This Analyst Is Bullish On Microsoft And Alphabet, Says ChatGPT Trajectory Will Drive Traction For Former And Search Market Lead For Latter

Raymond James analyst Aaron Kessler maintains Microsoft Corp MSFT with an Outperform and raises the price target from $270 to $310.

Microsoft has made AI a centerpiece of its product roadmap following the launch of Open-AI-powered products. While the fanfare around Bing's AI integration has been loudest, Microsoft is planning AI-powered product across its portfolio. 

Microsoft sees applications across its portfolio, even in gaming and advertising ex-Search. These platform enhancements can serve as "lock-in" features for Azure clients or new Azure businesses, making the platform relatively more attractive in the public cloud wars.

The re-rating reflects expansive opportunities for AI integration across the MSFT platform for both Enterprise and Consumer applications.

Kessler found Bing+AI to be a bit more likely to provide valid and correct answers for fact-based and task-based queries versus Alphabet Inc GOOG GOOGL Google Bard, but neither was perfect. 

Given his expectation that AI Chatbots will be more integrated into Search over time, he believes Google's 90% plus market share in Search is a critical competitive advantage. 

Additionally, Google's extensive history with AI, significant R&D talent, and its ability to integrate AI for developers and businesses, including Cloud and Workplace, should be long-term advantages. Kessler reiterates his Outperform rating on GOOG with a $119 price target.

Kessler also surveyed more than 500 U.S. consumers about their chatbot usage. He found Google's dominant position in Search provides a lot more fertile ground to encourage users to engage with Bard. 

However, Chatbot's interest is solid, but uptake is low to date. He found Bard and ChatGPT tied for the likelihood of usage, and chatbot users find value in the services and are migrating some queries over. 

The analyst writes that AI will positively impact both Google and Microsoft, with Google benefiting from its entrenched leadership position in Search and AI investments and Microsoft benefiting from the ability to integrate OpenAI products across both Enterprise and Consumer.

Price Action: MSFT shares traded lower by 0.76% at $286.12 on the last check Monday.