Microsoft Corp (NASDAQ: MSFT) was a disappointment for its shareholders in 2022. But the new year will likely be the one of “recovery”, a D.A. Davidson analyst said in a note this morning.
Microsoft stock could climb to $270
On Thursday, Gil Luria recommended that investors buy Microsoft stock at the current discount as it has upside to $270, which translates to a more than 20% increase from here.
He’s bullish primarily on the tech behemoth’s $1.0 billion investment in OpenAI – an artificial intelligence research lab that operates “ChatGPT”.
Microsoft’s investment in OpenAI will translate to significant underappreciated upside. Longer-term, incorporating ChatGPT into Bing may provide MSFT with a once-a-decade opportunity to unseat Google’s Search dominance.
A day earlier, “The Information” said Microsoft was working with OpenAI to incorporate ChatGPT into its flagship search engine.
OpenAI investment to benefit Azure as well
Interestingly, the D.A. Davidson analyst doesn’t expect OpenAI to benefit “Bing” only. In fact, Azure – its cloud platform stands to benefit just as much from the said investment. His note reads:
We’ve heard estimates between $250 million to $1.0 billion annual run rate of expenses at OpenAI, much of which is being spent on Azure. We expect those levels to increase significantly with the introduction of GPT 4.0 later this year and the many product offshoots that’ll link to OpenAI via APIs.
In just over a month of its launch, ChatGPT has surpassed 1.0 million in terms of user count. Luria is also convinced that the multinational is well-positioned to weather an economic downturn (find out more).
The Nasdaq-listed firm is set to report its Q2 results later this month. Consensus is for it to earn $2.28 a share versus the year-ago $2.48. Versus its high in mid-August, Microsoft stock is down about 25% at writing.
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