May 31, 2024
How Microsoft Beat Apple to a $98.2B Market
Dear Subscriber,
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| By Michael A. Robinson |
As a longtime Apple (AAPL) fanatic, it pains me to say there is one tool the Silicon Valley legend offers that frustrates the daylights out of me.
Most of the time, Siri does an OK job, especially if it is something routine like telling her to send a text to my lovely wife.
But roughly 20% to 30% of the time, she is maddeningly dense … Siri, not my wife.
Like when I say, play Heavy Rock 78 from my music library and she plays Heavy Rock 8 instead, even after the fourth or fifth attempt.
Or if I ask for driving directions to say Farallon Way, she gives me Fairway or even Fairlane, no matter how many times I repeat the request.
If this were just a rant about one of life’s annoyances, I wouldn’t bring this up.
Fact is, IndustryARC says the voice bot market is on its way to being worth roughly $98.2 billion. That makes this a sector we want to target.
In a moment, I will reveal a great way to invest in this sector with a savvy tech company that excels at AI-powered voice bots.
But first, I have some news to share with you about Siri …
Adding AI Features
Apple is expected to announce an upgrade to its voice assistant at its annual Worldwide Developers Conference. Broadcast online, the event runs from June 10 to June 14.
Let me be clear. I don’t expect any event news, not even that involving Siri, to move the stock.
That’s why I usually ignore the event altogether. But as I noted earlier, we want to target this growth sector that is on the verge of becoming ubiquitous. And despite the headaches, I use Siri several times a day.
A recent report in the New York Times says the release of ChatGPT and its generative AI technology in late 2022 was a wakeup call for Apple.
Apple wants the AI version of Siri to be more conversational, understand context and answer more reasonably.
I applaud the move. And though I own Apple stock and still believe in the company, adding AI features to Siri on its own isn’t a reason to add to the investment.
The Leader in Voice
And I say that as someone who has been following this field for several years. In fact, I have even recommended Nuance Communications, a savvy voice leader with great tech, several times in the past.
The firm had a huge lead on the rest of the field. It pioneered AI-powered voice systems years before anyone else and is used by a who’s who of great organizations across the board.
It’s particularly strong in healthcare. Some 77% of American hospitals rely on Nuance for voice and text recognition.
This allows doctors to keep their patients’ medical documentation up to date by speaking as they work — for example, by describing their findings as they look over radiology imaging.
It’s also strong in finance, with 15 of the nation’s largest banks using the firm’s platform. Plus, it counts nine of the world’s ten largest telecommunications firms as clients.
Now then, as much as I love Nuance and its technology, there is no direct investment.
A $17 Billion Buyout
That’s because the firm got acquired by one of the world’s great tech companies, Microsoft (MSFT). It bought Nuance back in 2022 in a deal valued at $16.9 billion.
If you haven’t guessed already, I continue to recommend Microsoft. The reason: as the Nuance merger makes clear, Mr. Softee often uses bolt-on buyouts to enter new markets and find more growth.
Consider that in just the last five years alone, Microsoft has acquired roughly 45 firms. And I believe Nuance is one of its better buys.
This deal really delivers a nice combo of organic and bolt-on growth. Fact is, Microsoft’s Azure cloud computing service already has specialized platforms for healthcare.
And yet, with the purchase of Nuance, Microsoft gets a much stronger foothold in the sprawling $1.2 trillion healthcare market.
No doubt Microsoft is already thinking of how to use Nuance’s technology to help other industries use voice tech to automate their recordkeeping, too.
Bear in mind that Mr. Softee ranks as a world leader in AI … and not just voice-centric aspects, either.
A Strong AI Partner
Microsoft got a major leg up back in 2019 when it invested $1 billion in OpenAI, the firm behind the breakthrough ChatGPT, the first true consumer-facing AI platform.
In January 2023, Microsoft cemented its relationship with OpenAI by agreeing to invest another $10 billion over the next several years.
That puts the power of AI deep into core products like its Azure cloud computing service and its Bing search engine, which ranks second behind Google.
It also helps explain why the stock is such a strong performer, gaining some 244% over the past five years.
By contrast, the S&P 500 returned a very respectable 89%, That means Microsoft crushed the benchmark by … drumroll please … 155%.
Microsoft scorches the S&P 500 over past five years.
Source: YCharts.
Click here to see full-sized image.
This is exactly why I keep reminding investors of what I believe is an indisputable fact.
The road to wealth is paved with tech.
And as Microsoft makes clear, the journey is much more rewarding if you invest for the long haul.
Best,
Michael A. Robinson
P.S. Speaking of long-haul investing … my colleague, Chris Graebe, just found a company with a 25-year history of nearly constant, continuous growth.
It’s also in an industry that dates back 170 years and is valued at $1.4 trillion.
But you can’t buy shares on the stock market. However, it is opening its doors to outside investors for the first time right now.
Check it out here. After today, you’ll lose your chance.
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