The big news from the technology world last week was the announcement by the Chinese technology firm DeepSeek that it had successfully created an AI chatbot that required a fraction of the computing power of its peers.
Maximize Your Portfolio with Data Driven Insights:
- Leverage the power of TipRanks' Smart Score, a data-driven tool to help you uncover top performing stocks and make informed investment decisions.
- Monitor your stock picks and compare them to top Wall Street Analysts' recommendations with Your Smart Portfolio
The developments placed hyperscalers like Microsoft (NASDAQ:MSFT) in an interesting dilemma, as it could significantly impact the amount of money that needs to be spent on building out the AI infrastructure.
At this point, Microsoft’s viewpoint regarding DeepSeek seems to be ‘if you can’t beat them, join them.’ The company, which has fallen some 6% after its 2Q 2025 earnings report due to Azure revenue weakness, has now made the DeepSeek AI model available on both Azure and GitHub.
Investor Johnny Zhang believes this is a smart move.
“DeepSeek integration can strengthen Microsoft’s AI capabilities and competitive position, sustaining long-term growth momentum due to strong AI spending,” explains the investor.
Zhang spotlights two potential benefits from this integration, the first being that the DeepSeek open-source model will likely allow the company to create cheaper AI models using advanced AI chips. The investor explains that Microsoft has a built-in advantage over its competitors in China, since it will not need to worry about accessing the high-powered hardware.
Another advantage could stem from allowing developers to access the DeepSeek AI through GitHub, while also “leveraging the Safety Evaluation System to test their apps,” notes Zhang, referencing Microsoft’s set of tools designed to maintain the safety and security of products and services on the platform.
The investor believes this could serve as a growth driver for MSFT, improving the company’s ability to turn AI into cash.
Though acknowledging the market’s disappointment in the weaker Azure numbers, Zhang remains bullish, in large part due AI growth momentum in the cloud business.
“The increasing commercial bookings related to AI and the integration of DeepSeek into its Azure platform further reinforce its competitive position in the industry,” concludes Zhang, who rates MSFT a Buy. (To watch Zhang’s track record, click here)
Wall Street does not appear phased by the DeepSeek news when it comes to Microsoft, at least not yet. With 28 Buy and 3 Hold ratings, Microsoft boasts a consensus rating of Strong Buy. Its 12-month average price target of $508.68 would translate into gains of ~23% in the coming year. (See MSFT stock forecast)
To find good ideas for stocks trading at attractive valuations, visit TipRanks’ Best Stocks to Buy, a tool that unites all of TipRanks’ equity insights.
Disclaimer: The opinions expressed in this article are solely those of the featured investor. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.
