Microsoft Just Starting To Hit Next Gear Of Growth, Backed By ChatGPT And AI, Analyst Says

Microsoft Corp. (NASDAQ: MSFT) has been making waves ever since it announced an expanded $10 billion deal with OpenAI for integrating the latter’s GPT-3 tech into its Bing search engine and cloud services.

The Microsoft Analyst: Wedbush analyst Daniel Ives maintained an Overweight rating for Microsoft shares and raised the price target from $280 to $290.

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The Microsoft Thesis: Cloud enterprise spending for Microsoft has stabilized after the softness seen in December, Ives said in a note, citing the firm’s recent cloud checks.

Despite the macroeconomy remaining a concern for CIOs due to the impact it can have on IT spending, many large cloud platform deals have been given the nod for Redmond, the analyst said. This is a positive for the quarter and the year, he added.

With less than 50% of workloads on the cloud currently, the analyst sees “transformational” shift to cloud platforms as a key IT priority for enterprises. Microsoft’s “Azure” is well positioned to gain share,” he said.

“We believe the shift to the cloud represents a massive opportunity for Nadella & Co. going forward despite the storm clouds forming for FY23 in the uncertain macro backdrop,” Ives said. “Redmond is just starting to hit its next gear of growth with ChatGPT and AI also adding a new layer of growth to the MSFT story over the coming years,” he added.

Azure/Office 365, along with AI monetization on Azure with the consumer search piece will likely add $20 per share to Microsoft’s sum-of-the-parts valuation over the next 12 to 18 months, Ives said.

Despite regulatory hiccups for the pending Activision Blizzard Inc. (NASDAQ: ATVI) in the U.S. and Europe, the analyst expects the deal to close by late summer.

Price Action: Microsoft shares closed Thursday’s session 1.30% higher, at $254.77, according to Benzinga Pro data.

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