23 May The Ratings Game: Microsoft has ‘pole position’ in the AI race — but maybe not for the reason you’d think
Microsoft Corp. is poised to win “round 2” of the cloud wars thanks to its ability to help companies build and train the tools they need for the artificial-intelligence revolution, according to an analyst.
Jefferies analyst Brent Thill named Microsoft Corp.’s stock
a “franchise pick” Tuesday, while lifting his price target on the stock to $400 from $350 and noting that, although Amazon.com Inc.
won “round 1” of the cloud wars, Microsoft has the right tools to thrive as AI moves to center stage.
Thill reasoned that as one of the “AI arms dealers,” Microsoft was well-positioned to provide the infrastructure needed for generative artificial-intelligence technology to be built and to run at scale. He expected AI to be a tailwind to the company’s cloud business and thought the company will be able to take advantage of the vast amounts of data required to train AI models.
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“We note that AI has the ability to both capture incremental spend from existing customers and open the door to new use cases and new customers, which may not have considered MSFT historically,” Thill wrote in a report. That’s true in the case of the company’s security products, he added, citing “upsell capabilities.”
In fact, while Microsoft has gotten a lot of buzz for its investment in ChatGPT creator OpenAI and its work to integrate generative AI into Bing, Thill said a recent chat with an AI expert indicated that Microsoft’s consumer opportunities are “less exciting” than its potential to benefit from AI in the enterprise realm.
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In his view, the company “has taken pole position in what is likely to be a decade-long industry evolution.”
Thill was particularly upbeat about Microsoft’s GitHub Copilot tool, which he said allows coders to be more productive by turning language prompts into coding suggestions. He noted that his AI expert flagged how “developer use cases are most exciting given customers have already begun seeing benefits from these products.”