Investing.com -- Scotiabank initiated coverage of Microsoft (NASDAQ:MSFT) with a Sector Outperform rating and a $470 price target, citing the company’s strong positioning in artificial intelligence (AI) and cloud computing.
"This 50-year-old software boutique… is taking a shot in the arm and betting big on artificial intelligence (AI) at both the application and infrastructure layers," Scotiabank (TSX:BNS) analysts wrote.
The firm expects 2025 to be a "paradigm-shifting" year for AI adoption, with increased customer investments in Azure and Microsoft 365 Copilot.
According to Scotiabank, Azure is "exceptionally well placed" to capitalize on AI-related spending.
The firm’s research indicates that about 60% of companies are already running foundational AI models in the public cloud, and enterprise adoption is set to accelerate. Microsoft’s partnership with OpenAI and deep enterprise relationships provide a key competitive advantage, the firm added.
On Microsoft 365 Copilot, Scotiabank sees significant penetration potential. "It’s clear in our expert conversations that the tool increases productivity for a subset of employees, typically 5%-20%," analysts noted, adding that Copilot usage could increase tenfold to 43 million users by late 2027.
Some companies are said to be already budgeting multi-million-dollar spending on Microsoft’s AI-powered productivity tools for 2025.
Microsoft’s AI business is scaling rapidly, with its AI revenue run rate exceeding $13 billion in early 2025. Scotiabank believes this figure could surpass $50 billion by fiscal 2027, making AI a key driver of Microsoft’s growth.
Despite potential near-term economic risks, including tariffs and federal budget constraints, Scotiabank sees a "window(s) of opportunity" in Microsoft stock, especially given its recent underperformance. "MSFT shares are poised to ‘Excel,’" the firm concluded.