Microsoft Stock (MSFT) Price Rises Despite Fears of AI Market Bubble
By:C, Fiona
On Wednesday, when Microsoft (MSFT) introduced its Bing search engine and Edge web browser driven by artificial intelligence, the business received a flurry of price-target increases. But other experts are sounding the alarm about a possible AI stock bubble.
Following Tuesday’s briefing on the company’s AI efforts, at least five Wall Street brokerage firms increased their price estimates on Microsoft stock.
Microsoft has announced that the technology underlying the popular chatbot ChatGPT would be incorporated into Bing and Edge. Microsoft is headquartered in Redmond, Washington. Microsoft has just announced a multibillion-dollar investment in OpenAI, the maker of the ChatGPT text generator and the Dall-E picture generator.
Mizuho Securities analyst Gregg Moskowitz predicted in a letter to clients that Microsoft’s AI enhancements to Bing might increase the company’s market share in both search engine queries and search advertising.
Microsoft Stock Fluctuates
Moskowitz estimates that by 2022, the digital advertising sector will be worth $570 billion (of which 40% will come from search), expand by the high single digits, and be extremely lucrative. Microsoft stated, “Every percentage point you earn in search share is worth an additional $2 billion in potential revenue every year.”
Moskowitz has maintained his buy recommendation on Microsoft stock and increased his price objective from $280 to $300. Microsoft shares fell 0.3% to $266.73 at the market close today. It reached a session high of a 3.4% gain earlier today.
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The AI Stock Market Is Going Crazy From All the Excitement
Some market watchers are confident that AI will yield substantial returns in the not-too-distant future.
Call me dubious, but this frenzy over ChatGPT and ‘generative AI’ is propelling a lot of companies to ridiculous levels,” Jordan Klein, managing director for tech, media, and telecom sector trading at Mizuho Securities, wrote in a note to investors on Wednesday.
What’s more, “I lived through the dot-com boom and bust of the late 1990s. The amount of excitement about ChatGPT is nowhere near as high, but I can’t help but feel uneasy because of the striking similarities between the two.”
Businesses are eager to publicize their own AI initiatives at the moment, he said, riding the wave of enthusiasm for the field to its fullest potential. The revelation didn’t sway Guggenheim analyst John DiFucci from his sell rating on Microsoft stock.
“Microsoft has been in the forefront of publicizing its AI goals, but will it reap the benefits more than its competitors? We don’t think so, or there’s a good chance that you’re wrong if you do, “DiFucci wrote to customers saying.
Google Market Share Gains for Bing Will Take Time
Brent Thill, an analyst at Jefferies, was optimistic about Microsoft stock in the wake of the company’s announcement. He is still recommending a buy and has increased his price target from $275 to $310.
He did note, though, that it will take time for Microsoft’s top and bottom lines to benefit from the product upgrades.
In a letter to clients, Thill argued that “search enhancements will operate as a tailwind to ad income long term,” but that it would take time to woo people back to Bing and that the company would require a “crowbar” to lure advertisers away from Google. Nearly all of the world’s search traffic goes through Google, whereas only a small percentage uses Bing.
And Google’s parent firm Alphabet (GOOGL) saw its stock price fall on Wednesday. A recent commercial for Google’s Bard artificial intelligence chatbot provided an inaccurate answer, which investors took as a sign to steer clear.
Alphabet stock dropped 7.7 percent, ending the day at 99.37.
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