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Microsoft expected to see "wave" of customer spending on AI products - Wedbush

Published 06/17/2024, 10:18 AM
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Investing.com -- The "artificial intelligence party" for technology stocks is "just beginning" and should lead to a wave of customer spending on Microsoft (NASDAQ:MSFT)'s AI-optimized products, according to analysts at Wedbush.

In a note to clients on Sunday raising their price target for Redmond, Washington-based Microsoft's stock to $550 from $500, the Wedbush analysts said that "recent AI customer checks" indicate that the monetization of Microsoft's AI-powered Copilot tool and its Azure cloud computing service is "on the doorstep."

"We have seen deal conversions for broader enterprise scale AI deployments 'accelerating' in the field," the analysts said.

They maintained their "Outperform" rating of Microsoft shares, adding that AI is set to "change the cloud growth trajectory" of the company, with over 70% of its current customer base tipped to eventually use its automated options. The amount of consumers using Microsoft's AI offerings is also seen hitting an "inflection point" of rapid growth in the firm's 2025 fiscal period.

"[T]he stock still has yet to price in what we view as the next wave of cloud and AI growth," the Wedbush analysts said.

Shares in Microsoft, which has benefited from an investment from ChatGPT-maker OpenAI, have soared by more than 19% so far this year, giving the business a market capitalization of roughly $3.29 trillion. In a separate note, the Wedbush analysts said the company is now in a race with AI-chipmaker Nvidia (NASDAQ:NVDA) and iPhone-manufacturer Apple (NASDAQ:AAPL) to reach a $4 trillion valuation.

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