FX168 Finance News (North America) reported that the CEO of Microsoft stated in a recent interview that from ancient Greece to modern Silicon Valley, the only thing that can topple civilizations, nations, and companies is arrogance.
Nadella recalled the first day when the software giant became the company with the largest Market Cap.
He said: "I remember walking around the campus—everyone, including myself—we all strutted around, and our brilliance ultimately reflected in the Market Cap. "Somehow, 'God, that's the culture you want to avoid' stays fresh in my memory."
Nadella attributes his success to his wife introducing him to psychologist Carol Dweck's book on cultivating a growth mindset.
The CEO of Microsoft, Nadella, encourages learning.
He said he encourages his people to go from knowing everything to being omnipresent.
He said, it's a destination you will never reach because the day you say, 'I have a growth mindset,' means by definition, you do not have a growth mindset.
The Technology sector has been troubled by a shortage of Semiconductors, but Nadella stated in the interview: "I am not constrained by chip supply."
He said, "We are definitely limited in 2024. We told [Wall Street] that is why we are optimistic about the first half of 2025, which is the remaining time of our fiscal year. After that, I think we will be in a better position as we enter 2026, so we have a good vision."
Microsoft is considered NVIDIA's (NVDA) largest customer, and Nadella's comments led to a drop in the stock price of this AI chip manufacturer.
NVIDIA's GPU support integrates generative AI models like OpenAI's GPT into Azure, Microsoft 365 Copilot, and Bing.
The company holds about 49% of the shares in the AI group OpenAI, which sparked global interest in AI when it released ChatGPT in November 2022.
Nadella joined Microsoft in 1992 and became CEO in 2014. He discussed the so-called Magnificent 7, a group of large-cap technology companies including Apple, Alphabet, Amazon, Meta (Facebook's parent company), Microsoft, NVIDIA, and Tesla.
He said, "If you think of OpenAI, in a way, you could say it's the eighth technology giant. I think this generation of companies has been established, which is open AI. In a sense, it's a bit like Google or Microsoft of this era."
Although he said the AI field will be very competitive, Nadella did not foresee a scenario where a single winner would dominate.
He said, we will compete fiercely at different layers of the stack. "As I often tell our team, pay attention to those who come in and join... I want to say OpenAI is one of those companies that has escape velocity at this point."
Microsoft's stock price has risen by 15.5% so far this year. The company exceeded Wall Street's first quarter earnings expectations in October, but the stock fell after MSFT predicted growth would slow down more than expected.
Large tech companies are spending significant amounts of money on AI.
Loop Capital Analyst Yun Kim released a research report on December 23, adjusting estimates for selected Software names.
The analyst raised the company's target price for Microsoft from $500 to $550 and confirmed a Buy rating for these Stocks.
Kim noted that the consensus estimates for the company over the next few years are artificially low due to the significant capital expenditure investments needed to support generative AI programs.
The analyst stated that Microsoft's stock premium should be much higher than its Large Cap Software peers.
Capital expenditures have been a major issue in the era of AI.
According to Fortune's report last month, large tech companies spent approximately $74 billion on capital expenditures in the first half of 2023. By the third quarter of that year, the amount had risen to about $109 billion.
In the first half of 2024, large technology companies spent nearly 104 billion dollars, a year-on-year increase of 47%. By the third quarter, that amount skyrocketed to 170 billion dollars, a 56% increase compared to the same period last year.
In the third quarter of 2024, Microsoft's and Amazon's total capital expenditure was 42.6 billion dollars, while Alphabet maintained a capital expenditure of about 13 billion dollars per quarter, and Meta began to accelerate spending.
During Microsoft's Earnings Reports conference call, Chief Financial Officer Amy Hood stated that capital expenditures, including financing leases, were 20 billion dollars, as expected, with cash paid for PP&E or property, plant, and equipment amounting to 14.9 billion dollars.
She told Analysts that about half of our cloud and AI-related spending continues to be directed towards long-lived assets that will support monetization for the next 15 years and beyond. The remaining cloud and AI spending mainly goes towards Servers, including CPUs and GPUs, to serve customers based on demand signals.
She said the free cash flow was 19.3 billion dollars, a year-on-year decrease of 7%, "reflecting the increased capital expenditures to support our cloud and AI products."
