By Sam Boughedda
Morgan Stanley analysts told investors in a note Wednesday that their firm sees bigger and higher probability opportunities for Microsoft (NASDAQ:MSFT) and AI.
The analysts, who have an Overweight rating and $307 price target on Microsoft, acknowledged that the release of a new Bing-powered by an OpenAI-based large language model created a big marketing splash and cracked open the door for potential share gains in search but that the opportunities are more significant as the "OpenAI functionality permeates through the MSFT portfolio."
"While the capabilities of Generative AI models like GPT (which powers the new Bing and ChatGPT) or Dall-e (which powers Microsoft Designer) have captured the imagination of the general public, catalyzing a large hype cycle around the theme of AI broadly and likely proves to be a great marketing event for vendors like Microsoft, the underlying machine learning technologies enabling these models have been in development for decades and permeating into most software solutions for years now," wrote the analysts.
"Industry analyst firm IDC estimates the market for AI Platforms and Applications will grow to $328 billion by 2026. Microsoft CEO Satya Nadella sees an even broader opportunity," they added.
Furthermore, they stated that by Morgan Stanley's calculations, a doubling of tech spend as a percent of Global GDP would "represent an incremental $7 trillion opportunity."
"To be clear, Generative AI is one component of a broader set of functionalities under the AI umbrella, but definitely one which is capturing people's imagination," the analysts concluded.