Fast Facts
- Wedbush analyst Dan Ives said in a note Monday that the AI revolution is here, and Microsoft is in the driver's seat.
- He boosted his price target to $500 from $475.
- Microsoft, trading slightly below a 52-week-high, has a market cap above $3 trillion.
Wedbush tech analyst Dan Ives is raising his price target on Microsoft (MSFT) to $500 from $475 because, in his words, the "AI revolution is here."
Ives has long been bullish on the business potential of artificial intelligence, frequently touting the value of such names as Nvidia (NVDA) , Apple (AAPL) , Palantir (PLTR) and Tesla (TSLA) . But Microsoft, through its work in Copilot, has been a favorite of his for months.
For Ives, the key to Microsoft's success has everything to do with monetization.
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Calling Microsoft's monetization of Copilot "transformative," Ives said that based on conversations with Microsoft customers and partners, adoption of the tech is gaining momentum. In turn, he said, this is "catalyzing more Azure cloud deal flow" for the company as "AI use cases explode across the enterprise landscape."
Ives predicted that within the next three years 70% of Microsoft's enterprise installed base will be on the company's artificial-intelligence-driven functionality, which he said would change the landscape for Microsoft going forward.
He said that Copilot could add between $25 billion and $30 billion to Microsoft's revenue by 2025.
Copilot represents Microsoft's "iPhone moment ... as this AI revolution plays out across the tech ecosystem over the coming years with Nvidia and Microsoft leading the way as this $1 trillion AI tidal wave hits the shores of the tech world," Ives writes.
Ives remains convinced that the stock, which has risen more than 12% this year, has yet to fully price in the next wave of growth in the cloud and AI sectors.
Seven of 10 Microsoft customers, Ives predicted, will soon go down the Copilot route, a prediction that six months ago stood at two out of every 10.
Ives maintained his outperform rating on the stock, which is also a member of Wedbush's Best Ideas list.
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Microsoft and the AI revolution
Ives's latest round of Microsoft excitement comes about a week after the company snatched another startup and launched a new organization called Microsoft AI.
The organization, which bundles all of Microsoft's consumer-facing AI efforts under one roof, will be led by Mustafa Suleyman, the founder of DeepMind and co-founder of Inflection.
Another Inflection co-founder, Karén Simonyan, is joining Suleyman as Microsoft AI's chief scientist, as are a number of Inflection's staff.
At the same time, Inflection said it would begin hosting its latest model, Inflection 2.5, on Microsoft Azure as it transitions away from personal AI assistants and toward commercial AI solutions.
The Information reported that while Microsoft doesn't want the move of absorbing the bulk of Inflection's staff and its models to be seen as an acquisition, the tech giant paid the company around $650 million as a licensing fee that Inflection will use to make its investors whole.
Microsoft in February announced a partnership with French AI startup Mistral, which likewise included the hosting of Mistral's latest model on Azure in addition to a 15 million euro investment by Microsoft.
And of course there is OpenAI, the startup responsible for ChatGPT.
Microsoft has invested more than $10 billion into the company, a partnership that is being scrutinized by the European Commission, additionally serving as something of a focal point in Elon Musk's lawsuit against OpenAI.
This comes as AI regulation remains somewhere between nascent and nonexistent, even as harms from Microsoft's own tools seem to be stacking up.
The deepfake images of Taylor Swift that went viral in January were made using Microsoft's tools — one of the company's engineers later said in a public letter that "Microsoft was aware ... of the potential for abuse" long before the instance occurred, adding that the situation was "not unexpected."
Microsoft at the time didn't respond to requests for comment regarding the letter. It has since strengthened its AI guardrails, taking measures to block specific prompts.
Contact Ian with tips and AI stories via email, ian.krietzberg@thearenagroup.net, or Signal 732-804-1223.
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