Microsoft is intensifying its focus on artificial intelligence by launching a range of proprietary AI models, a strategy that Wells Fargo believes could drive its stock price to new heights. The bank raised its price target for Microsoft shares from $625 to $650, indicating a potential 44% upside from the stock's closing price on Friday.
Analyst Michael Turrin noted that Microsoft is better positioned in the software layer than it is currently recognized for, and its investments in AI capacity and models are expected to yield substantial adoption over time.
This week, Microsoft is set to unveil new AI tools at its 'Build' conference, including a coding model that will enhance GitHub Copilot, as well as models for reasoning, transcription, and image processing. Additionally, the company is anticipated to provide updates on its profitable partnerships with leading AI startups, which could act as a catalyst for its stock in the near term.
According to Wells Fargo, approximately two-thirds of Microsoft's $37 billion AI business is derived from Azure consumption by OpenAI and Anthropic, alongside revenue from Microsoft 365 and GitHub Copilot. The positive outlook from Wells Fargo aligns with the broader consensus among analysts, with 56 out of 60 recommending a buy or strong buy on Microsoft shares.
Despite this optimistic forecast, Microsoft's stock has declined nearly 7% since the start of the year, lagging behind the overall market performance