Recently, tech companies like Apple (AAPL  ) and Baidu (BIDU  ) have begun entering the vehicle market. Now, Microsoft (MSFT  ) is joining them as the company announced an investment in General Motors' (GM  ) Cruise Division to commercialize self-driving vehicles.

Cruise Investment

Other investors in the venture include Hondo Motors, Softbank, and T. Rowe Price. Cruise is competing with companies like Tesla (TSLA  ), Baidu, Google (GOOG  ), and Amazon (AMZN  ) who are working on self-driving vehicles. Given the massive potential of this market, it makes sense that Microsoft is looking to compete.

Based on this latest funding round, Cruise has a valuation of $30 billion. As part of the agreement, Microsoft will be the cloud provider for GM and Cruise. Additionally, both parties will work together on developing software and building hardware to commercialize the technology.

The partnership also makes sense given the computing power required for autonomous vehicles. In a statement following the announcement, GM said Microsoft will be its "preferred public cloud provider to accelerate its digitization initiatives, including collaboration, storage, artificial intelligence, and machine learning capabilities."

Stock Price Outlook

The news resulted in GM's stock climbing 9.8% to finish at a new, 52-week high. GM's stock has been on fire in the last couple of months with a 57% gain. Investors have had an insatiable appetite for electric vehicle (EV) stocks since the market bottom in March. At first, they bid up the early entrants like Tesla and NIO (NIO  ).

Later, they got interested in battery stocks, EV SPACs, and electric charging stocks. Now, they are finally getting interested in the legacy automakers who are looking to compete in the EV space as well such as Ford (F  ) and GM. These companies have their own advantages in terms of production facilities and distribution channels, and they are going to fight for market share as well.

Another catalyst is the improving economic outlook for 2021 means that car sales will be strong as well. Global auto sales have been below-trend since 2018, so there should be some bounceback. In the US, given the new stimulus checks, strong household balance sheets, and low rates, it's likely that we will see a new record in terms of auto sales.

Microsoft's stock also saw a 2% gain on the news. While the broader market has chugged higher, Microsoft has been range-bound over the last six months. Given its nearly $2 trillion market cap, this news was not impactful enough to break the stock out of this range. However, next week's earnings will be a major factor in determining whether Microsoft breaks out higher from this range or falls lower.