Last week, Nadella announced the creation of Microsoft AI, which will focus on consumer-facing AI products and research. Microsoft and OpenAI are apparently planning a $100 billion data center project with an artificial intelligence supercomputer named Stargate to start in 2028.
Analyst:'Microsoft top AI winner' According to secret negotiations, Microsoft would likely finance the project, which is projected to cost 100 times more than some of the largest data centers, The Information claimed. Last week, Wedbush tech analyst Dan Ives raised his Microsoft price target to $500 from $475, declaring the “AI revolution is here.”
Ives called Microsoft's Copilot monetization “transformative” and told investors that customer and partner engagements are driving adoption. This is “catalyzing more Azure cloud deal flow” for the company as “AI use cases explode across the enterprise landscape,” he said.
Ives estimated that 70% of Microsoft's enterprise installed base will use artificial-intelligence-driven capabilities in three years, changing the company's future. He estimated that Microsoft's chatbot Copilot might generate $25 billion to $30 billion by 2025.
Bank of America warned investors that November 2023's AI-enabled Microsoft 365 Copilot "remains in the early stages of penetration." The investment group said Copilot is expensive at $30 per month and "limited penetration can drive meaningful incremental growth."
Bank of America maintained its buy rating and $480 stock price target on MSFT, calling it a "top pick." After hearing about Microsoft's new supercomputer initiative with OpenAI, Jefferies analyst Brent Thill boosted his price objective on the company's shares to $550 from $465, retaining a buy rating.
Thill declares Microsoft the AI champion. The company benefits most from generative Al's infrastructure and "app angles opportunities, capturing the most of this transformational opportunity," he said.
The analyst advises owning Microsoft and Amazon (AMZN) for enterprise, Google parent Alphabet (GOOG), Facebook parent Meta Platforms (META) for consumer, and CrowdStrike (CRWD) for security.
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