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Melius Research recently reaffirmed Microsoft (NASDAQ:MSFT) as a Buy, emphasizing the company’s potential to dominate the AI landscape. According to Melius analysts, Microsoft’s “Copilots,” a range of Generative AI productivity tools, are not just about immediate revenue but are focused on revolutionizing the AI computing interface. With approximately 200 million users eligible for Copilot currently, Microsoft stands to gain significantly if a large portion of its 80 million consumers and over 400 million knowledge workers embrace Copilot for their daily tasks.
Melius analysts underscore Microsoft’s strategy to consolidate AI tools within Copilot as a move that could unlock substantial value and broaden the company’s Total Addressable Market (TAM) within the software industry.
Despite trailing in AI development, Evercore ISI analysts express optimism about Apple’s future in this rapidly expanding sector. They maintain an Outperform rating and a $220 price target for Apple (NASDAQ:AAPL) following the introduction of ReALM (Reference Resolution As Language Modeling) by Apple researchers. This innovation showcases Apple’s progress in AI technology, with smaller ReALM models reportedly performing on par with GPT-4 but with fewer parameters, making them more suitable for on-device AI processing. The larger ReALM models are said to surpass GPT-4 in performance, particularly in enhancing Siri’s capabilities to comprehend on-screen data and conversational context.
Jefferies analysts highlight a shift in the generative AI landscape, noting a transition from exploring the technology’s potential in 2023 to actualizing tangible advancements in 2024. Vendors are now refining and pricing their AI solutions, while users are identifying practical applications for AI technology. Jefferies identifies Microsoft as the leading AI beneficiary in the current generative AI cycle, citing the company’s strong positioning to capitalize on infrastructure (Azure OpenAI) and application opportunities (Copilots).
Citi Research recommends seizing the next wave of the Artificial Intelligence trade by adopting a comprehensive approach that extends beyond the U.S. market, encompassing the entire AI value chain. Citi categorizes AI investments into Enablers, Creators, and Users, emphasizing the overlooked potential in the User category and global firms. The firm introduces two investment baskets – “Artificial Intelligence-at-a-Reasonable-Price” and “Artificial Intelligence Value” – to facilitate exposure to AI stocks with varying growth and risk profiles.
In a strategic move, Apple is in discussions with Baidu (NASDAQ:BIDU) to integrate generative AI capabilities into its devices in China. This collaboration aims to embed Baidu’s Ernie Bot into future Apple products tailored for the Chinese market, following Apple’s pattern of partnerships with search engine providers like Google (NASDAQ:GOOGL) and Baidu. Macquarie analysts anticipate a structured agreement between Apple and Baidu akin to the Google-Samsung deals, potentially involving on-device AI models for new AI applications such as voice recognition and photo editing.
