What you need to know
- Microsoft's early investment and adoption of AI across its products and services is paying off.
- The tech giant is now the world's most valuable company, with over $3 trillion in market capitalization.
- According to a Wedbush analyst, Microsoft is on course to reproduce its own iPhone moment with AI.
- The market analysts attributed Microsoft's success to the rapid growth of the Azure cloud business and the integration of AI capabilities and Copilot across its products.
Microsoft's multi-billion dollar investment in generative AI and its extended relationship with it is seemingly paying off. At the beginning of this year, we saw the tech giant dethrone Apple from its position as the world's most valuable company, with $3 trillion in market capitalization.
This change in pace can be attributed to several factors. But, at least according to market analysts, it's Microsoft's early investment in AI and the integration of its capabilities across its wide portfolio of products and services that is critical. Building on this premise, 13 market analysts unanimously voted that Microsoft will be the world's most valuable company ahead of Apple in the next five years.
As we speak, Microsoft's stock is miles ahead of Apple's, with an approximate lead of $500 billion. While appearing at CNBC studios for an interview, Wedbush analyst Daniel Ives indicated that things will get even better for the Redmond giant, citing it's on the verge of hitting its iPhone moment with AI (via MarketWatch).
Ives pointed to the rapid growth of Microsoft's Azure cloud business and the integration of AI capabilities and Copilot across its products as clear indications that the company is well on its way to achieving this milestone.
According to Ives:
"In a nutshell, we see an acceleration of adoption for generative AI and Copilot activity, which in turn is catalyzing more Azure cloud deal flow for [Chief Executive Satya Nadella and his team] with major momentum heading into the next six to 12 months as AI use cases explode across the enterprise landscape."
The market analyst placed his price target for Microsoft's stock at $500, up from $475. This represents an 18% upside from Monday's closing level. Ives' strong belief in Microsoft's rapid growth and success in the market stems from credible information showcasing how well Copilot AI is performing in the market right now.
Copilot is a big deal and it'll continue to grow and evolve
Copilot is important for Microsoft, which explains why we have an AI-powered assistant across all Microsoft products and services. Despite its complicated relationship with the ChatGPT maker OpenAI, the company doesn't seem like it will slow down anytime soon.
In the past few months, OpenAI has been slapped with several lawsuits, from copyright infringement issues to abandoning its founding mission and opting to go the for-profit way. Be it as it may, Microsoft seems hell-bent on seeing through its AI projects and advances if the CEO Satya Nadella's words are anything to go by:
"We were very confident in our own ability. We have all the IP rights and all the capability. I mean, look, if tomorrow OpenAI disappeared, I don’t want any customer of ours to be worried about it, quite honestly, because we have all of the rights to continue the innovation, not just to serve the products."
READ MORE: Microsoft contributed to Apple's success with the iPod
According to Ives, over 70% of Microsoft's installed base will leverage Copilot's capabilities, a 10% bump from his previous 60% adoption estimation. He added that Microsoft will likely benefit more from its early investment in the AI wave through the next fiscal year, which he refers to as "the true inflection year of AI growth." The analyst also indicated the tech giant would make more pricing moves for its services, like the recent introduction of a paid subscription for Copilot.
Interestingly, another billionaire investor recently indicated that the AI boom will be doomed soon, predictably leading to an economic slowdown and inflation. "The faster and higher things go up, the harder they fall," says DoubleLine Capital CEO Jeffrey Gundlach. He added that the stocks have skyrocketed because of the interest cuts, attracting customers to spend rather than save.
