UBS remain constructive on Microsoft ahead of ‘key AI catalysts’

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Analysts said in a note that their checks indicate Oracle (NYSE:ORCL) “and soon after Microsoft (in 2Q/Dec) are about to go live on their large-scale H100 GPU capacity, a trigger that could start to alleviate the GPU constraints and serve as a near-term growth catalyst for Azure.”

“We now have even higher confidence that Microsoft has likely signed a large GPU capacity deal with CoreWeave and investors are wondering if Microsoft is the Big 3 CSP engaged to acquire GPU capacity from Oracle,” the analysts added.

Furthermore, analysts, who maintained a $400 price target on the stock, stated that while a proliferation of open models evidently narrows OpenAI’s moat, the vast majority of UBS enterprise checks are indicating plans to leverage OpenAI’s ChatGPT LLM.

The analysts acknowledged that the MSFT stock sentiment has weakened over the last several months as some AI hype has eased and some investors trimmed their year-to-date winners given the still-tough macro. However, while “the key AI lifts aren’t landing in the 1Q/Sept quarter,” UBS believes MSFT shares are now cleaner with more modest growth expectations into its print.