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Wall Street sees Microsoft as a big winner after a weekend marked by high drama in the artificial intelligence sector. OpenAI was at the center of the technology world’s discourse following the board’s decision to oust CEO Sam Altman. Despite pressure for his reinstatement at OpenAI, Microsoft — which pledged an estimated $13 billion investment in OpenAI earlier this year — said Altman would instead lead a new advanced AI research team for the software giant. The saga continued playing out on Monday, as hundreds of OpenAI employees reportedly threatened to follow Altman out the door if the ChatGPT maker’s board does not resign. But even as the story continues unfolding, analysts already view Microsoft as well-positioned coming out of the latest Silicon Valley spectacle. “MSFT hired this key asset … which is the music to the ears of investors,” said Wedbush analyst Dan Ives. Ives, who reiterated his outperform rating and $425 price target for Microsoft, said the OpenAI board was a “kids poker table and thought they won.” But he said their sense of victory was shattered when Microsoft CEO Satya Nadella “took this all over in a World Series of Poker move for the ages” by hiring Altman and Greg Brockman, an OpenAI co-founder. “We view Microsoft now even in a STRONGER position from an AI perspective with Altman and Brockman at MSFT running AI,” Ives wrote to clients Monday morning. Ives’ price target is higher than the consensus on Wall Street of $403, according to LSEG, formerly known as Refinitiv, implying upside of slightly more than 9%. Microsoft shares rose more than 1% in morning trading. The stock has climbed 56% so far in 2023, outperforming both the S & P 500 and technology-heavy Nasdaq Composite . Some were at first concerned that any shake-ups at OpenAI could slow down its innovation and, thus, weigh on partners. Azure, Microsoft’s cloud computing platform, was one area of focus given its use of OpenAI technology. But Oppenheimer analyst Timothy Horan called the move from Microsoft — which uses OpenAI technologies in products such as Bing — a “win/win.” That’s because Microsoft still has access to the best large language models, or LLMs, currently on the market. Now, Redmond, Washington-based Microsoft also has a top-tier team to create its own LLMs and best implement AI. “MSFT has the best AI data and applications and most optimized AI infrastructure for LLM training and inferencing, in our view,” said Horan, who has an outperform rating on Microsoft and a price target of $410. MSFT .SPX,.IXIC YTD mountain Microsoft vs. the S & P 500 and Nasdaq Composite in 2023 Evercore ISI’s Kirk Materne said Microsoft snatching Altman may have even set the software giant on a better path in the long term. Materne has an outperform rating on the stock and a $432 price target. He called the move a “clear win for Microsoft” that “should help offset concerns regarding potential near-term uncertainty at OpenAI.” “When taking a long-term view, hiring Altman and team might end up being a better outcome vs the prior status quo,” Materne told Evercore ISI clients. “Clearly, there is still some risk to Azure if OpenAI growth were to materially slow, but we think the long-term opportunity around GenAI for Microsoft trumps any near-term risk associated with the OpenAI disruption.” — CNBC’s Michael Bloom contributed to this report.
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