David Becker
Microsoft (NASDAQ:MSFT) emerges as the frontrunner, well-poised to benefit significantly as chief information officers globally shift their focus and increase budgets towards embracing artificial intelligence (AI) and machine learning, according to Morgan Stanley.
The latest fourth-quarter CIO survey conducted by Morgan Stanley projects that nearly 63% of global CIOs are primed to leverage “at least” one of Microsoft’s generative AI products over the next 12 months, shedding light on the company’s promising prospects in the AI domain. The survey underpins the anticipation of a 3.3% year-over-year surge in IT budgets for 2024, with generative AI seizing the top spot on the priority list for CIOs.
Morgan Stanley has expressed confidence in Microsoft’s future by assigning an overweight rating and a strikingly optimistic $415 price target on the company.
The survey further unveils a surge in the adoption rate of Microsoft services, with 37% of CIOs intending to utilize Azure OpenAI services (up from 27% in the second quarter), and another 38% gearing up to embrace Microsoft 365 Copilot (up from 22% in the second quarter) over the next 12 months.
Reaffirming Microsoft’s dominance, the bank’s analysts noted, “Microsoft widened its lead as the #1 share gainer of IT wallet as a result of the shift to the cloud on both a 1-year and 3-year view,” suggesting the company’s stronghold in the evolving landscape. The report underscores Microsoft’s bright prospects to reap the benefits of vendor consolidation, particularly in areas such as Observability, Automation, and Robotic Process Automation (RPA).
Despite trading at a discount in comparison to its large-cap peers, at approximately 26 times 2025 earnings, Microsoft is primed for further upward momentum, as per the bank’s analysis.
The fruitful prospects have reflected in the market, evident in Microsoft shares surging by 0.5% in premarket trading on Thursday.
