The Ratings Game: Microsoft will benefit from ChatGPT, OpenAI in multiple ways — potentially at Google’s expense, analyst says

by | Jan 4, 2023 | Stock Market

Microsoft Corp.’s investors don’t fully appreciate its investment in OpenAI, and by extension the profusely-hyped and rapidly growing chatbot ChatGPT, a platform that could eventually help the tech giant compete with Google, an analyst said Wednesday. That analyst, Gil Luria at D.A. Davidson, initiated coverage of Microsoft
MSFT,
-4.37%
with a buy rating and a $270 price target, after the analyst who was previously covering the stock left the firm.

And even as Microsoft and others in the tech industry cut jobs, Luria said the tech behemoth stands to weather a downturn just as well as its large peers. Shares of Microsoft finished 4.4% lower during Wednesday. But the stock had inched 0.2% higher after hours. “We believe Microsoft’s investment in OpenAI will translate to significant underappreciated upside,” Luria said in a research note Wednesday. He said that the “unprecedented activity” at ChatGPT, which articificial-intelligence research company OpenAI debuted several weeks ago, was likely generating more business for Microsoft’s cloud platform Azure. Microsoft in 2019 said it was investing $1 billion in OpenAI, and the two companies at that time struck a partnership intended to broaden Azure’s reach in big AI systems. “We have heard estimates between $250mn-1bn annual run rate of expenses at OpenAI, much of which is likely being spent on Azure,” Luria said. “We expect those levels to increase significantly with the introduction of GPT4.0 later this year and the many product offshoots that will link to OpenAI via APIs.” Also read: ChatGPT is called ‘an iPhone moment in AI,’ …

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