Wedbush analyst Daniel Ives reiterated an Outperform rating on Microsoft Corp
The analyst strongly believes the first step for MSFT was Azure and Office 365, with the next step ChatGPT and AI monetization on both the consumer and enterprise fronts combined, adding $40 to $50 per share to MSFT's sum-of-the-parts valuation.
His cloud checks this quarter for MSFT remain very firm as he believes share gains vs. Amazon.Com Inc
With AI the next step, Ives believes on a sum-of-the-parts valuation that MSFT should join Apple Inc
He believes Nvidia Inc's
Ives estimates that for every $100 of cloud Azure spent with MSFT in the last few years, there is an incremental $35-$40 of AI spend that now is on the table, which changes the game and TAM for Nadella & Co. looking ahead.
The analyst views the enterprise as the golden goose opportunity as he estimates the AI market opportunity is an $800 billion market over the next decade.
Microsoft's stock has been on a tear in 2023 as he believes investors are starting to appreciate now that less than 50% of the workloads have moved to the cloud. Redmond remains in an enviable position to gain share in its enterprise backyard against AWS in this cloud arms race over the next 12 to 18 months, with AI front and center as a catalyst.
Ives believes 90%+ % of Azure and Office 365 large deal activity is on track through his partner checks for the June quarter. ChatGPT will be the next leg of the growth stool for MSFT.
His thesis remains that the cloud and underlying Office 365 and Windows ecosystem will comprise a bigger and bigger piece of Redmond in the future and will ultimately spur growth and margins into FY23 and FY24 despite this downturn.
The analyst also believes Redmond is just starting to hit its next growth gear, with ChatGPT and AI adding a new layer of growth to the MSFT story over the coming years.
Price Action: MSFT shares traded higher by 0.33% at $339.12 on the last check Wednesday.
