Piper Sandler recently conducted a survey among corporate technology buyers, revealing a shift in budget priorities. While overall spending outlooks have softened, there is a clear winner: artificial intelligence applications.
According to Piper analyst Brent Bracelin, Microsoft (ticker: MSFT) stands to benefit greatly from this trend as more companies express their intention to utilize its cloud-computing services. Bracelin, who holds an Overweight rating for Microsoft stock and a $400 price target, believes the company will reap the rewards.
In a recent report released by the investment bank, 147 chief information officers (CIOs) were asked about their spending plans for this year and beyond. The findings suggest that IT budgets are expected to moderate in 2023. Compared to six months ago, expectations for 2023 spending growth decreased by 1.3 percentage points, now standing at a rate of 3.6%.
Among the areas of increased focus for CIOs in the coming years, generative artificial intelligence (AI) has emerged as the top emerging technology trend. The report reveals that 75% of CIOs are either testing or implementing projects related to generative AI. Additionally, security, storage, and application software remain key spending priorities, while hardware devices and servers rank lower on the list.
Piper’s team commented on the rise of generative AI, stating, “Enterprise testing and implementation of Gen AI appears to be consuming incremental budget dollars.”
One notable product in this space is ChatGPT, which was released last year and has experienced rapid success. This has fueled a surge in interest for generative AI products that leverage text, images, and videos to create content and provide analytical output. ChatGPT utilizes a language model that generates humanlike responses based on the relationships it has learned from analyzing internet content and other texts.
On Thursday, Microsoft shares saw a 1.3% increase in early trading, reaching $341.55.
Based on the responses from CIOs, Piper’s team predicts that hardware suppliers, particularly computer server manufacturers, are likely to face budget cuts later this year.
