If until now Microsoft’s (NASDAQ:MSFT) Bing search engine came across as a poor man’s Google, on Tuesday that changed completely. The tech giant unveiled the new AI-powered Bing, based on OpenAI’s GPT technology.
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The AI opportunity will not only have a big impact on digital advertising, says Piper Sandler analyst Brent Bracelin, but could have momentous implications elsewhere.
“We estimate that the new AI-powered Bing could help expand Microsoft’s share of the digital ad market by 3% to 7% in CY26E. This equates to an incremental $20B in Microsoft consumer AI revenue (mostly digital ads),” the analyst explained. “That said, we see an even bigger enterprise opportunity that could expand to $22B by CY26E leveraging AI transformers further into four product categories: GitHub, Microsoft 365, Teams, and Azure AI services.”
What’s more, Microsoft’s AI endeavors could have a much faster impact than previous new offerings. While it took Microsoft Cloud around nine years from the Azure and O365 launches in 2010 and 2013 to reach revenue over $40 billion, Bracelin reckons that across five product categories, Microsoft AI could grow to revenues of $40 billion in half the time, with Microsoft Consumer AI accounting for $20 billion+ and Enterprise AI contributing $22 billion.
Google might be scurrying to make up ground now, having already announced that it is working on its own version of ChatGPT, but the OpenAI investments have already provided Microsoft with a “unique first-mover advantage” in AI transformer models. And Bracelin expects Microsoft to fully exploit the opportunity this year.
“The early days of AI-powered applications (including Bing) are bound to have fits and starts, but the pace of change seems faster than any other enterprise technology that we’ve encountered,” the analyst summed up.
The result of the upheaval at the Big Tech summit is a new price target to reflect the “untapped AI potential.” The figure rises from $247 to $290. (To watch Bracelin’s track record, click here)
Not many on the Street are betting against Microsoft’s ongoing success. 25 out of 29 analyst reviews are positive, making the consensus view here a Strong Buy. However, at $280.97, the average target suggests only modest one-year gains of 5%. (See Microsoft stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
