Street Sees Dollar Signs as Microsoft Invests in Cloud, Artificial Intelligence

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Microsoft’s investments in cloud and artificial intelligence have not gone unnoticed on Wall Street as MSFT shares were up one percent during midday trading on Monday.

Morgan Stanley analyst Keith Weiss reiterated his “Overweight” rating on Microsoft, increasing his price target on the stock to $80 from $72. In a note, he said that he expects Microsoft to report higher profits next year due to strength across its top line drivers: Azure, data center, and Office 365.

The growing trend of machine learning will also drive demand for Azure, with the potential to add up to $110 billion in market value for Microsoft, Weiss said.

Microsoft has been building on investments and research in the artificial intelligence space as its biggest cloud competitors – AWS and Google – do the same. Recent numbers by Research and Markets illustrates the overall growth opportunity in AI, with annual worldwide AI revenue expected to grow from $643.7 million in 2016 to $38.8 billion by 2025.

The company formed the Microsoft AI and Research Group last year, led by 20-year Microsoft veteran Harry Shum, to “accelerate the delivery of new capabilities to customers across agents, apps, services and infrastructure.”

In terms of investment in the AI space, Microsoft Ventures has been on a bit of a tear lately, participating in Element AI’s recent $102 million series A round, the $15 million investment in CognitiveScale, and a $20 million funding round in CrowdFlower.  

The application for artificial intelligence and machine learning are certainly widespread. This week Microsoft detailed how it used machine learning to help the Federal Trade Commission track down tech support scammers, and how the team from deep learning startup Maluuba, which Microsoft acquired this year, used artificial intelligence to get the maximum score on Ms. Pac-Man.

As the public cloud war continues to play out, it is worth watching how artificial intelligence will drive investor interest in Microsoft.