Published on November 17, 2023, 6:54 am

Microsoft’s Copilot AI assistant tool, which recently became available in Microsoft 365, is showing promising signs of becoming a game-changing product. Analyst Dan Ives from Wedbush believes that the monetization potential for AI and ChatGPT in the cloud is significant, with Microsoft positioned as a leader in this industry transformation.

According to Ives, for every $100 spent on Microsoft’s cloud Azure in recent years, there will be an additional $35-$40 spent on AI in the coming years. He expects that approximately 50% of the installed base will incorporate AI functionality within the next three years. While there will be a noticeable increase in AI use cases by fiscal year 2024, fiscal year 2025 is anticipated to be the true inflection point for AI growth.

Ives predicts that the deployment of pricing, beta customers, and use cases within the next three to six months could lead to an estimated $20 billion addition to Microsoft’s top-line revenue by FY25. This optimistic outlook has prompted Ives to raise his price target for Microsoft stock from $400 to $425, implying potential gains of 13% from its current levels. Ives maintains an Outperform rating on the stock.

The positive sentiment surrounding Microsoft is shared by other analysts as well. The stock currently holds a Strong Buy consensus rating, with 30 Buys and 1 Hold recommendation. The average price target of $409.62 suggests potential returns of about 9%.

It should be noted that while these opinions are solely those of the featured analysts and should not serve as investment advice, they highlight the transformative potential of AI and demonstrate why many experts are optimistic about Microsoft’s future prospects.

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As always, it is essential for investors to conduct their own analysis and due diligence before making any investment decisions.

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