial intelligence supercharged its core advertising business.

The social media giant upped the lower end of its annual capital spending by $2 billion - just days after Alphabet made a similar move - signaling that Silicon Valley’s race to dominate the artificial-intelligence frontier is only accelerating.

Amazon.com - the largest U.S. cloud provider - which will report earnings on Thursday after markets close, rose 1.7%.

Wall Street’s surging confidence in the company comes on the heels of back-to-back record revenues for the tech giant since September 2022.

The stock’s rally had also received an extra boost as the tech giant trimmed its workforce and doubled down on AI investments — determined to cement its lead as businesses race to harness the technology.

While sweeping U.S. tariffs had investors bracing for tighter business spending, Microsoft’s strong earnings have shown that the company’s books are yet to take a hit from the levies.