Microsoft Gets Price-Target Hike On 'Jaw-Dropping' Nvidia Guidance: 'Direct AI Barometer For Redmond'

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Zinger Key Points
  • For every $100 of Cloud Azure spend with Microsoft seen over the last few years, there is an incremental $35-$50 AI spend: Dan Ives.
  • He also expects the company to gain share in the enterprise cloud market against market leader AWS.

Microsoft Corp. MSFT is among the frontrunners in the artificial intelligence arms race. An analyst at Wedbush said on Monday he is incrementally positive about the company and its AI prospects.

The Microsoft Analyst: Daniel Ives maintained an Outperform rating and increased his price target from $340 to $375.

The Microsoft Thesis: Microsoft's resilient cloud deal flow and AI monetization opportunity make Wedbush more bullish on the software giant, Ives said in a note. The analyst also said the company firmly remains on the "Wedbush Best Ideas List."

The analyst sees ChatGPT/AI monetization on the consumer and enterprise fronts, combined, would add $40-$50 per share to the company's sum-of-the-parts valuation.

"We believe Nvidia’s ‘jaw-dropping guidance' heard around the world is a direct AI barometer for Redmond as our recent checks further confirm the monetization opportunity for MSFT is happening much sooner than the Street had anticipated in the field," Ives said.

Nvidia Corp. NVDA last week reported stellar first-quarter results as the chipmaker rides an artificial intelligence-powered momentum. The company issued an upbeat outlook on surging demand for its data center products.

See Also: Best Artificial Intelligence Stocks

For every $100 of Cloud Azure spend with Microsoft seen over the last few years, there is an incremental $35-$50 AI spend, the analyst said. This would change the game and the total addressable market for the company in the future, he said. He also repeated his $800 billion estimated market opportunity for AI.

Microsoft shares have run up in 2023 as investors took stock of the fact that less than 50% of the workloads have moved to the Cloud, Ives said. He expects the company to gain a share in the enterprise market against market leader Amazon, Inc.’s AMZN AWS over the next 12-18 months, with AI front and center as a catalyst.

Ives' thesis on Microsoft has centered around:

  • Cloud and underlying Office 365/Windows ecosystem comprising a bigger chunk going forward
  • Microsoft hitting the next gear of growth with ChatGPT and AI

Microsoft Price Action: Microsoft shares closed Friday's session at $332.89, up 2.14%, according to Benzinga Pro data.

Read Next: Nvidia CEO Calls For Urgent Action: Embrace AI Or Risk Being Left Behind

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