Microsoft is the stock to buy as it continues its leadership in the generative AI space with ChatGPT, according to Wedbush.
While Alphabet is still playing catchup with its Bard offering, Microsoft is gearing up to monetize its headstart in AI.
“We believe Microsoft is in a unique position to gain market share in the cloud while deploying additional AI capabilities,” Wedbush said.
The battle over generative artificial intelligence heated up after Alphabet’s I/O conference on Wednesday, where Google’s parent announced updates to its Bard platform.
But according to Wedbush analyst Dan Ives, Microsoft remains a stock to buy as it continues its leadership in AI with its stake in ChatGPT and prepares to start monetizing the opportunity.
“The AI monetization opportunity makes us even stronger [Microsoft]”he said in a note on Thursday. “We believe that Microsoft is in a unique position to gain share in the cloud market while deploying additional AI capabilities that we estimate will expand the overall addressable market in Redmond around the cloud by 35% to 40% over the coming years.”
The company’s strategic stake in ChatGPT, which was strengthened earlier this year with an additional $10 billion investment in OpenAI, could position Microsoft for the opportunity to start sharing the cloud space from offering on Amazon’s AWS.
“[Microsoft] remains in an interesting position to gain a share of its business backyard against AWS in this cloud arms race over the next 12 to 18 months,” Ives said. “We also believe that Redmond is starting to enough of its next growth tool with ChatGPT and AI also adds a new layer to Microsoft’s growth story in the coming years.”
Ives reiterated his “Outperform” rating on Microsoft and said it remains “a great idea.” Additionally, he raised his price target on Microsoft to $340 from $325, which represents a potential upside of 9% from current levels.
As Alphabet continues to play catchup in the AI space, it’s set up to go head-to-head for market share against Microsoft, especially as the search firm indicated it plans to incorporate AI capabilities into all aspects of its product suite, including the cloud.
“With the need for AI applications accelerating across industries, we view the advancements and integration of generative AI across Google’s portfolio as a positive in the AI battle because it now comes when who can collect market share as improvements are released throughout the year,” Ives said.
Despite Alphabet’s new opportunity in the AI space, he still favors Microsoft over Alphabet, with no formal recommendation or price target for Google.
“We continue to believe that Microsoft’s game changing early investment in ChatGPT is getting a head start on the AI front in this Game of Thrones game for big tech that Google is now playing in major catchup mode,” Ives said.
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