Microsoft's AI Adoption Surges, Wedbush Raises Target Price 16%

Wedbush Securities has observed a notable acceleration in the adoption of Microsoft's (MSFT.US) artificial intelligence (AI) products and services among enterprise users. This trend has prompted the firm to raise its target price for Microsoft from $515 to $600, while maintaining an "outperform" rating. The company, under the leadership of Satya Nadella, remains a top investment pick for Wedbush.

The firm's analysts highlighted in a report to clients that the "transaction conversion rate" for the deployment of enterprise-level AI solutions is rapidly increasing. Many of Microsoft's clients are focusing on implementing AI applications in vertical sectors such as finance, government, and retail, which are showing particularly strong performance.

Looking ahead, the analysts predict that over the next three years, more than 70% of Microsoft's enterprise and commercial market users will deploy these AI functionalities. This shift is expected to alter the company's growth trajectory. The analysts' recent surveys of partners indicate that Microsoft's clients are providing positive feedback on the deployment of Copilot, with projections suggesting that this could add approximately $25 billion in revenue for Microsoft by the 2026 fiscal year.

The report also estimates that for every $100 spent by customers on Azure cloud services in recent years, an additional $50 will be invested in AI (up from the previous estimate of $40). The core argument is that the monetization of cloud services and AI will play an increasingly significant role in Microsoft's business, driving growth and profitability over the coming years.