Microsoft (MSFT) -) has proved a titan even among its fellow Big Tech giants this year, surging to highs as it works to prove the fiscal viability of its heavy investments in artificial intelligence.
The stock, up around 54% for the year, made up tons of ground in the past month, reaching a 52-week high $373 on Nov. 15 from $313 on Oct. 3.
The surge followed Microsoft's highly anticipated unveiling of its first-ever graphics-processing chip made for AI, a move that could enable the company to compete with semiconductor giant Nvidia (NVDA) -).
During its Microsoft Ignite 2023 conference, the company simultaneously announced a second Arm chip for more general-purpose computing, as well as an expanded partnership with Nvidia designed to benefit Microsoft's cloud customers.
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Microsoft also said that it would be extending its Copilot offerings and experiences in an effort to "transform productivity for every role and function."
The company said that the bulk of its Copilot users have reported enhanced productivity, greater quality in their work and greater efficiency (all with fewer meetings).
Beyond sending the stock to highs, the conference drew enthusiastic responses from a number of analysts. Wedbush's Dan Ives lifted his price target for Microsoft to $425 from $400. He'd previously said that he expected the company's market cap to exceed $4 trillion by 2025.
Microsoft currently has a market cap of $2.74 trillion, making it one of the largest companies in the world.
Ives said that the enhanced price target reflects "incrementally positive AI customer checks with 'game changing' Co-Pilot monetization now on the doorstep" for Microsoft into 2024.
The stock, he said, is on Wedbush's Top Pick list into next year.
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The significance of Microsoft Ignite
The conference, according to Deepwater's Gene Munster, represented a significant moment for Microsoft. The announcements the company made Wednesday will make it easier for Microsoft to build "AI functionality into their core products."
"Score one for Microsoft," he said.
Microsoft is not unique among cloud companies in offering a computing chip — Google (GOOGL) -) and Amazon (AMZN) -) are committed to the same effort.
The move, according to Munster, will further diversify Microsoft's business while reducing its reliability on Nvidia, something that could fatten its profit margins.
"We've seen what's happened in Nvidia's business over the past nine months, and there is this competition for access to these compute platforms," Munster said.
"I think Microsoft wants to have insurance against being beholden to Nvidia," he said, adding that Microsoft seems to be seeking silicon dependency. That would enable the company to build out important AI infrastructure at lower cost, improving longer-term margins.
And while the announcement could prompt slight headwinds at Nvidia as Microsoft's reliance on the semiconductor giant lessens, Munster said the enhanced partnership between the two companies will help Microsoft's cloud sector grow.
"The odds that Azure growth continues at current levels slightly increases with this partnership," he said.
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