Whether AI can work or not will soon be answered. Microsoft Copilot is here! As the leader of this round of generative AI revolution, it is no exaggeration to say that the future performance of Microsoft Copilot will have a direct impact on the capital investment of the entire AI application side: if Microsoft can make money, the gold rush on the application side will soon come. If it cannot make money, the fourth industrial revolution will probably come to a temporary halt.
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A new era of AI in the Copilot bombing site is coming
At this press conference, Copilot was the highlight. Almost all of the more than 150 new features added to the Windows 11 system are based on AI. Microsoft CEO Satya NaDELLa also personally demonstrated various use cases of Copilot:
If the user copies a large amount of text in an email, Copilot will automatically pop up on the right side of the desktop to help summarize the key points of the email and search for important information in it, including directly giving the distance between different locations without copying and pasting them into a map.
Copilot can also be used to solve mathematical problems. Screenshot charts and equations in PDF format and you can solve them in Copilot that pops up automatically.
Copilot can also obtain content from the user's mobile phone (such as text messages). If the user wants to send flight schedules to family members, Copilot will import the data to the computer desktop upon request, and the message can be sent without even taking out the mobile phone.
Nadella said that Copilot is an experience that spans multiple interfaces such as the Windows 11 operating system and the Microsoft 365 productivity tool suite. It can understand the user's background information, provide appropriate skills when needed and adapt to personalized needs.
In terms of pricing, consistent with the news announced in July, Copilot's monthly subscription fee is US$30, which is an 83% increase from the previous Office 365. It is the company with the largest price increase in this wave of generative AI.
Copilot will be rolled out on Windows systems next Tuesday, and the enterprise version will be fully available on November 1.
It is worth pointing out that Microsoft CFOA MyHood told Wall Street analysts two months ago that the financial impact of AI is not explosive, but gradual, and may be mainly reflected in the second half of fiscal year 2024, which ends in June 2024.
In other words, in the first half of the 2024 calendar year, the revenue growth brought by AI is expected to be reflected in Microsoft's financial report, giving observers more indicator references.
Another 24% increase in the next year! Wall Street is generally optimistic about Microsoft's performance
Microsoft, which owns OpenAI, has always been considered the company that has benefited most from the wave of generative AI.
Citi analyst Tyler Radke previously raised his target price for Microsoft to $425. He believes that Microsoft Copilot has great potential. Even if the penetration rate is only 5%, the product can bring at least US$5 billion in incremental revenue to Office 365, which is close to half of Office 365's sales revenue to enterprises (US$9.4 billion) in the third fiscal quarter.
Wedbush analyst Dan Ives said in a report on Thursday that the latest survey of Microsoft shows that the company's cloud computing unit is "performing stably" and that the ability to monetize AI is just around the corner.
He said that Microsoft Azure's revenue guidance may achieve high growth of 25%-26%, and this growth will partly benefit from the popularity of AI.
In addition, he also believes that the Copilot tool can accelerate the customer penetration of Microsoft's AI services. He believes that within the next three years, more than half of Microsoft's users will use Copilot.
Ives wrote:
"We believe that while management has talked about a 'step-up' in AI monetization in fiscal 2024, based on our recent surveys, AI adoption has so far been faster than expected." "Our view remains that cloud computing and the underlying Office 365/Windows ecosystem will occupy an increasing share of Microsoft's future development and will ultimately stimulate growth and margins in fiscal 2024."
Ives gives Microsoft a buy rating and a $400 price target, believing the stock has room for a 26% upside in the coming months.
According to 34 research reports tracking Microsoft in the past three months, Wall Street analysts are very optimistic about Microsoft's stock price, with an average 12-month target price of $392.41, implying a potential upside of 24% in the next year.
HSBC throws cold water: Microsoft stock price has reached a reasonable level
However, HSBC recently pointed out that investors should be cautious about the impact of AI on various technology stocks.
Analysts noted:
"While we see the promise of AI, the timing remains unclear; however, demand for cloud and digital transformation remains strong."
HSBC gave Microsoft a "hold rating" with a target price of $347, saying that despite Microsoft's advantages and ability to benefit from the AI boom, its valuation is already high.
They believe that the market is “overly optimistic about the near-term prospects for AI monetization”:
"We estimate that Microsoft's near- and long-term operating performance will be strong, driven by the prospect of cloud computing, digital transformation and artificial intelligence. In the short term, Microsoft's business will continue to be strong, but the stock is already priced at a reasonable level."