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It’s happening in real-time, yet most investors remain completely oblivious. The “it” is the Artificial Intelligence (AI) revolution, the greatest productivity accelerant since electricity. Let’s talk about what it means for Microsoft Corp. (MSFT), writes Joe Markman, editor at Digital Creators & Consumers.

According to a report on Bloomberg, Microsoft is planning to cut thousands of jobs in its Xbox gaming division. These cuts will be in addition to the 6,000 employees fired in May at LinkedIn and other Microsoft subsidiaries.

This is a sticky subject. There is going to be massive disruption. But it is a wonderful time to be a Microsoft shareholder.

Microsoft Corp. (MSFT) Chart

Analysts scoffed at Magnificent Seven corporate leaders when they kept increasing capital expenditures for AI infrastructure. Research suggested that the companies would never earn a return on that invested capital because they couldn’t imagine a large-enough business to justify the investment.

When Satya Nadella, Microsoft’s chief executive, invested $10 billion in OpenAI two years ago, Wall Street analysts thought he had lost his mind. There was no demand for another Siri, they wrote.

What the analysts missed then is that ChatGPT, OpenAI’s flagship product, isn’t Siri. ChatGPT can write software code, while Siri can barely play songs on Apple Music. Apple Inc.’s (AAPL) digital assistant was never going to succeed, mostly due to corporate culture. The iPhone maker is a hardware company. But executives at the other Mag-7 companies live and breathe software. They understood immediately what ChatGPT was, and they went all-in on AI.

Make no mistake: layoffs at the biggest software companies are about to become much more common. This is because large portions of software employees can be replaced with AI. In the same way that electricity enabled mechanized, automated production that required fewer workers to achieve greater output, AI software is going to hollow out large parts of white-collar work. These changes will happen swiftly and persistently, as they are now occurring at Microsoft.

In the past, foundational technology shifts have led to greater employment as new sectors and businesses were born. Pessimists said the Internet was going to shutter the global economy. More than two decades later, it turns out that connecting the entire world to a network led to millions of new jobs in the digital economy and employment in business verticals that previously did not exist.

The flip side for investors is that productivity means increased profits. When headcounts are lower, more money flows to the bottom line. None of this is being reflected in share price valuations. Expect this to change in the second half of 2025 as hyperscalers talk about doing more with less, much to the surprise of the Wall Street analyst community. 

My recommended action would be to consider purchasing shares of Microsoft.

About the Author

Joe Markman is chief operations officer and marketing strategist at Markman Capital Insight, a technology-focused financial research company based in Seattle, Washington. Joe brings an entrepreneurial background and valuable insights into the great digital transformation, which we believe is the single most important business development of the century. He previously developed a successful innovative shoreline restoration venture in Seattle that was ultimately sold to a a large recycling company.

At Markman Capital Insight, Joe directs operations, enhances customer experiences, and drives growth, positioning the firm at the forefront of sectors such as AI, cloud computing, and connected technologies. His hands-on approach and keen market acumen equip him to guide investors through the complexities of the digital economy. 

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