• Wedbush Securities raised Microsoft's price target to $500, Dan Ives wrote in a Tuesday note. That calls for 18% upside from current levels over the next year.

• Customer checks reveal accelerating adoption of Microsoft's AI offerings.

• The next three years will see 70% of the company's base using its AI functionalities.

Wedbush Securities hiked Microsoft's price target from $475 to $500, touting the company's artificial intelligence ventures as a major growth accelerant. That implies around 18% upside from the firm's current share price.

Leading this bullishness is the success of Microsoft's Copilot, an AI assistant tool that Wedbush previously considered grounds for an "iPhone moment."

"In a nutshell, we see an acceleration of adoption for generative AI and Copilot activity which in turn is catalyzing more Azure cloud deal flow for Nadella & Co. with major momentum heading into the next 6 to 12 months as AI use cases explode across the enterprise landscape," analyst Dan Ives wrote in a note on Tuesday, citing customer checks.

Over the next three years, 70% of Microsoft's base is forecast to be using the firm's AI-driven functionalities; that's up from Ives' prior 60% estimate.

As use cases roll out over the next three to six months, fiscal year 2025 should mark an inflection point for AI growth, he said. By that year, strong Copilot uptake could ultimately add between $25 billion to $30 billion to Microsoft's revenue.

Meanwhile, Microsoft has also been embedding its Azure cloud platform with AI, also boosting the firm's top-line.

"We estimate for every $100 of cloud Azure spend with MSFT the last few years there is an incremental $35-$40 of AI spend for Nadella & Co. looking ahead," Ives wrote.

And still, all this is just the start of a new gear of growth for Microsoft, Wedbush cited, with AI leading the company's trajectory for the coming years.

"We continue to believe this is a '1995 Moment' as this AI Revolution plays out across the tech ecosystem over the coming years with Nvidia/Jensen and Microsoft leading the way as this $1 trillion AI tidal wave hits the shores of the tech world," Ives concluded.

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