Why Microsoft Is Optimistic about the General IT Environment



Tech stocks have been hit particularly hard since October

The last couple of months have been volatile for the markets in general and tech stocks in particular. For example, the NASDAQ Composite Index (QQQ), the proxy for the performance of technology stocks, has fallen ~10% since the beginning of October. In the rising interest rate scenario, investors are worried about whether high-flying tech stocks will be able to continue their growth. Slowdowns in Europe and China (FXI) have started to have a spillover effect on the US stock market as well.

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Amazon (AMZN) and Alphabet (GOOG) are the two large caps that have been hit particularly hard over the last month, as their recent earnings results disappointed investors. Amazon announced a slower-than-expected revenue growth rate in its most recent quarter, which led investors to wonder whether the company’s market cap breaching the $1 trillion mark was merely a blip. Alphabet’s revenue numbers also came in light during its latest earnings results, as the company had continued to cope with the issue of declining ad prices in the period.

Tech Stock Performances

Microsoft has given better returns than big Internet companies

Microsoft (MSFT), on the other hand, has been a steady stock. It hasn’t shown the volatile ups and downs that Internet stocks, in particular, have shown this year. During its most recent earnings conference call, Microsoft mentioned that it was seeing a strong IT spending environment during its talks with clients. The company also feels confident in gaining market share in the global spend on IT.

The chart above shows the stock performances of Microsoft, Amazon, and Google in the last six months. The data show that investors have shown more faith in Microsoft than in the Internet giants. But what’s driving Microsoft stock? Let’s analyze the drivers behind Microsoft’s growth in the next article.


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