Microsoft Is the Big Winner of CIO Survey on AI. Buy the Stock, Morgan Stanley Says.

Chief information officers expect Microsoft to claim the largest share of generative AI spending in the next three years. (Dreamstime)

Key Points

• Microsoft is expected by 37% of chief information officers to capture the largest or second-largest share of generative AI spending over the next three years.
• Microsoft is also anticipated to gain the largest additional share of IT budgets from cloud migration, according to 49% of surveyed chief information officers.
• Fifty-eight percent of chief information officers currently have artificial intelligence projects in production or expect to by the end of the year.

Microsoft remains in pole position to cash in on artificial-intelligence spending, according to Morgan Stanley’s quarterly survey of chief information officers.

Among hundreds of U.S. and European CIOs polled between Aug. 5 and Sept. 9, 37% expect Microsoft to claim the largest or second-largest share of additional generative AI spending in the next three years. That is miles ahead of Amazon.com, ranked second at 12%.

“Bottom line, Microsoft again remains the clearest beneficiary of GenAI spend,” wrote Morgan Stanley analyst Keith Weiss. Microsoft has consistently led the field in the bank’s CIO survey.

The company is also poised to benefit from the migration of computing work to the cloud from on-premise servers, Morgan Stanley found. Forty-nine of 100 respondents who were asked about the trend expect Microsoft to gain the largest additional share of IT budgets as a result of the shift to the cloud in the next three years. Twelve answered Amazon and six said Salesforce, followed by a host of smaller players.

Morgan Stanley reiterated an Overweight rating and a $625 price target for Microsoft stock, which is the firm’s “top pick” in large-cap software. Shares ticked down 0.7% to $521.38 on Thursday.

AI continues to dominate the thinking of CIOs; 58% either have AI projects in production already or expect to by year-end. That compares with 60% last quarter.

CIOs are also prioritizing security, digital transformation, and cloud-computing projects, Morgan Stanley found. Microsoft has exposure to each of those areas.

“We see Microsoft as well positioned for both growth and defense given the current CIO priorities,” Weiss wrote.

Write to Nate Wolf at nate.wolf@barrons.com