GPT-4 should further cement Microsoft’s leading position in AI, Oppenheimer says

The stock market has been fully engrossed recently with the fallout from the collapse of SVB bank, but this week also provided a reminder that the previous big topic of 2023 still has plenty to add to the conversation.

Before banks began a competition to find out which was the most badly managed, AI was all the rage on Wall Street, with Microsoft’s (NASDAQ:MSFT) big investment in OpenAI, the maker of viral sensation ChatGPT, hogging the headlines.

AI is back on the agenda this week with the news OpenAI released GPT-4, a year after v3.5 was released. The makers have described of the latest version as multimodal, meaning as well as text, images can also be used for the generation of content.

“For example,” explains Oppenheimer analyst Timothy Horan, “a user could give it a picture of a closet and ask for wedding outfits, or show pantry for creative dinner options.”

Duolingo and Stripe are integrating the latest iteration and Microsoft has confirmed that Bing has been running on GPT-4. That might raise eyebrows given some of the unsettling conversations the chatbot has had with users since Bing started using the tech. However, Horan thinks these are just some growing pains.

“GPT-4’s initial issues in Bing Chat could cause some to dismiss, but we think Microsoft is just working out the kinks,” the 5-star analyst opined.

While Horan concedes that Microsoft’s AI experiments have affected Bing’s performance, despite the tech still being in its infancy, Horan finds it to be “compelling.”

All told, Horan thinks the latest release augurs well for Microsoft and its AI ambitions.

“4.0 should increase Azure demand funnel (more compute), still poses possible step-change improvement of productivity franchise, augment Search, and bear-hug of OpenAI places it in pole position for AI platform shift,” the Oppenheimer analyst summed up.

Overall, Microsoft gets plenty of support on Wall Street; its Strong Buy consensus rating is based on 31 recent analyst reviews that include 26 Buys, 4 Hold, and 1 Sell. However, the $291.19 average price target suggests a modest upside potential of 4%. (See Microsoft stock forecast)

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Disclaimer: The opinions expressed in this article are solely those of the featured analyst. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.

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