Microsoft Corporation (MSFT) is experiencing a surge in its stock momentum, fueled by a promising outlook in artificial intelligence (AI). Analyst Daniel Ives from Wedbush has raised the price target for Microsoft shares to $500, indicating a potential 19% upside from current levels.
Microsoft’s AI leadership fuels investor confidence
This bullish sentiment stems from the company’s pioneering role in the AI revolution and the transformative impact of its Copilot AI technology. One of the key features of Copilot’s expansion is its distinctive icon, which appears in the taskbar upon receiving the update.
This easily recognizable icon serves as a visual cue for users, facilitating quick access to Copilot’s features and functionalities. Despite being in preview mode, Copilot remains active in the background, providing continuous assistance even if users opt not to engage with it directly. This persistent integration underscores the company’s dedication to seamlessly integrating AI into the Windows experience, ensuring a more intuitive and responsive user interface.
In his assessment, Ives likened the company’s current AI endeavors to its ‘iPhone Moment,’ signaling a pivotal juncture in its trajectory. The burgeoning adoption of Copilot AI among customers and across various verticals is proving to be a significant growth driver.
Through recent customer checks and engagements with industry stakeholders, Ives noted a palpable acceleration in AI adoption, particularly in generative AI and Copilot activity.
The palpable acceleration in AI adoption is expected to catalyze more Azure cloud deal flow, with substantial momentum anticipated over the next six to 12 months. Ives has revised his estimate of the installed base, utilizing Copilot from 60% to 70%, reflecting growing confidence in the technology’s widespread adoption.
Microsoft’s promising outlook and market performance
Looking ahead, Ives believes that Microsoft’s stock has not yet fully reflected the potential of the next wave of cloud and AI growth. He foresees AI enterprise use cases driving additional budget allocation to AI in 2024 and 2025.
Partner checks indicate strong deployment of Copilot among Microsoft customers, with projected contributions of an additional $25 billion to $30 billion to the company’s topline by fiscal 2025.
Microsoft’s stock closed the latest session at $422.86, experiencing a minor decline of 1.37%. However, the stock rose by 0.55% in premarket trading to $425.19. Despite short-term fluctuations, the overall trajectory appears positive, buoyed by the burgeoning AI landscape and Microsoft’s strategic positioning.
In fiscal year 2025, set to commence in July 2024, analysts anticipate a significant turning point in Microsoft’s AI growth trajectory. Over the next 3-6 months, the company plans to introduce pricing structures, engage beta customers, and unveil various use cases.
Despite the impending surge in Cloud and AI growth expected in fiscal year 2024, Microsoft’s stock has yet to fully reflect this potential. With a strong competitive edge against rivals like Amazon and Alphabet, Microsoft is poised to capitalize on monetization opportunities by deploying AI and ChatGPT in the cloud.
Analysts estimate that for every $100 spent on Azure cloud services, an additional $35-$40 could be allocated to AI initiatives. Microsoft anticipates that its Cloud and Office 365/Windows ecosystem will be increasingly significant, driving growth and margins throughout fiscal years 2024 and 2025. Microsoft’s stock experienced a marginal decline of 0.16%, closing at $374.07. Year-to-date, the stock has seen a substantial gain of approximately 58%.
