What happened

Shares of cloud and artificial intelligence (AI) giant Microsoft (MSFT 0.84%) were rallying today, up 5.3% as of 1:38 p.m. ET, reaching a new all-time high for the first time since late 2021.

It's perhaps not surprising that Microsoft is rallying on exciting artificial intelligence news, especially news that connects the current AI hype with monetization, giving investors the opportunity to see how the current AI craze is translating into real incremental revenue and profit opportunities.

So what

Microsoft held its Inspire conference today, in which the tech giant made a few new AI announcements. Among the most prominent was pricing for new AI-powered CoPilot tools for its Office suite, Microsoft's core software pack that contains Word, Excel, PowerPoint, and Teams, among other programs.

Microsoft will now make its AI CoPilot feature an optional upgrade for $30 per month per user. That is a significant pricing boost, as Microsoft's E3, E5, Business Standard, and Business Premium Office subscriptions currently go for between $12.50 and $57 per month per user. So, the AI CoPilot tool will boost the subscription price for Microsoft's Office offerings by nearly 100% or more, depending on the plan.

Microsoft is thought to have a current lead in AI capabilities, thanks to its massive $10 billion investment in ChatGPT parent OpenAI. While that was certainly a steep price to pay to invest in OpenAI, which has a cap on how much profit its investors will be able to ultimately make, we can now see how Microsoft is benefiting in indirect ways from proprietary access to OpenAI's leading generative AI models.

Not only will Microsoft benefit from announcements like these with regard to Office, but OpenAI is also using Microsoft's Azure Cloud exclusively, which will benefit Microsoft both financially and through gains in artificial intelligence expertise.

A person in an office raises their hands in celebration.

Microsoft made several positive AI-related announcements today. Image source: Getty Images.

While the Office Suite pricing was likely the largest reason for the stock's move, there were other announcements, too. Microsoft unveiled Bing Chat Enterprise, which incorporates the tools of the consumer Bing search engine infused with ChatGPT unveiled earlier this year, but with data protection that will allow enterprises to bring their proprietary data to Search without worry that it will be compromised.

Finally, Microsoft announced another AI-related item, this time in collaboration with Meta Platforms. One year ago, Meta chose Microsoft's Azure cloud as its strategic platform for building AI models. While it may go under the radar, Meta is actually investing a lot in AI. This is not only for proprietary models for its Reels recommendation and ad targeting engines, but also for generalized large language models, which Meta will open-source to the developer community.

Today, Meta and Microsoft announced Microsoft was optimizing Meta's Llama2 model, which will be available on the Azure AI model catalog and optimized to run on the Windows operating system. While all Meta models, including Llama2, will be open-source and should therefore available outside Microsoft's platforms, it appears as though Llama2 will be optimized for Microsoft's Azure and Windows, which may save customers and developers the hassle of configuring Llama2 for a non-Microsoft environment.

Now what

It's a big milestone that Microsoft has now reached a new high for the first time in 18 months. And while the stock no doubt looks expensive at nearly 40 times earnings, there really isn't a better combination of safety and growth among large-cap technology stocks today.

Microsoft is diversified across several high-margin businesses, and has an early lead in the generative AI era. Even at this high price, it should remain a core holding for young and older investors alike.