Microsoft stock tumbles after software giant adds AI to Office apps

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Microsoft ,msft) The stock jumped to a buy position on Friday after the company announced it was adding artificial intelligence tools to its popular office productivity applications.

The Redmond, Wash.-based software giant introduced Microsoft 365 Copilot on Thursday. Microsoft is embedding Copilot functions into apps many employees use daily, including Word, Excel, PowerPoint, Outlook and Teams.

CoPilot uses next generation AI to automate and simplify tasks. In addition, the software is currently in testing with select commercial customers. But Microsoft did not elaborate on how it intends to monetize Copilot.

Microsoft also announced Business Chat. The new experience works across Office apps and the customer’s calendar, email, chat, documents, meetings and contacts to do things people couldn’t do before.

For example, with natural language prompts such as “Tell my team how we updated the product strategy,” Business Chat will generate a status update based on the morning’s meetings, emails and chat threads, Microsoft said.

Microsoft stock surges on AI news

“By grounding your business content and context, Copilot delivers results that are relevant and actionable,” Jared Spataro, Microsoft’s corporate vice president for modern work and business applications, said in a statement. News release, “It is enterprise-ready, built on Microsoft’s comprehensive vision for security, compliance, privacy and responsible AI. CoPilot marks a new era of computing that will fundamentally change the way we work.” “

Microsoft’s stock jumped 2.3% to 282.65 in morning trading on the stock market. Moreover, according to IBD MarketSmith charts, Microsoft stock broke out of a flat base at a buy point of 276.86.

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Co-pilot is said to be a big productivity booster

In a note to clients, Mizuho Securities analyst Greg Moskovitz called Copilot “a leap forward in AI-powered productivity.”

Moskowitz also reiterated his buy rating on Microsoft stock and raised his price target to $315 from $300.

“Microsoft 365 will be a huge productivity booster for Copilot users,” he said. “We continue to see very broad AI applicability for Microsoft across consumer and enterprise use cases.”

In a presentation Thursday, Microsoft showed how CoPilot can generate content from work files with simple voice or text commands. Examples include “creating a slide presentation,” “analyzing sales data,” and “prioritizing my inbox.”

It will be difficult for rivals to match

Oppenheimer analyst Timothy Horan said in a note to clients that Microsoft 365 Copilot will be very difficult for rivals to emulate. For one, Microsoft has a massive user base of 1.5 billion users. It also has access to OpenAI technology.

Furthermore, he said that Alphabet ,Google)-unit google and sales force ,crm) the “me-too” announcements were timed with Microsoft’s presentation.

Deutsche Bank analyst Brad Zelnick kept his buy rating on Microsoft stock following the incident.

“As the system matures, we are optimistic that Microsoft 365 Copilot will become more widely incorporated into workflows to increase productivity and business value,” Zelnick said in a report. “The focus on productivity or the ability to do more with less has long been a key tenet of Microsoft’s overall value proposition.”

Microsoft stock is a long-term leader

UBS analyst Carl Keirstedt took a more cautious stance. He maintained his neutral rating on Microsoft stock but raised his price target to $275 from $250.

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He said Microsoft still has hurdles to overcome with Copilot. These include monetizing the technology and demonstrating its usefulness in practice.

“The obvious productivity gains from the technology – which can create presentations, filter and summarize email, draft Word docs, create Excel templates and more – appear to be material and the demo shows the potential Impresses even the biggest skeptics,” Keirstead said in a note to customers.

Meanwhile, Microsoft stock is in the IBD Long-Term Leaders Portfolio.

Follow Patrick Seitz on Twitter @IBD_PSeitz For more stories on consumer technology, software and semiconductor stocks.

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