Microsoft's 'iPhone Moment'? Wedbush Analyst Dan Ives Expects AI To Add $1 Trillion To Valuation

Move over, Apple Inc AAPL. Microsoft Corp MSFT is having its “iPhone moment.”

That’s according to Wedbush Securities’ Daniel Ives, who called this the dawn of a new era for the tech giant.

As the AI revolution gains momentum, Ives and other analysts predict a monumental boost to Microsoft’s valuation, adding a whopping $1 trillion to its market cap.

Shift To Software Phase

With the Q2 earnings season upon us, Ives says “expect tech stocks to be up another 15% for the year.” He sees this propelled not by multiples but by accelerating growth and earnings. The AI revolution is the driving force behind this transformation, with cloud deployments and enterprise AI spending surpassing Street expectations.

Ives’ field checks indicate robust AI monetization, shifting from semiconductor-led growth to a software phase. This transition is set to drive significant gains for the tech sector.

Ives expects standout performances from cybersecurity firms like Zscaler Inc ZS, CrowdStrike Holdings Inc CRWD, and Palo Alto Networks Inc PANW.

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Acceleration In Microsoft Copilot, GenAI

The AI revolution’s impact on Microsoft’s cloud growth trajectory is particularly noteworthy. Ives highlights an acceleration in generative AI and Copilot activity, which is catalyzing increased Azure cloud deal flow. This surge in AI use cases across enterprises is expected to continue for the next six to 12 months, further boosting Microsoft’s prospects.

The broader tech sector is also poised for a positive earnings season. Ives predicts tech stocks will rise another 15% this year, building on the robust gains seen in the first half of 2024. Software, cyber security, digital advertising, and semiconductors are all set to play pivotal roles in this growth story.

AI To Add Over $1T To Microsoft Valuation

As Microsoft gears up for this transformative period, “AI adds $1 trillion+ to the Microsoft valuation story. We strongly view this as Microsoft’s “iPhone Moment”, said Ives.

“We also believe Microsoft, Alphabet Inc GOOG GOOGL, and Amazon.com Inc AAPL among others will be very aggressive with tech M&A over the coming year,” he added.

Microsoft’s “iPhone moment” underscores the transformative potential of AI. As the tech sector heads into a promising Q2 earnings season, investors can expect significant gains, driven by accelerating growth and the continued monetization of AI.

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