It is currently undergoing a major shift into the cloud. One market that gets overlooked in terms of its AI impact is the Federal Government. “Second, even Azure OpenAI API customers are all new, and the workload conversations, whether it's B2C conversations in financial services or drug discovery on another side, these are all new workloads that we really were not in the game in the past, whereas we now are.” Generative AI for Government: Management commented on this in the earnings call: This is because OpenAI APIs run on Azure even if the customer isn’t directly an Azure customer. The OpenAI opportunity extends beyond Microsoft’s installed base, which is an important change to Microsoft’s market position. 6 Ways Microsoft Can Drive Another $100 Billion with AI: Open AI APIs: However, valuation poses a risk to Microsoft’s current stock price, and as outlined below, our firm prefers to wait before we add again to our position. ![]() We believe that history will repeat itself and the market is underestimating the impact AI will have on MSFT’s future sales growth across its business lines. At the time, the market did not comprehend the revenue potential in these two businesses. The stock appreciated 180% over that time frame. ![]() It increased from $110 billion to $198 billion in revenue. To provide some context, Azure and Office 365 helped Microsoft add almost $100 billion in revenue over the past four years. Analysts have been raising their price targets to the high $300s with an Evercore analyst raising his price target to $400 stating: “the infusion of AI across Microsoft’s product portfolio represents a potential $100 billion incremental revenue uplift in 2027.”
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