Bill Peters
The benefits of the AI arms race are “happening much sooner than the streets expected,” analysts say
Analysts at Wedbush Wednesday were pushed by the strength of the cloud infrastructure business and future earnings driven by ChatGPT, while Microsoft, boosted by investor interest in all things AI, will soon become a $3 trillion company. said he could join Apple.
Analysts led by Daniel Ives said Microsoft’s (MSFT) cloud business over the next 18 months is well-positioned to take business from AWS, the cloud services arm of Amazon.com Inc. And they said Microsoft is in the “driver’s seat” as its big tech rivals embark on an AI arms race.
“As more companies embark on this transformational path with Nadella & Co., growing share of AWS is paramount, so MSFT’s cloud check has been very strong this quarter. said Ives in a research note on Wednesday, referring to Microsoft’s chief executive. Satya Nadella executive.
“In our opinion, AI is the next step, and based on our overall assessment, we believe MSFT should join Apple in the $3 trillion monopoly club by early 2024,” Ives said. continued.
He maintained his Outperform rating and $375 price target on Microsoft. Shares rose 0.1% on Wednesday. The Redmond, Wash.-based company currently has a market valuation of about $2.5 trillion and has invested billions in ChatGPT’s research arm, OpenAI.
Shares of tech giants such as Microsoft, Alphabet and Amazon (AMZN) have rebounded this year as executives look to the potential of AI in their companies after pandemic-era digital demand recedes. Shares of chip maker NVDA soared in May after the company touted the benefits of the AI boom.
“We believe Nvidia’s ‘shocking guidance’ being heard around the world is a direct AI barometer for Redmond. Because it’s further confirmed that it’s happening much sooner than expected,” said Ives. .
“Through numerous conversations with Microsoft customers, partners and field research over the past few weeks, we have learned that the monetization opportunity around the adoption of AI and ChatGPT in the cloud is an opportunity for industry-wide transformation, with Redmond as a catalyst. has become very clear, please take a seat,” he added.
Ives said he believes that for every $100 spent on Microsoft’s Azure cloud service, there is an additional $35 to $40 worth of spending on AI “currently under consideration.”
Microsoft shares are up 41% year-to-date. By comparison, the S&P 500 index rose 15.7% over the period.
-Bill Peters
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(Closed) Dow Jones Correspondence
07/05/23 1456ET
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