AI tech rally continues, Microsoft surpasses $3T market cap

Microsoft (MSFT) has moved past a $3 trillion market cap as an AI-fueled rally continues throughout the market. Part of the AI rally is being fueled by chipmaker ASML (ASML) posting earnings that topped estimates, with revenue of 7.2 billion euros.

Yahoo Finance Anchors Josh Lipton and Julie Hyman breakdown the latest developments for these companies and what it means for the markets moving forward.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Editor's note: This article was written by Nicholas Jacobino

Video transcript

JOSH LIPTON: Microsoft hitting a historic $3 trillion market cap after rallying earlier in the day, briefly surpassing Apple's. So this is a big bogey for Microsoft to hit here, Julie. $3 trillion in today's trade. Of course, follows Apple hitting that milestone. By the way, Microsoft, stocks up about 65% now in the past 12 months. It's up about 7% this year already. Investors, we know, in large part the excitement here has been about AI and the way that the company is integrating AI across its product portfolio, Bing and Azure and Copilot. And I actually checked with Brent Bracelin over at Piper today. And he covers Microsoft. We know Bracelin, a long time tech analyst. I just wanted to put some numbers on this.

And here's what Brent told me, which is that he estimates AI right now accounts for about 1% if you were looking at total company revenue, or about $2 billion, but thinks it's going to be north of $10 billion in two to three years-- that's his estimate-- and then told me he ultimately thinks this is the next, in his opinion, $100 billion-plus opportunity for CEO Satya Nadella and his team there. So you can understand the excitement of analysts like Brent Bracelin and investors who have sent this one skyrocketing.

JULIE HYMAN: Yeah. And the catalyst today seems to be earnings from ASML, which is a big chip equipment maker. That company came out with earnings that came in way above estimates. ASML shares rising to a record. Up 10% in US trading today. Orders more than tripling last quarter.

And Peter Wennink, the CEO, on the call really talking about the AI opportunity here and the tech transition that is ongoing. He says the demand is not just because of AI, but that sort of commentary seems to have been what spurred this latest rally today, or at least contributed to it because if you look at the Yahoo Finance Trending Ticker page, it is an everything AI rally. You've got ASML on there. You've got AMD on there. You've got Nvidia on there. You've got Microsoft on there. You've got Alphabet on there. So it is the Magnificent Seven certainly and then some, right, the other stuff that seems to be perceived as benefiting from AI.

And we're going to get more information on all of this because Tesla's just the first thing that we're going to start to get earnings from the rest of these companies. We hear from Microsoft and Alphabet on the 30th. Then we hear from Apple, Amazon, and Meta on February 1. As we've mentioned before, Nvidia, we got to wait until later on in February. But that's when investors are going to be looking for some sort of confirmation or a little bit more meat on monetization of AI.

JOSH LIPTON: Yeah. It's interesting because you mentioned Apple there as well, which we recently had Bank of America analyst Wamsi Mohan on. And he actually upgraded that one to a buy. And when we talked to him, in part it was because he's betting, listen, there's going to be this multi-year strength in iPhone cycles ahead because he's betting on new AI-enabled iPhones that are on the way. And also, by the way, after the bell today, IBM, Big Blue. And we know some investors and some in the Street have said, listen, that is an underrated way to play the AI theme as well.

JULIE HYMAN: Right. I believe it was Evercore ISI in particular recently pointing that out. So we'll see how that goes.