Microsoft ‘leading the pack’ in artificial intelligence with ChatGPT

In a Friday note, he maintained an outperform rating and a $280 price target on the stock but also sees $300 under a bull-case scenario, representing a 15% jump from current levels.

“Overall, the AI story and ChatGPT monetization opportunity could add roughly $20 per share at least to the MSFT sum of the parts story in our opinion as this all plays out over the next 12 to 18 months,” Ives said.

Microsoft extended its long-term partnership with ChatGPT creator OpenAI in January with a $10 billion investment, following previous investments in 2019 and 2021.

Microsoft has already integrated components of ChatGPT-like technology into its search engine Bing, and plans to rollout more consumer-facing AI products in the future.

“While there will be issues with Bing and ChatGPT it’s clear MSFT now has an opportunity to expand its AI capabilities into a number of areas around the consumer and enterprise ecosystem,” Ives said.

The “Game of Thrones” AI race is an $800 billion market opportunity over the next five years in areas such as search, cloud, data analytics, cyber security, and machine learning, he estimated.

And every slice of market share in search that Bing can take from Google will translate to billions of advertising dollars for Microsoft, he said.

Rivals are also stepping up efforts to capitalize on the AI race, with Google announcing its own chatbot, Bard, earlier this month.

“Now the Street awaits Apple, Meta and others with their next poker moves in this AI Big Tech battle underway,” Ives added.