You say you want a revolution?
Well, you know, we all want to change the world.
But whether you want it or not, the revolution promising to change this old world of ours radically is heading your way, and its initials are “A.I.”
Artificial intelligence is shaping up to become the biggest Next Big Thing ever and the numbers look pretty impressive.
The AI market is projected to reach roughly $305 billion this year, according to Statista, and nearly $740 billion by 2030.
Admittedly, some say the AI hype is just that — hype.
In November, the software company Retool released a study that found that more than half the tech workers surveyed said that AI is overrated.
However, the report also found that even among AI’s biggest skeptics, only 14.4% said their company was over-investing in AI.
Microsoft CEO Satya Nadella (Photo by Ben Kriemann/Getty Images)
One CEO says AI ‘transforming work’
A month later, Brad Lightcap, chief operating officer of OpenAI, the company behind ChatGPT, told CNBC that there was an overhyped aspect of AI where people think it can “in one fell swoop … deliver substantive business change.”
He added, “there’s almost never a silver bullet answer. … There’s never one thing you can do with AI that fully solves that problem.”
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One thing that is underhyped, Lightcap said, “is the level of individual empowerment and enablement that these systems create for their end users.”
Hype or no hype, several Wall Street analysts say that one company in particular stands to benefit something fierce from the AI overhaul.
And that happens to be a little outfit that goes by the name of Microsoft (MSFT) .
CEO Satya Nadella said the software giant is all in on AI, telling analysts during the company’s earnings call in January that “we are integrating the power of AI across the entire data stack.”
“Our Microsoft Intelligent Data Platform brings together operational databases, analytics, governance, and AI to help organizations simplify and consolidate their data estates,” he said.
Microsoft reported fiscal second-quarter earnings of $2.93 per share, up from $2.32 a year earlier. Revenue totaled $62 billion, up 18% from a year earlier, driven by growth in the intelligent cloud business.
The company is slated to report fiscal third-quarter results later this month.
“A growing body of evidence makes clear the role AI will play in transforming work,” Nadella said.
“Our own research, as well as external studies, show as much as 70% improvement in productivity,” he continued, “using generative AI for specific work tasks, and overall early Copilot for Microsoft 365 users were 29% faster in the series of tasks, like searching, writing and summarizing.”
Last week, Nadella told staffers that the company was launching a new organization called Microsoft AI that will focus on consumer-facing AI products and research.
Meanwhile, Microsoft and OpenAI are reportedly working on plans for a data center project that could cost as much as $100 billion, including an artificial intelligence supercomputer called Stargate, set to launch in 2028.
Analyst: ‘Microsoft top AI winner’
Microsoft would likely finance the project, which is expected to be 100 times more costly than some of the biggest existing data centers, The Information reported, citing people involved in private conversations about the proposal.
Last week, Wedbush tech analyst Dan Ives boosted his price target on Microsoft to $500 from $475 as he declared that the “AI revolution is here.”
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Ives called Microsoft’s monetization of Copilot “transformative” and told investors that the adoption of the tech is gaining momentum based on conversations with the company’s customers and partners.
In turn, this is “catalyzing more Azure cloud deal flow” for the company as “AI use cases explode across the enterprise landscape,” he said, referring to Microsoft’s cloud computing program.
Ives predicted that within the next three years, 70% of Microsoft’s enterprise installed base will be on the company’s artificial-intelligence-driven functionality, which he said would change the landscape for Microsoft going forward.
Copilot, the company’s chatbot, could add between $25 billion and $30 billion to Microsoft’s revenue by 2025, he said.
Bank of America told investors that the AI-enabled Microsoft 365 Copilot, launched in November 2023, “remains in the early stages of penetration.”
With a $30 monthly fee, the investment firm said, Copilot is not cheap, and “limited penetration can drive meaningful incremental growth.”
Bank of America maintained its buy rating and $480 stock price target on MSFT and says the company is a “top pick.”
Amid reports of the new supercomputer project with OpenAI, Jefferies analyst Brent Thill cited Microsoft’s strong AI position when he raised his price target on the company’s shares to $550 from $465, affirming a buy rating.
Thill calls Microsoft the top artificial intelligence winner. He said the company was the key beneficiary of generative Al, where it can benefit from both infrastructure and “app angles opportunities, capturing the most of this transformational opportunity,”
The analyst recommends owning Microsoft and Amazon (AMZN) for the enterprise, Google parent Alphabet (GOOG) , and Facebook parent Meta Platforms (META) for the consumer, and CrowdStrike (CRWD) for security.
“Investors should start positioning now,” he said.
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