Although Microsoft is Already Bigger Than Apple, Its 'iphone Moment' May Be Just Around the Corner

Microsoft Corp. currently holds the title of the largest public U.S. company, boasting a substantial lead of nearly $500 billion over its closest competitor, Apple Inc.

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However, this dominant position doesn't preclude Microsoft from potentially capitalizing on its own version of the transformative magic that propelled Apple with the advent of the iPhone. This sentiment is echoed by Wedbush analyst Daniel Ives, who suggested on Monday that artificial intelligence (AI) could have a similar transformative effect on Microsoft's growth trajectory.

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Ives specifically highlights Microsoft's Azure cloud business as a focal point for potential revenue growth, alongside the company's ability to enhance its software business through the integration of new Copilot AI features. He believes that Microsoft is on the cusp of realizing significant monetization opportunities with its "transformative" Copilot technology, which is increasingly gaining traction across various customer segments and industries.

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Following discussions with customers, chief information officers, and partners regarding Copilot's market reception, Ives has grown more optimistic about Microsoft's prospects, likening AI's potential impact to an "iPhone moment" for the company.

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Accordingly, Ives has revised his price target for Microsoft's stock upward to $500 from $475 in his latest report, suggesting an 18% upside from Monday's closing price. His confidence in Microsoft's trajectory stems from observations indicating an accelerated adoption of generative AI and Copilot functionalities, driving increased Azure cloud deal flow for CEO Satya Nadella and his team.

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Ives predicts that within three years, over 70% of Microsoft's customer base will utilize Copilot, surpassing his previous estimate of 60% adoption. He anticipates that the momentum surrounding AI will continue to build throughout the current fiscal year, with the subsequent fiscal year marked as the true inflection point for AI growth. During this period, Microsoft is expected to implement pricing adjustments and introduce new AI use cases, further catalyzing enterprise adoption.

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Looking ahead, Ives asserts that the stock has yet to fully reflect the potential of Microsoft's forthcoming cloud and AI growth wave, projecting significant budget allocations to AI in 2024 and 2025 as enterprise use cases expand.

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Year-to-date, Microsoft's stock has appreciated by 12%, demonstrating positive performance in the market. In premarket trading on Tuesday, the stock is up by 0.5%, indicating continued investor interest in Microsoft's growth prospects.

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