Microsoft’s (MSFT) Ignite conference is being held in San Francisco this week, and the analysts at J.P. Morgan said the software and cloud giant revealed a compelling case for its version of enterprise AI and what it calls “Frontier Firms.”
“Microsoft further defines its vision for the future of AI as it sees the technology evolving from concept and experimentation and toward implementation and utilization, with AI becoming ubiquitous across organizations, necessitating effective, secure, and compliant orchestration and observability as multi-agent ecosystems emerge,” said J.P. Morgan analysts, led by Mark Murphy, in a Wednesday investor note.
J.P. Morgan reiterated its Overweight rating and $575 price target on Microsoft.
Citing an IDC study that expects as many as 1.3B AI agents will be deployed by 2028, Microsoft announced its Agent 365, which will help clients deploy and scale agents across a business. Microsoft also discussed the importance of an Intelligence Layer, which can help unify structured and unstructured data for utilization by said agents.
Microsoft announced an App Builder for M365 Copilot as well as “software is evolving from being made for people to by people” thanks to the rise of AI-powered coding processes.
“With App Builder, users can create an app within a matter of minutes through the combination of natural language and the intelligence layer within Microsoft’s platform that provides business-specific context to AI apps,” Murphy noted. “This complements Microsoft’s GitHub Copilot family of products, helping provide development tools to users from the technical to the non-technical.”
Finally, J.P. Morgan highlighted the new partnership between Microsoft, Nvidia (NVDA) and Anthropic (ANTHRO). As part of the deal, Nvidia and Microsoft are committing to invest up to $10B and up to $5B, respectively, in Anthropic. Anthropic also said it has committed to spend $30B on Microsoft’s Azure compute capacity and to contract additional compute capacity up to one gigawatt.
“While MSFT continues to encounter some AI capacity constraints modestly restricting Azure growth, we see it planting the longer-term seeds for success across Security, Teams, Power Apps and now the forward-looking OpenAI/ChatGPT investments,” Murphy added. “In addition, limited headcount growth shows the commitment to efficiency and alignment of OpEx to the new environment.”