If the Microsoft results were so good, why did the stock crash so badly. The answer lay in the total AI and cloud investment that Microsoft guided for during the quarterly results. It announced a massive investment of $37 billion into cloud and AI and that is what spooked the markets leading to the crash. The reason itself was quite surprising. Just a few quarters back, any company announcing a massive outlay for AI (artificial intelligence) would have seen stock prices soaring. However, markets are getting a lot more cautious now. They are starting to ask a very logical, yet uncomfortable, question. AI outlays are great; but then what about the ROI on such investments? 

To understand the entire concept of return on investment (ROI) on AI investments, one needs to understand the difference between Generative AI and Agentic AI. Generative AI is a lot simpler. It is the AI that you use to automate all types of content; whether text, graphics, images etc. In such cases, the ROI in the form of higher revenues or lower costs will be visible almost immediately. The problem is with Agentic AI, which is about using AI to fine tune processes of the business. These can take much longer. According to a survey, Agentic AI benefits (ROI) could take between 3 years to 6 years to show up. 

The bottom line in the global markets today is that the markets are looking for enticing stories. A company investing billions of dollars in artificial intelligence is a great story. Similarly, a company promising that AI would totally remodel its business paradigm is a very interesting story. However, telling investors to wait for 5-6 years to see the ROI results may be the truth, but it is not a great story. Also, telling investors that the ROI on AI would be conditional may be the truth, but it is hardly an enticing story. The reality is that ROI in agentic AI is not just about how the AI plan is implemented, but also about how the top management buys in and how it is drilled down at each level. 

Unfortunately, the “shoot from the hip” approach will not work well when it comes to the long-term benefits of agentic AI. That is the problem that the Microsoft quarterly results faced this time around. Microsoft has the muscle and it is investing deeply into AI, but the results will take time to manifest. Let us take an analogy. When factories shifted from steam to electricity, it was not just the process, but the entire manufacturing ecosystem that had to change. The implementation of agentic AI is something similar. Eventual success rate may not be too high for companies, but the extent of success will range. For the companies and investors who persist with the right stories, there is still a big treasure!