Tech giant Microsoft (MSFT) may be starting to reconsider its rampant use of artificial intelligence (AI), and is pushing back against a principle called “tokenmaxxing” accordingly. The pushback is prompting internal concerns, and changes in how Microsoft handles its use of AI. The move fell flat with shareholders, though, as share prices lost over 3% in Thursday afternoon’s trading.
The concept of “tokenmaxxing” is fairly simple, and is about what it sounds like. It involves using the highest number of AI tokens possible as a means to prove a department is being productive. It proved as an excellent metric for CEOs—look at all the AI we are using!—while at the same time terrifying CFOs who saw the bills for that practice come in hard and fast.
Thus, Microsoft is starting to urge a certain amount of restraint in token usage. CEO Satya Nadella noted to his own employees that, perhaps, using “…frontier models for non-frontier problems” is perhaps not the way to go. Nadella expanded, saying, “Let’s kind of match these things such that you get the outputs, you get the economics—it can’t be a race to doing things that just don’t add value.”
The Next Business Model Involves Layoffs, Apparently
Recently, we heard about Microsoft’s plans to change the Xbox’s business model in response to soaring component costs and the very real potential that most gamers may end up ignoring the new console due to sheer affordability issues. Apparently, that new business model involves layoffs, and substantial ones at that.
New reports say the layoffs will be “major”, though just how many people will lose their jobs as a result of this are as yet unclear. The layoffs will start in July, and budgets will be cut in multiple areas, with marketing specifically pointed out. The cuts might be a good plan, but it is not likely to lower costs to gamers, which means Microsoft’s primary revenue stream is at risk.
Is Microsoft a Buy, Hold or Sell?
Turning to Wall Street, analysts have a Strong Buy consensus rating on MSFT stock based on 35 Buys and two Holds assigned in the past three months, as indicated by the graphic below. After a 17.02% loss in its share price over the past year, the average MSFT price target of $557.64 per share implies 43.63% upside potential.
