Microsoft could add another growth leg to its business from its investment in ChatGPT developer OpenAI, according to US broker Wedbush.
Setting a new price target of US$340, from US$325 previously, Wedbush says Microsoft remains firmly on its best ideas list with the AI opportunity adding to a steady cloud deal flow.
“It has become crystal clear to us that the monetization opportunities around deploying AI and ChatGPT in the cloud is a transformational opportunity across the industry with Redmond [Microsoft’s campus] in the driver’s seat.
“We believe that Microsoft is in a unique position to gain share in the cloud market while deploying additional AI capabilities that we estimate could expand Redmond's total addressable market around cloud by 35%-40% over the coming years.”
How will Microsoft monetise AI?
This won’t happen overnight, suggests Wedbush, but be a gradual process of integration of beta programs on the Azure platform and layers in AI functionality.
“In this Game of Thrones Battle for AI market share we view the enterprise as the golden goose opportunity as we estimate the AI market opportunity is a US$800bn market over the next decade.
ChatGPT will be the next leg of the growth stool for Microsoft, added the broker.
“Our thesis remains that the cloud and underlying Office 365/Windows ecosystem is going to comprise a bigger and bigger piece of Redmond going forward.
“We also believe Redmond is just starting to hit its next gear of growth with ChatGPT and AI also adding a new layer of growth to the story over the coming years.
“We continue to believe the first step was Azure/Office 365 with the next step ChatGPT/AI monetization on both the consumer and enterprise fronts combined adding $25-$30 per share to the sum-of-the-parts valuation.”
Shares were US$312.31, having risen 20% over the past year.