Technology provider Microsoft Co. (NYSE: MSFT) has garnered much of the spotlight in mainstream artificial intelligence (AI) adoption in 2023. Open.ai’s launch of ChatGPT kicked off the AI mania as users climbed over 100 million in five days. Microsoft’s investment in Open.AI, parent of generative-AI platform ChatGPT, has put it in a battle with the Alphabet Inc. (NASDAQ: GOOGL) Google Bard-AI.
Microsoft integrated a next-gen version of ChatGPT in its Bing search platform in March 2023 to parlay the interest in AI. While ChatGPT usage has grown like wildfire, the question is whether it can make a material improvement for traffic on the world's second most popular search engine, Bing. Second place is generous when you consider that Google has a 93.37% market share, followed by Bing with 2.81% and Yahoo! at 1.13% to round out the top three as of February 2023 data.
Bing Search Engine
While Bing has 8.19% of the desktop search engine market share, it's mainly because it's the default search engine on Windows. Bing has a 38.46% market share among U.S. gaming consoles since it's the default search engine for Xbox. Microsoft's Bing is only ranked #5 when mobile search. Bing receives its highest traffic from China. Bing had 1.1 billion visitors in February 2023. It hit 100 million daily active users after the release of Bing ChatGPT. Bing has over 900 million searches a day.
Integration with ChatGPT
At the start of 2023, Microsoft made a $10 billion investment in Open.ai. Its term sheet is speculated to stipulate that they will take 75% of Open.ai's profits until the full $10 billion is made whole, and then Microsoft will also own a 49% stake in Open.ai.
Microsoft integrated OpenAI's ChatGPT features and a more powerful next-gen version customized to search into its Bing search engine. Microsoft Prometheus model is a proprietary way of working with the Open.AI model to leverage its power to provide more timely and relevant search queries. It also incorporated It into its Edge browser. The latest data shows that Google's search engine market share slipped to 92.66%, while Bing’s market share fell to 2.76% in June 2023.
On June 7, 2023, Microsoft presented at the Bank of America Global Technology Conference. Microsoft chief marketing officer and corporate vice president Yusuf Mehdi hosted the question and answering session. He addressed the enormous opportunities with its Bing search engine.
He noted roughly 10 billion search queries on any given day, half of which go unanswered. Long travel queries and sophisticated research provided an opportunity to marry AI with Bing to create a new interface to solve some problems. He gave an overview of its tight relationship with Open.ai. They built proprietary technology inside of Microsoft called Prometheus, a proprietary way to access large language models to the Bing search index.
He commented that Bing had surpassed 100 million daily users. Microsoft has put Bing on the Windows Taskbar so 500 million people can have one-click chat access.
Bing Image Creator
Mehdi mentioned the Bing Image Creator, which creates images by typing in words. He commented, “So you can say, for example, I have used this. I am doing a home remodel design. So I have said, help me design a mid-century modern living room with brass and wood. And it will come back with a picture. And then I can say, oh, hey, make that rounded and let's change the color from black to white, and they can do that.”
Analyst Outperform Reiterated
On May 3, 2023, Oppenheimer analyst Timothy Horan reiterated an Outperform rating on Microsoft with a $330 price target. He specifically mentioned the integration of AI as a driver.
He commented, "Recall, our eye-opening recent analysis showed that, while Azure grew by $914M in calendar 1Q23, AWS actually shrank for the first time by $24M during the same period, while GCP rose $149M, but likely contracted absent accounting changes. This suggests that 1Q23 marked an inflection point, with Microsoft's emerging dominance in the hyper-scale cloud market only set to increase with Azure OpenAI and related halo effects. No change to FY23/FY24 estimates, which we raised last week.”
Microsoft analyst ratings and price targets are at MarketBeat.
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Weekly Cup Pattern
The weekly candlestick chart on MSFT illustrates the recovery to the cup lip line, which commenced in November 2021 after peaking at $344.80. Shares fell to a low of $211.84 by October 2022, forming a rounding bottom. MSFT triggered a breakout through the weekly market structure low (MSL) trigger at $299.53 in April 2023 as shares surged to a peak of $351.47 before forming a weekly market structure high (MSH) sell trigger on the $332.07 breakdown.
The weekly RSI rose to the 77-band before peaking and falling under the overbought 70-band as shares chop between the weekly cup line and the MSH trigger. Pullback levels are $312.83, $288.53 weekly MSL trigger, $274.77 and $257.14.