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Though it’s currently in the midst of a video game battle, Microsoft (NASDAQ:MSFT) has taken shots against its competitors, Google (NASDAQ:GOOG) (NASDAQ:GOOGL) chief among them, in the race for use cases of generative artificial intelligence, leading to praise from several Wall Street analysts.
Wells Fargo analyst Michael Turrin, who has an overweight rating and $300 per-share price target on Microsoft (MSFT), noted the inclusion of technology from OpenAI in both Bing and Edge will help drive market share gains for search, browser and advertising, with the potential for further AI-enable innovation across the tech giant’s products and services.
Turrin said the announcements, including applying artificial intelligence to core search, “substantially improves” the relevancy of queries, calling it the largest improvement in more than 20 years. And with the search engine, browser and new Chat feature for Bing, which provides an interactive chat function based on ChatGPT, Microsoft (MSFT) now has a “unified web experience.”
Turrin added that Microsoft (MSFT) could see an additional $2B in revenue opportunity from the improvements to Bing and Edge.
Microsoft (MSFT) shares rose nearly 2% in premarket trading on Wednesday.
Bernstein analyst Mark Moerdler, who has an outperform rating on Microsoft (MSFT), said Tuesday’s event was just the beginning, as he believes more use cases stemming from the Microsoft (MSFT)-OpenAI partnership will come “relatively quickly.”
“This will drive both top-line and bottom-line growth, and while margins may grow incrementally slower, the AI platform Microsoft has built will deliver margin improvement as it scales,” Moerdler wrote.
Moerdler also pointed out the integration of ChatGPT-like technology into Bing could result in “incremental revenue dollars,” as each percentage point in market share for search is worth roughly $2B in revenue.
Bank of America analyst Brad Sills, who has a buy rating and $300 per-share price target on Microsoft (MSFT), said it’s unlikely Bing will take any “meaningful” search share from Google (GOOG) (GOOGL) – which has more than 85% of the search market – but the company is doing what it can to compete.
“We believe that Microsoft is staying ahead of the curve for AI-enabled enterprise use cases, which are likely to generate more meaningful incremental revenue growth for the company over time,” Sills wrote.
Sills added the updated version of Edge could continue to drive market share gains, as it has increased its market share over the past seven consecutive quarters. He also noted there is the potential for Edge to drive engagement and volume to Bing.
“Bottom-line, it took about 9 years for Microsoft Cloud to reach $40B+, and we think it’s plausible for Microsoft AI to reach $40B+ in half the time,” Bracelin added. He raised his per-share price target to $290 from $247 following the event.
